ithacaVC

APRIL 5, 2011

It should also provide a combined summary so that it is easy to see who owns what % of the company on a fully diluted and converted basis. One rule of simple cap tables is to issue “normal” stock to founders (common stock only) and investors (typically preferred stock, but sometimes common stock to early friends and family).

Common Stock 45

Common Stock Stock Cap Table Preferred Stock 45

Both Sides of the Table

SEPTEMBER 18, 2014

And now I have to explain to team that they’re taking more dilution than they expected if we do a down round. Me: More dilution? These are all real conversations. What if when you have that conversation you don’t agree? “But lawyers will charge much more for equity.” Stock Option plans.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Startup Professionals Musings

JANUARY 27, 2012

Define equity type. The first capital a young company receives usually takes the form of common stock, the same class of shares the founders hold. Anti-dilution protection. But some dilution is almost inevitable. But the lead Angel would certainly ask to be given a seat. Right of first refusal.

Term Sheet 223

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 223

keen.io

FEBRUARY 5, 2013

For example: Don’t accept equity compensation (stock shares) without knowing the percentage of the company you’ll own. From there, I began googling things like “first employee startup equity” and “startup offer negotiation.” These were the best resources I found: Equity for Early Employees in Early Stage Startups.

Salary 50

Salary Equity Startup San Francisco 50

Startup Professionals Musings

SEPTEMBER 14, 2010

Define equity type. The first capital a young company receives usually takes the form of common stock, the same class of shares the founders hold. Anti-dilution protection. But some dilution is almost inevitable. But the lead angel would certainly ask to be given a seat. Right of first refusal.

Term Sheet 227

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 227

Scott Edward Walker

JUNE 9, 2019

For example, if an investor owns 20% of the equity of a startup on a fully-diluted basis following the closing of a Series A round, it will have the right to purchase 20% of the shares of the preferred stock issued in the subsequent Series B round. This is a huge red flag and founders should push back very hard.

Preferred Stock 56

Preferred Stock Term Sheet Dilution Stock 56

Gust

OCTOBER 17, 2011

Define equity type. The first capital a young company receives usually takes the form of common stock, the same class of shares the founders hold. Anti-dilution protection. But some dilution is almost inevitable. But the lead angel would certainly ask to be given a seat. Right of first refusal.

Term Sheet 158

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 158

Both Sides of the Table

APRIL 14, 2010

Liquidation preference is the amount of money that an investor gets paid before the common stock (e.g. It also gets the new investor concerned that management (common stock holders) will not be incentivized because they realize that the investors will take most of the money unless there is a big upside scenario.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

Both Sides of the Table

MARCH 21, 2010

I’ve heard the following so many times that it still makes me scratch my head, “if those guys are going to get rich off of our backs then we’re going to look like fools if we don’t have equity.&#. I’ve already made clear that I think raising equity from “strategic money&# is an oxymoron.

Warrant 298

Warrant Dilution Startup Stock Options 298

Gust

SEPTEMBER 17, 2014

And now I have to explain to team that they’re taking more dilution than they expected if we do a down round. Me: More dilution? These are all real conversations. What if when you have that conversation you don’t agree? But lawyers will charge much more for equity.” Stock Option plans. A down round?

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

ithacaVC

DECEMBER 13, 2013

VCs in particular typically insist on a slug of available options counting in the pre-money share total as they do not want to be diluted later by the issuance of those options. On a fully diluted pre-money basis, that would mean the option pool represents 14.5% (356,758/2,456,758) of the cap table. times more equity than Founder X.

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

Gust

OCTOBER 21, 2011

For convertible notes, the only liquidity event we need be concerned with is an acquisition of the startup in the near future, before the maturity date; otherwise, the notes will convert to equity of one kind or another, and the eventual sale of that equity (in a public offering, acquisition, or private sale) is a different subject for another day.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Scott Edward Walker

APRIL 9, 2012

Part 3 will cover certain special issues, such as (i) what happens if the startup is acquired prior to the note’s conversion to equity? (ii) ii) what happens if the maturity date is reached prior to the note’s conversion to equity? A convertible note is short-term debt that converts into equity.

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Gust

OCTOBER 12, 2011

In Part II, we looked at the mandatory conversion language that is at the heart of any convertible debt financing. In my experience, a term of 12 to 24 months is common, with 12 months being on the short end. Readers may find it helpful to download the sample term sheet from my firm’s website and follow along with the commentary.

Finance 107

Finance Term Sheet Pre-Money Valuation Early Stage 107

venturehacks.com

MARCH 21, 2008

If an advisor can uncork a million dollars of your company’s latent value with 15 minutes of conversation or a single introduction, you should pay him appropriately. 0.25% of a company’s post-Series A stock. Finally, there is a beauty to paying in equity rather than an equivalent amount of cash.

Advisory Board 44

Advisory Board Cap Table Vesting Equity 44

Startup Company Lawyer

JANUARY 9, 2011

One super-angel I talked to told me that while a year ago these caps “approximated what I’d pay in equity” that they’re now “33% higher than what I’d normally agree to pay now.”. A logical alternative to convertible debt is a priced Series A preferred stock financing.

Liquidation Preference 57

Liquidation Preference Finance Preferred Stock Common Stock 57

Tim Keane

JANUARY 12, 2010

The investors and the entrepreneurs are – or should be – aware that the price of the company’s equity is set by the market – in simplest terms, what an informed buyer is willing to pay.   Note that this applies only to earl stage Series A-type equity financings and assumes no cash dividends are paid to investors.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Startup Company Lawyer

JANUARY 31, 2011

Automatic conversion: on a $1M equity financing with no conversion discount and no price cap , provided that the transaction documents provide for a right to purchase a pro rata share of future financings. (I Optional equity conversion: on other equity financings with no conversion discount and no price cap.

Preferred Stock 60

Preferred Stock Liquidation Preference IPO Common Stock 60

The Startup Lawyer

FEBRUARY 4, 2011

If an incubator offers your startup $25,000 in exchange for 6% equity, the pre-money valuation is a whopping $391,667. Thus your startup needs to determine the intangible value offered by the incubator (and yes, a $150,000 convertible note with no cap and no conversion discount qualifies as an intangible).

Incubator 105

Incubator Pre-Money Valuation Option Pool Advisory Board 105

venturehacks.com

OCTOBER 21, 2010

Reading on, the term sheet states, “The $8 million pre-money valuation includes an option pool equal to 20% of the post-financing fully diluted capitalization.&# First, the option pool only dilutes the common stockholders. It states that the share price is $1.00… this must be a mistake!

Option Pool 68

Option Pool Pre-Money Valuation Dilution Warrant 68