K9 Ventures

NOVEMBER 21, 2011

Let’s say you’re the founder (I use a solo-founder in my example to keep things simple, but this could just as well apply to a founding team) of a startup called Blood, Sweat and Tears, Inc. The objective is really to be able to get some risk off the table for the founders and not leave all their eggs in one basket.

Founder 87

Founder Common Stock Preferred Stock Stock 87

K9 Ventures

NOVEMBER 21, 2011

Let’s say you’re the founder (I use a solo-founder in my example to keep things simple, but this could just as well apply to a founding team) of a startup called Blood, Sweat and Tears, Inc. The objective is really to be able to get some risk off the table for the founders and not leave all their eggs in one basket.

Founder 84

Founder Common Stock Preferred Stock Stock 84

Both Sides of the Table

JULY 29, 2010

The downside is that people need to buy their stock. I talked also about 409a valuations and why common stock purchases cost less than preferred stock purchases. But most importantly I lectured founders that you can’t avoid the admin of setting up your ESOP. Do it early. Bad behavior but prevalent.

Venture Capital 282

Venture Capital Term Sheet Valuation Stock Options 282

Austin Startup

JULY 6, 2018

More traditional and comprehensive programs often require 5–8% of common stock, but often provide between $20K and $100K up-front as well. However, for the most in-demand startups, over-committing on future participation rights can become a problem because it can require you to raise more money than you really need to.

Dilution 48

Dilution Startup Technical Review Equity 48

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. Key founder vesting should have no cliff. Retain the right to reclaim stock from anyone leaving the startup.

Stock 120

Stock Vesting Common Stock Founder Vesting 120

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. Of course, initially these founder’s shares were worth essentially nothing, but it doesn’t take much of an imagination to grasp the possibilities.

Stock 129

Stock Vesting Preferred Stock Cofounder 129

Startup Company Lawyer

AUGUST 31, 2012

At the maturity date, there is a risk that investors may demand repayment. ” However, I believe that YC realizes that having debt outstanding that may need to be repaid is not a good situation for founders. The risk that an investor might demand repayment of a convertible note is eliminated with the convertible security.

Convertible Security 73

Convertible Security Equity Security Preferred Stock 73

Startup Company Lawyer

MARCH 14, 2010

Founders Institute Plain Preferred Term Sheet (by WSGR – disclaimer, I represent the Founders Institute and was involved in drafting this document). The only way that the Series Seed documents will be widely used is if investors demand use of the documents. Y Combinator Series AA Equity Financing Documents (by WSGR).

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

ithacaVC

MAY 1, 2013

I read an article this morning in DealBook titled “ In Venture Capital Deals, Not Every Founder Will be a Zuckerberg “ Go ahead and give it a read. The article states “When venture capitalists invest, they typically demand preferred shares that accrue a yearly dividend of about 8 percent. Huge difference!

Dividend 45

Dividend Liquidation Preference Common Stock Venture Capital 45

Gust

OCTOBER 12, 2011

In my experience, a term of 12 to 24 months is common, with 12 months being on the short end. Thus, it’s in everyone’s best interest to see the startup raise more capital rather than declaring default and demanding repayment. First, a word about the maturity date.

Finance 107

Finance Term Sheet Pre-Money Valuation Early Stage 107

Gust

OCTOBER 21, 2011

In descending order of preference from the founders’ point of view: 1. a) payable upon demand as of the closing of such transaction; or. (b) a mix of cash and stock) received by other equity holders in the transaction. What happens to the outstanding convertible notes?

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Tim Keane

JANUARY 12, 2010

These include: ·       Vesting of Founder Stock. Especially in situations where the founders have a large position and are key employees, it is not uncommon for investors to request that they agree to have some portion of their holdings vest on a schedule.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

abovethecrowd.com

MAY 20, 2013

There are common stock, common options, and as many as three to five different layers of preferred stock, each with a specific liquidation preference. 3) Investor/Founder Mindset Challenges. An investor may say “we own 22% of the company”, or a founder may note, “I still own 31% of my company.”

Merger 53

Merger Institutional Investors Liquidation Preference Preferred Stock 53

Both Sides of the Table

SEPTEMBER 5, 2012

Can you imagine investing in the stock market where your price was determined at a future date and the better that company performed the HIGHER the price you paid for that investment. In fact, most early investor work hard to help their startups get to the next level so it makes no sense for the angel investor and founders to be at odds.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Professor VC

JULY 25, 2013

I''m a strong believer in fairness (although my daughters may not agree) and investors and entrepreneurs working together as a team to create something valuable to all stakeholders (customers, employees, founders, investors). Startup outcomes tend to be very binary. Unfortunately, not everyone follows the KISS principle.

Term Sheet 46

Term Sheet Silicon Valley Syndicate Syndication 46

www.paulgraham.com

APRIL 28, 2010

I think it would help founders to understand funding better—notjust the mechanics of it, but what investors are thinking. And if trouble withinvestors is one of the biggest threats to a startup, managing themis one of the most important skills founders need to learn. Few startups get it quite right. Many are underfunded.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76