Both Sides of the Table

SEPTEMBER 8, 2012

There is simply no reason for the first angel to write you a check until you have the whole round secure, which is why people herd cats. You can do it with equity & a price. This is occasionally how convertible notes are structured at the time of conversion anyways. why buy anything? why buy me? why buy now? Price the round.

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

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

Business Plan Blog

NOVEMBER 13, 2013

Among the most common methods of funding used by startups when raising seed capital is “Convertible Debt Financing.” Convertible Debt” is a loan, which is automatically converted to equity at maturity or upon the closing of a round of financing. Various terms such as price cap, discount, conversion to equity, etc.,

Finance 93

Finance Accredited Investor Angel Investor Seed Capital 93

Scott Edward Walker

MAY 15, 2012

What Happens If a Startup is Acquired Prior to the Note’s Conversion to Shares of Preferred Stock? As discussed in part 1 , in the context of a seed financing, a convertible note is a loan that typically automatically converts into shares of preferred stock upon the closing of a Series A round of financing.

Finance 64

Finance Founder Accredited Investor Preferred Stock 64

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

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

Berkonomics

OCTOBER 1, 2015

Most sophisticated investors will take either a promissory note or preferred stock, both of which come before founder or management stock in a sale or liquidation. Promissory notes come before any equity, and most late equity investments come before early equity investments, even of the same class of security.

Dividend 48

Dividend Preferred Stock IRR Participating Preferred 48

Austin Startup

MAY 17, 2017

Instead, the company just has a loose set of individual advisors they work with on strategic matters, often in exchange for equity with a vesting schedule. This means the investor has the right to observe everything that happens at the Board level, which includes hiring people, equity grants, approving major deals, etc.

Seed Stage 48

Seed Stage Startup Cap Table Angel Investor 48