Agile VC

DECEMBER 4, 2014

As a result, one of the trickier things co-founders tackle is determining the equity split amongst the founding group of individuals. Across both the startups I’ve personally been involved in (PayPal and LinkedIn) and the startups in which I’ve been an investor, I’ve seen a broad range of co-founder equity splits.

Cofounder 173

Cofounder Equity Founder Sweat Equity 173

Up and Running

SEPTEMBER 19, 2017

When you accept outside money, particularly a private equity (PE) investment, however, that changes. In this article, I’ll provide some personal stories of how investors have navigated the balance between raising private equity capital and not losing control of their startup. You make all the decisions, when you want, how you want.

Private Equity 94

Private Equity Pre-Money Valuation Equity Startup 94

www.inc.com

SEPTEMBER 24, 2011

Will Work for Equity. Why Arizona Bay started taking stock from its customers instead of cash. Dave Graham Business Venture Capital Private Equity GlobalLogic Inc. Determined not to miss another opportunity, Graham has begun waiving fees and instead taking equity in clients he thinks have a good shot at success.

Arizona 40

Arizona Equity Iowa Venture Capital 40

VC Adventure

AUGUST 15, 2018

Most boards did some level of work to determine the FMV of a company’s stock but generally options were priced between 10% and 15% of a company’s then preferred price (because common equity sits behind preferred equity there is typically a discount applied to the FMV of common stock to account for this “overhang”).

Valuation 48

Valuation Common Stock Cap Table Software Review 48

Startup Professionals Musings

JANUARY 15, 2021

When an entrepreneur first incorporates a business, they may find themselves the proud owner of 10 million shares of common stock, commonly called founder’s shares. To retain control, the original founder must reserve the right of first refusal to buy shares back at cost from a partner who decides to leave early or stop working.

Vesting 298

Vesting Dilution Stock Founder Vesting 298

Austin Startup

JULY 6, 2018

The below outlines how I would approach the decision: Cash and Equity. Very simply, what are you giving and what are you getting in return in terms of cash and equity for joining the program? More traditional and comprehensive programs often require 5–8% of common stock, but often provide between $20K and $100K up-front as well.

Dilution 48

Dilution Startup Technical Review Equity 48

Eric Friedman

JUNE 27, 2016

Bigger/better advisors who get more equity have things like; excellent domain expertise to help you avoid pitfalls, deep connections within the industry to help with the intros, partnerships, and more. As a potential advisor looking to get involved with the company; MORE EQUITY! This leaves plenty of room for a final 4th advisor for

Equity 98

Equity Vesting Cap Table Common Stock 98

Agile VC

APRIL 17, 2011

Obviously most of these employees are working hard primarily for equity upside compensation, but Kayak’s personnel costs are roughly $200K/head so the company is highly productive on a per employee basis. One can infer valuations based on per share prices of preferred stock and oustanding common shares (~5.3M

Pre-Money Valuation 113

Pre-Money Valuation Liquidation Preference Dividend Common Stock 113

Scott Edward Walker

OCTOBER 19, 2020

Unfortunately, I was involved in such a scenario a few years back, and it cost the founders a lot of money to get the prior employer to agree to execute a waiver. As noted above, any IP created pre-incorporation will typically be assigned to the company in exchange for equity. Any IP created by a founder (e.g.,

IP 52

IP Software Review Founder Technical Review 52

Both Sides of the Table

SEPTEMBER 18, 2014

There are a million ways to do quick, easy, low-cost rounds with prices. If you want to give them a 50% discount offer them $1 of common-stock warrants (no liquidation preference) for every $1 of stock they buy. “But lawyers will charge much more for equity.” Stock Option plans. And so forth.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Startup Professionals Musings

JANUARY 29, 2018

I’ll never forget that great sense of excitement I felt when I incorporated my first business, and realized that I was now the proud owner of 10 million shares of common stock. Even though initial stock has no market value today, it is extremely valuable in dividing equity ownership between co-founders, investors, and early partners.

Stock 129

Stock Vesting Preferred Stock Cofounder 129

www.payne.org

SEPTEMBER 22, 2011

Startup Equity For Employees. 2 Stock Classes: Common and Preferred. 5 Stock vs Options. 6 Founders / Restricted Stock. 7 Salary vs Equity. Important disclaimer: Ive got experience negotiating stock compensation packages from both sides of the table. Stock Classes: Common and Preferred.

Equity 56

Equity Employee Vesting Preferred Stock 56

Startup Professionals Musings

MAY 18, 2015

When an entrepreneur first incorporates his or her business, he or she may find him or herself the proud owner of 10 million shares of common stock, commonly called founder’s shares. This is called stock dilution control. Minimize your own loss of ownership as major investors contribute.

Stock 120

Stock Vesting Common Stock Founder Vesting 120

Austin Startup

JULY 22, 2021

Austin based ZPEG developed an upgraded compression algorithm for streaming videos based on an advanced human visual model that reduces streaming costs for 4K streams by 30%. Dallas’ YouGoNatural designs luxury headwraps and offers an extensive collection of looks that makes protecting hair a stylish experience.

San Antonio 107

San Antonio Dallas Houston Founder 107

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 Company Lawyer

MARCH 14, 2010

After the recent announcement of the Series Seed Financing documents by Marc Andreesen, Brad Feld points out that there are now four sets of “open source&# equity seed financing documents: TechStars Model Seed Funding Documents (by Cooley). Y Combinator Series AA Equity Financing Documents (by WSGR). under $500K).

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

ReadWriteStart

JANUARY 28, 2022

With the rise of startups and growing businesses , it has become more critical for investors to have a thorough understanding of equity to be aware of all of the advantages they are receiving from the companies they have invested in. What is Company Equity? Types of equity. Common stock. Preferred shares. .

Valuation 108

Valuation Equity Warrant Common Stock 108

Up and Running

AUGUST 17, 2015

C Corp versus LLC, non-competes, liquidation preferences, preferred versus common stock, and so on). By the time of their restaurant’s grand opening, they were able to build a brand around their restaurant, perfect their menu, and develop a clear understanding of their operating costs.

Entrepreneur 60

Entrepreneur Cofounder Angel Investor eCommerce 60

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. What is a Convertible Note?

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Startup Company Lawyer

MAY 4, 2009

Startup companies consume resources intelligently, put people to work in efficient ways, and produce market driven products at lower costs. The application fee is $50, which only partially offsets costs associated with processing applications. Helping smart people start new companies should, in fact, help the global economy.

Founder 28

Founder Warrant San Francisco Intellectual Property 28

Gust

DECEMBER 18, 2013

Note: The one significant exception to this is that Friends & Family seed rounds are usually done as Convertible Notes with a Cap, because in the absence of a professional investor (such as a serious angel or an early stage VC) the extreme likelihood is that both sides will price the deal incorrectly, and will thus cause significant problems down (..)

Valuation 150

Valuation Founder Seed Money Common Stock 150

Gust

SEPTEMBER 17, 2014

There are a million ways to do quick, easy, low-cost rounds with prices. If you want to give them a 50% discount offer them $1 of common-stock warrants (no liquidation preference) for every $1 of stock they buy. But lawyers will charge much more for equity.” Stock Option plans. Try doing THAT with equity.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Both Sides of the Table

SEPTEMBER 5, 2012

This time by the efforts of Adeo Ressi to introduce a new kind of structure called “ convertible equity.” My initial reaction to Adeo when we spoke was that while it may have solved some issues (debt versus equity) it didn’t solve the ones that I’ve been warning entrepreneurs about most loudly.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Gust

DECEMBER 8, 2011

Readers can anticipate my next point in continuing the analogy: It makes no more sense for a non-lawyer to prepare fundamental legal, governance, equity and intellectual property documents than it would for a patient to self-diagnose and begin taking prescription-strength antibiotics or other medications. Newco, Inc.”) Newco, Inc.”)

Intellectual Property 139

Intellectual Property Non-disclosure Agreement Delaware Stock 139

Agile VC

FEBRUARY 2, 2012

I’ll focus for now on the business itself, there’s plenty of other info on the web if you care to understand the equity ownership or financing history of Facebook and frankly this has been fairly well known for awhile. ==. Here’s my first look at Facebook viewed through the lens of their IPO filing. Facebook, Inc.

IPO 100

IPO South Korea Venezuela Revenue 100

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. Rather than assign a monetary value to the intangibles, a startup should instead assign an equity percentage value to intangibles like mentorship. Other incubators may want to set up an option pool.

Incubator 105

Incubator Pre-Money Valuation Option Pool Advisory Board 105

Lightspeed Venture Partners

OCTOBER 1, 2012

in sales but made only $20k in profit, despite not having any advertising costs. The product retails for $39.95, wholesales for $19.95, and costs just $5 to make. He asked for 30% equity plus a $5 royalty until he got his capital back, and for the founder to quit his job to work on Posture Now full time.

Pre-Money Valuation 158

Pre-Money Valuation Valuation Participating Preferred Preferred Stock 158

ReadWriteStart

MAY 8, 2012

I did recover from this, but when you start the funding process, evaluate exactly what you need to do to get to the next steps and how much that will cost. Take into consideration board seats, the investor’s equity stake in the business and whether they will receive preferred or common stock.

Cofounder 140

Cofounder Startup San Francisco Silicon Valley 140

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

JULY 20, 2009

If there is more than one founder, the likelihood of an argument about how the equity should be split in the new company increases dramatically. Incorporating a company and issuing stock to the founders will help prevent misunderstandings among the founders about equity splits.

IP 67

IP Stock Options Preferred Stock Capital Gains 67

Startup Professionals Musings

OCTOBER 29, 2013

Here are the parameters you should use in sizing your request, and be able to explain in justifying your request to investors: Consider implied ownership cost. Do your financial model first with the volume, cost, and pricing parameters you want. The investor would be buying your company five times over, and he doesn’t want it.

Valuation 258

Valuation Early Stage Warrant Common Stock 258

Startup Professionals Musings

SEPTEMBER 19, 2012

Here are the parameters you should use in sizing your request, and be able to explain in justifying your request to investors: Consider implied ownership cost. Do your financial model first with the volume, cost, and pricing parameters you want. The investor would be buying your company five times over, and he doesn’t want it.

Valuation 236

Valuation Early Stage Warrant Common Stock 236

venturehacks.com

MARCH 21, 2008

Advisor compensation Whether you’re hiring a normal advisor or super advisor: Advisory shares are usually issued as common stock options. Finally, there is a beauty to paying in equity rather than an equivalent amount of cash. If you pay in equity, you pay once and keep getting served ad infinitum.

Advisory Board 44

Advisory Board Cap Table Vesting Equity 44

Startup Professionals Musings

JULY 8, 2011

Here are the parameters you should use in sizing your request, and be able to explain in justifying your request to investors: Consider implied ownership cost. Do your financial model first with the volume, cost, and pricing parameters you want. The investor would be buying your company five times over, and he doesn’t want it.

Entrepreneur 234

Entrepreneur Valuation Early Stage Warrant 234

Startup Professionals Musings

JUNE 9, 2010

Here are the parameters you should use in sizing your request, and be able to explain in justifying your request to investors: Consider implied ownership cost. Do your financial model first with the volume, cost, and pricing parameters you want. The investor would be buying your company five times over, and he doesn’t want it.

Valuation 227

Valuation Early Stage Warrant Common Stock 227

www.paulgraham.com

APRIL 28, 2010

Some VCsnow require that in any sale they get 4x their investment backbefore the common stock holders (that is, you) get anything, butthis is an abuse that should be resisted. It costs you a little more equity, but being able to play the two firms off each other (as well as ask one if the other is being out of line) is invaluable.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

venturehacks.com

OCTOBER 21, 2010

If you don’t keep your eyes on the option pool, your investors will slip it in the pre-money and cost you millions of dollars of effective valuation. This reverse dilution benefits all classes of stock proportionally even though the common stock holders paid for all of the initial dilution in the first place!

Option Pool 68

Option Pool Pre-Money Valuation Dilution Warrant 68