Startup Company Lawyer

AUGUST 31, 2012

Over the past few years, convertible debt has emerged as a quick and inexpensive method for startup companies to raise money from angel investors and early stage venture funds. ” As a result, Ted introduced the Series Seed preferred stock documents as an alternative to convertible debt for early stage investments.

Convertible Security 73

Convertible Security Equity Security Preferred Stock 73

Gust

JUNE 7, 2014

In many, if not most, seed and early stage funding scenarios, the investments are structured in LIFO order: Last In, First Out. 5) Senior Preferred Stock and warrants. 7) Junior Preferred Stock and warrants. Invested Interests company early stage funding investors startup starup' 2) Secured creditors.

Warrant 157

Warrant Preferred Stock Common Stock Early Stage 157

Gust

DECEMBER 18, 2013

Assuming the company is able to make effective use of the seed money to greatly increase the value of the enterprise, all of that value therefore accrues to the founder, rather than the investor.

Valuation 150

Valuation Founder Seed Money Common Stock 150

Both Sides of the Table

MAY 13, 2013

For the past 5 years or so Google, Facebook and a handful of tech industry giants have been quietly buying scores of early-stage startups for their talent. A couple of tech giants throw millions around in either cash (for which they have hoards) or part with some publicly traded stock. has now employed the same strategy.

Liquidation Preference 357

Liquidation Preference Early Stage Retention Lock-up Period 357

Up and Running

AUGUST 17, 2015

Legal Aspects of Entrepreneurship: While the exact title and contents of this class may vary depending on the business school you attend, as a first time founder, it’s incredibly important to understand all of the legal considerations around starting your own company (e.g., It helps mitigate startup risk.

Entrepreneur 60

Entrepreneur Cofounder Angel Investor eCommerce 60

Both Sides of the Table

SEPTEMBER 18, 2014

I know how to structure around that to protect the founders from getting screwed on a multiple liquidation preference. But most VCs don’t bother so many convertible note founders get screwed and never know it until they sell their companies. I see that all the time. My colleague: Whoa. These are all real conversations.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Haystack

JULY 8, 2018

So, that’s why I’m writing this short post specifically for 1) employees of early-stage startups and 2) the earliest investors in these startups, who are often themselves new to the entire sector. You can read more about the types of stock granted in startups here.

Early Stage 95

Early Stage Dilution Private Equity Common Stock 95

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). I suspect that this seems reasonable if there is basically no due diligence due to the early stage of the companies. (By Legal fees. Legal opinion.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Berkonomics

JULY 23, 2020

Does the board declare dividends upon the preferred stock invested in order to increase the amount paid out to the preferred – at the expense of the common – shareholders, which usually includes the founder(s)? Can you protect the common shareholders? There is a time for all investors and founders to celebrate.

Delaware 62

Delaware Liquidation Preference Preferred Stock Early Stage 62

YoungUpstarts

JUNE 26, 2020

Many entrepreneurs waste time talking to investors who are at the wrong stage, sector or tribe. When a VC’s website says they do “early stage” – to a VC that means a product has already been built and generating some revenue, while to an entrepreneur it means “just an idea.”. This might seem obvious, but it’s not. I was wrong.

Finance 180

Finance Silicon Valley Valuation Startup 180

Startup Lessons Learned

AUGUST 26, 2009

The companies I spoke to all agreed that the community there was extremely supportive, especially in the critical ulta-early-stage. They take common stock, not preferred, a fact that the entrepreneurs mentioned to me many times. Then, create an encouraging environment for early-stage companies.

San Francisco 113

San Francisco Silicon Valley Startup Lean 113

www.inc.com

SEPTEMBER 24, 2011

Last spring, Dave Graham , founder of software consulting firm Arizona Bay, learned that a major client, Jumpstart Automotive Media, had been acquired for more than $80 million. Graham also pushes for common stock, the right to participate in future funding rounds to preserve the size of the stake, and a guaranteed seat on the board.

Arizona 40

Arizona Equity Iowa Venture Capital 40

Gust

OCTOBER 12, 2011

In my experience, a term of 12 to 24 months is common, with 12 months being on the short end. Particularly when there are multiple closings taking place over a period of months, the fuse burns awfully quickly on a 12-month note given the many competing priorities of early stage entrepreneurs.

Finance 107

Finance Term Sheet Pre-Money Valuation Early Stage 107

keen.io

FEBRUARY 5, 2013

The founders had been dropping hints that they wanted me to join them. This book was written to help founders negotiate financing with investors, but it really helped me understand Keen’s financial situation, and I highly recommend it to anyone joining a startup. Startup Equity for Early Employees. So I knew a little bit.

Salary 50

Salary Equity Startup Cap Table 50

Up and Running

DECEMBER 1, 2015

Typically, employers that offer employees equity compensation will do so in the form of common stock, preferred stock, or stock options. As opposed to stock options where the employee can decide to purchase the stock or not, restricted stock is often “granted” or given to the employee.

Equity 60

Equity Employee Stock Options Vesting 60

Gust

JULY 23, 2012

However, for investors and founders, it may be helpful to think outside the box when it comes to giving. Q: Wouldn’t a contribution of early-stage company stock have a very small impact? In fact, the contribution of early-stage company stock can have tremendous impact.

Stock 114

Stock Capital Gains Warrant Stock Options 114

Gust

SEPTEMBER 17, 2014

I know how to structure around that to protect the founders from getting screwed on a multiple liquidation preference. But most VCs don’t bother so many convertible note founders get screwed and never know it until they sell their companies. There are a bunch of ways to offer cheaper pricing to people who commit early without notes.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Warrant 153

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

Growthink Blog

MAY 10, 2012

When seeking equity investments, the source of capital is, for the most part, tied to the stage of capital being raised. You see, equity capital is raised in stages or rounds. The five main stages include the following: 1. Early Stage Investment (Series A & B) 4. Pre-Seed Funding 2. Seed Funding 3.

Equity 88

Equity Mezzanine Later Stage Venture Capital 88

Berkonomics

AUGUST 29, 2013

Does the board declare dividends upon the preferred stock invested in order to increase the amount paid out to the preferred – at the expense of the common – shareholders, which usually includes the founder(s)?

Delaware 66

Delaware Liquidation Preference Liquidity Event Preferred Stock 66

Gust

OCTOBER 21, 2011

In descending order of preference from the founders’ point of view: 1. Assuming a hypothetical $100,000 investment at a 10% interest rate, this kind of payoff would yield a return of $5,000 ( 5% ) six months later – not exactly the kind of return angel investors are looking for when they make risky early stage investments.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

K9 Ventures

MAY 14, 2011

In my view the terminology being used for early stage investors by the press and the media is not as clear as it should be. I’ve talked about this on several occasions when I’ve been at conference and on panels, but I figured it would make sense to do a post explaining my taxonomy of the early-stage investing world.

Preferred Stock 125

Preferred Stock Seed Stage Incubator Early Stage 125

www.payne.org

SEPTEMBER 22, 2011

2 Stock Classes: Common and Preferred. 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. From Payne.org Wiki.

Equity 56

Equity Employee Vesting Preferred Stock 56

Austin Startup

OCTOBER 18, 2017

Background Reading: Should Non-SV Founders use SAFEs in Seed Rounds? the majority of the content available online for founders to educate themselves comes from Silicon Valley. Purely from the perspective of founders, it is a fantastic deal. Extensions are very common. The problem with chasing whales.

Silicon Valley 48

Silicon Valley Los Angeles Angel Investor Common Stock 48

Growthink Blog

APRIL 7, 2010

million from three individual angel investors and one early-stage venture capital fund. The name "Series A" refers to the class of preferred stock that you sell to investors in return for their cash. It's just two successful entrepreneurs trying to improve on products in an established industry.

Angel Investor 54

Angel Investor Preferred Stock Common Stock Venture Capital 54

The Entrepreneurial Mind

MARCH 10, 2010

JumpStart Foundry will focus on very early-stage concepts. In return for this investment, JumpStart Foundry will receive a collective 10% ownership in the Common Stock of the company. This amount of capital is often much more than an entrepreneur can effectively utilize at the very early-stage of concept development.

Nashville 53

Nashville Tennessee Early Stage Common Stock 53

Gust

MAY 24, 2012

Some commentators have suggested this is the wave of the future, signifying a shift in the balance of power from investors to founders of the relatively small, elite group of growth companies that make it to public markets. Options and warrants, when issued, are also typically exercisable for shares of Common Stock.

IPO 159

IPO Equity Common Stock Stock 159

Scott Edward Walker

SEPTEMBER 21, 2011

Not only will this scare-away many sophisticated angel and VC investors, but also the founders will likely find themselves constantly peppered with questions about their company and how things are going; not to mention turning holidays, like Thanksgiving, into stockholders’ meetings. What about issuing shares of common stock?

Preferred Stock 45

Preferred Stock Angel Investor Entrepreneur Common Stock 45

Tim Keane

JANUARY 12, 2010

  A cumulative dividend can get to be very expensive and is not often a feature in early stage terms. These include: ·       Vesting of Founder Stock.   Oftentimes, term-sheets specify provisions under which there is not a majority on the board from either founders or investors.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

The Startup Lawyer

FEBRUARY 4, 2011

But before your startup signs up and cashes that $[XX,000] check, your startup’s co-founders should sit down and evaluate the incubator’s offer. As equity in the company tends to be the currency of early stage startups, the startup should have a good foundation for assigning value in terms of equity.

Incubator 105

Incubator Pre-Money Valuation Option Pool Advisory Board 105

ReadWriteStart

JANUARY 28, 2022

Common stock. The holding of common stock in a company indicates ownership in the corporation. Investors of common stock are eligible for : The choice of the Board of Directors. However, the holder of a warrant holds a leveraged bet on the corporation’s common shares. Preferred shares.

Valuation 108

Valuation Equity Warrant Common Stock 108

Up and Running

SEPTEMBER 20, 2021

Furthermore, there are various forms of equity, such as preferred stock, common stock, and convertible notes, which influence the present and potential future investors. Founders can apply the information to instantly ascertain what percentage of the startup they have to propose a new investor. Total share ownership.

Cap Table 112

Cap Table Pre-Money Valuation Stock Options Option Pool 112

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 Vesting 76

Professor VC

FEBRUARY 18, 2011

Techcrunch called it one of the " most like-minded and forward-thinking acquisitions I’ve ever seen " I met with the founders of CardMunch several months ago when they were out raising their Series Seed round. I liked the founders (Bowei and Sid) a lot more than the business.

Acquisition 31

Acquisition San Jose Angel Investor IPO 31

Austin Startup

AUGUST 1, 2017

This is most clearly highlighted in the “unicorn” boom we all saw over the past few years, where founders raised very large rounds, with terms very onerous to the underlying common stock, hoping they could eventually justify billion dollar valuations to skeptical acquirers or public market investors.

Liquidation Preference 48

Liquidation Preference Common Stock Valuation Silicon Valley 48

Startup Professionals Musings

JULY 8, 2011

If your company is early stage and has a valuation under $1M, don’t ask for a $5M investment. If your company is still in the “idea” stage, you have no valuation, so size your investment request on the basis of “goodwill” that you have with your rich uncle, and your business track record. Single or staged delivery.

Entrepreneur 234

Entrepreneur Valuation Early Stage Warrant 234

Gust

OCTOBER 3, 2011

Once in, this money stays in, and is part of what makes up your Founder’s Equity (along with your work and your intellectual property.). A majority of companies that are started in the US begin and end with the first stage: the founders’ own money. From +/- $1.5m

Finance 70

Finance Venture Capital Intellectual Property Early Stage 70