View from Seed

DECEMBER 4, 2014

You can then work with your law firm to formally draw up founder common stock paperwork either then or subsequently. It’s also worth keeping in mind that regardless of how the founders’ common stock is divided, there will be future issuance of stock that will dilute the founders over the lifecycle of the company.

Equity 315

Equity Founder Sweat Equity Cofounder 315

Startup Professionals Musings

MARCH 23, 2014

In reality, so-called “Founder’s” shares are simply common stock, issued at the time of startup incorporation, for a very low price, and normally allocated to the multiple initial players commensurate with their investment or role. Here are some typical special terms and considerations for Founder’s stock: Negligible real value.

Stock 256

Stock Vesting Common Stock Founder Vesting 256

Startup Professionals Musings

JANUARY 22, 2013

In reality, so-called “founder’s” shares are simply common stock, issued at the time of startup incorporation, for a very low price, and normally allocated to the multiple initial players commensurate with their investment or role. Here are some typical special terms and considerations for founder’s stock: Negligible real value.

Vesting 245

Vesting Common Stock Stock Founder Vesting 245

Agile VC

DECEMBER 4, 2014

You can then work with your law firm to formally draw up founder common stock paperwork either then or subsequently. It’s also worth keeping in mind that regardless of how the founders’ common stock is divided, there will be future issuance of stock that will dilute the founders over the lifecycle of the company.

Cofounder 255

Cofounder Equity Founder Sweat Equity 255

ReadWriteStart

JUNE 1, 2020

The shares given out can either be common stocks or preferred stocks. ? Debt investment. Raising higher capital at an early stage means more equity to be diluted to the investors. Equity investment is the most popular and most talked-about avenue for startup funding. Capital is expensive. It might be tempting to do so.

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

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

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? 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. A down round? ” Simple.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Startup Company Lawyer

MARCH 14, 2010

If new investors get better rights in a future equity financings (such as registration rights, price-based anti-dilution, redemption rights, etc.), The Certificate of Incorporation gives the Series Seed a board seat, while the common get two board seats. . Anti-dilution protection. Future rights. Self-explanatory. Board seat.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Gust

MARCH 16, 2014

In reality, so-called “Founder’s” shares are simply common stock, issued at the time of startup incorporation, for a very low price, and normally allocated to the multiple initial players commensurate with their investment or role. Here are some typical special terms and considerations for Founder’s stock: Negligible real value.

Stock 175

Stock Vesting Common Stock Founder Vesting 175

Agile VC

DECEMBER 4, 2014

You can then work with your law firm to formally draw up founder common stock paperwork either then or subsequently. It’s also worth keeping in mind that regardless of how the founders’ common stock is divided, there will be future issuance of stock that will dilute the founders over the lifecycle of the company.

Cofounder 173

Cofounder Equity Founder Sweat Equity 173

Startup Professionals Musings

JANUARY 27, 2012

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. This does not mean that if you have eight Angels in your company, you will have to seat all eight of them on your board.

Term Sheet 223

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

The Equity Kicker

NOVEMBER 9, 2016

Additionally, they introduce a small amount of complexity and an element of misalignment between the investor and the common stock holder (usually the founder). That trade gives them less dilution and therefore more cash in upside scenarios but less cash (and potentially nothing) in extreme downside scenarios.

Liquidation Preference 122

Liquidation Preference Silicon Valley Participating Preferred Common Stock 122

Berkonomics

MARCH 8, 2018

Pay early stage board members of companies that are not lifestyle businesses one percent of the fully diluted equity in the form of an option that vests over four years of service. You do not pay professional investors who are serving on behalf of an investment company or VC and paid by that company.

Early Stage 102

Early Stage Vesting Stock Options Preferred Stock 102

Startup Professionals Musings

SEPTEMBER 26, 2015

What they worry about is a whole different set of issues, including how much control they will have over how their money is spent, what will happen when future investors jump in to dilute their position and how they will get some money back if things don’t go according to plan. Type of stock assigned to the investor.

Term Sheet 120

Term Sheet Demand Preferred Stock Liquidation Preference 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. To retain control of your business, you need to reclaim stock shares from anyone leaving the startup for any reason.

Stock 129

Stock Vesting Preferred Stock Cofounder 129

Steve Blank

APRIL 10, 2019

The mechanics of a stock option was a simple idea – you received an option (an offer) to buy a part of the company via common stock options (called ISOs or NSOs ) at a low price (the “strike price”.) Not everyone got the same amount of stock. The founders got most of the common stock.

Stock Options 333

Stock Options Stock Vesting Common Stock 333

Startup Professionals Musings

SEPTEMBER 14, 2010

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. This does not mean that if you have eight angels in your company, you will have to seat all eight of them on your board.

Term Sheet 227

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

Haystack

JULY 8, 2018

For employees at early-stage companies… the equity you’ve been granted is likely common stock, just like the founders. You can read more about the types of stock granted in startups here. That can seem dire, but the new age also presents opportunities in hotly-contested secondaries.

Early Stage 95

Early Stage Dilution Private Equity Common Stock 95

Startup Professionals Musings

OCTOBER 7, 2010

In reality, so-called “founder’s” shares are simply common stock, issued at the time of startup incorporation, for a very low price, and normally allocated to the multiple initial players commensurate with their investment or role. Here are some typical special terms for founder’s stock: Negligible par value.

Stock 214

Stock Vesting Common Stock Founder Vesting 214

Gust

OCTOBER 17, 2011

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. This does not mean that if you have eight angels in your company, you will have to seat all eight of them on your board.

Term Sheet 158

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

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.

Preferred Stock 56

Preferred Stock Term Sheet Dilution Stock 56

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

Early Growth Financial Services

JUNE 26, 2014

Valuation — Know what these terms mean: Fully-diluted — This includes all issued stock and anything that could be converted into common stock (typically after an acquisition or IPO), such as your stock option pool.

Pre-Money Valuation 51

Pre-Money Valuation Option Pool Dilution Common Stock 51

K9 Ventures

NOVEMBER 21, 2011

3) Setting a precedent for the price of the Common Stock : This is the biggest issue with founder liquidity. Founders typically hold Common Stock in the company, but they (obviously) want to sell the Common Stock at the same price as the Preferred price or close to it.

Founder 87

Founder Common Stock Preferred Stock Stock 87

Both Sides of the Table

MARCH 21, 2010

Future investors aren’t likely to mind that you had a PBW program because the dilution will be taken before they invest. Every share option you allocate to an employee is dilution both you and your investors face so they shouldn’t be allocated lightly. Make the warrants for common stock and not preferred stock.

Warrant 298

Warrant Dilution Startup Stock Options 298

K9 Ventures

NOVEMBER 21, 2011

3) Setting a precedent for the price of the Common Stock : This is the biggest issue with founder liquidity. Founders typically hold Common Stock in the company, but they (obviously) want to sell the Common Stock at the same price as the Preferred price or close to it.

Founder 84

Founder Common Stock Preferred Stock Stock 84

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? 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 people seem pretty focused on that number.

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. I have posted on this previously.

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

Berkonomics

APRIL 4, 2019

These include election or re-election of board members if required by the bylaws of the corporation, approval of any increases to stock option plans (which would dilute the worth of shares outstanding,) and approve any additions to the capital stock authorized to be issued.

Stock Options 48

Stock Options Balance Sheet Stock Common Stock 48

Scott Edward Walker

APRIL 9, 2012

Why Can’t a Startup Issue Shares of Common Stock to Investors? In fact, many incubators like Y Combinator and TechStars are issued shares of common stock for their initial investment (usually about $20,000). Friends and family are also often issued shares of common stock. Speed, simplicity and cost.

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

www.mattbartus.com

SEPTEMBER 24, 2011

We will grant him/her X% fully diluted shares up front, and every time he/she makes an introduction, he/she will vest in 100 shares.” First, you’d probably want them to receive common stock, not preferred stock (which is the likely next round). ” To which I normally say, “don’t bother.”

Equity 40

Equity Vesting Silicon Valley Intellectual Property 40

Berkonomics

DECEMBER 6, 2010

Because the valuation is now a requirement under Rule 409a of the Internal Revenue Code, most companies with stock option plans today have fairly valued common stock with known prices per share. It is the same logic larger corporations use when deciding whether to use cash or stock to make an acquisition.

Stock Options 61

Stock Options Stock Warrant Common Stock 61

keen.io

FEBRUARY 5, 2013

If the company is pre-funding or only has a small friends-and-family seed round, then the numbers should go up from there, based on expected dilution and greater risk.” Assumption: The pre-dilution amount prior to Series A should be approximately double the amount in this post-Series-A chart. Result: A fair offer would be between.8

Salary 50

Salary Equity Startup San Francisco 50

www.payne.org

SEPTEMBER 22, 2011

2 Stock Classes: Common and Preferred. 3 Dilution. 5 Stock vs Options. 6 Founders / Restricted Stock. The re-heating of the venture funded tech market has pushed a heat up of the hiring market, and Im getting more calls from friends asking for help understanding startup stock (equity) offers. 4 Vesting.

Equity 56

Equity Employee Vesting Preferred Stock 56

Tim Keane

JANUARY 12, 2010

.   This is most commonly used when a conversion confers superior economic benefits on the preferred stockholder. ·       Anti-dilution provisions that reduce the price of the preferred shares (using a variety of formulas) in the event that the company issues new stock at a lower price.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

ithacaVC

MAY 1, 2013

It is ONLY once the VC’s liquidation preference is cleared that the common stock held by founders and employees is worth anything. Fiduciary duty law is well settled, and, no, directors cannot approve dilutive financings without regard to common shareholder interests. And I think that makes 100% sense.

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. There are as many variations on this scenario as there are startups, but here are some common scenarios upon maturity: The startup negotiates with the bridge lenders to extend the maturity date. First, a word about the maturity date.

Finance 107

Finance Term Sheet Pre-Money Valuation Early Stage 107