Gust

OCTOBER 21, 2011

For convertible notes, the only liquidity event we need be concerned with is an acquisition of the startup in the near future, before the maturity date; otherwise, the notes will convert to equity of one kind or another, and the eventual sale of that equity (in a public offering, acquisition, or private sale) is a different subject for another day.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Scott Edward Walker

MAY 15, 2012

This post is the third part of a three-part primer on convertible note seed financings. Part 1, entitled “ Everything You Ever Wanted To Know About Convertible Note Seed Financings (But Were Afraid To Ask) ,” addressed the basics. Part 2, entitled “ Convertible Note Seed Financings: Econ 101 for Founders ,” addressed the economics.

Finance 64

Finance Founder Accredited Investor Preferred Stock 64

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. valuation, that’s sort of like a new IPO, but without the lockup period.

Early Stage 95

Early Stage Dilution Private Equity Common Stock 95

Version One Ventures

APRIL 6, 2021

This capped off an incredible month for them, with over $29M in total sales volume in March. The company expects its direct listing to occur on April 14, 2021 with its Class A common stock trading on the NASDAQ under the ticker symbol COIN. Preemadonna raised over $5M in seed financing. valuation. .

Portfolio 60

Portfolio SEC Common Stock Angel Investor 60

Steve Blank

OCTOBER 24, 2017

This required a repeatable and scalable sales process, which required a professional sales staff and a product stable enough that customers wouldn’t return it. A 20th century VC was likely to have an MBA or finance background. This allows founder(s) to sell part of their stock (~10 to 33%) in a future round of financing.

Founder 245

Founder Technical Review CTO Hire IPO 245

ithacaVC

DECEMBER 13, 2013

The share price is calculated by taking the pre-money valuation and dividing it by the number of shares outstanding pre-money. So Share Price (SP) = Pre-Money Valuation (PMV) / Shares Outstanding (SO). That is normal for a pre-money % as it will drop down to about 10% post money depending on size of round and valuation.

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

The Startup Lawyer

JANUARY 10, 2012

In most equity financing rounds, an investor will ask for (and get) a term called a liquidation preference. A liquidation preference is the amount that must be paid to a preferred stock holder before any sale proceeds may be paid to the holders of common stock (i.e., founders, option holders, etc.).

Liquidation Preference 73

Liquidation Preference Pre-Money Valuation Participating Preferred Preferred Stock 73

Both Sides of the Table

SEPTEMBER 5, 2012

Was Paul Graham right in his “high resolution” financing post? What the entrepreneurs were really saying is, “I don’t want to take a lower valuation now, while I don’t have customers or a full team. Some thoughts on raising angel money. So let me weigh in more loudly than in the past.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Eric Friedman

JUNE 27, 2016

I have seen what I call “predatory advisors” come in and really mess up a cap table by promising big intros and sales contracts only to disappear after the first 6-12 months. So what most companies do is get FMV from a 409A valuation and use that for their strike price. Tread cautiously here. So why would you do this?

Equity 98

Equity Vesting Cap Table Common Stock 98

Startup Company Lawyer

JANUARY 31, 2011

Automatic conversion: on a $1M equity financing with no conversion discount and no price cap , provided that the transaction documents provide for a right to purchase a pro rata share of future financings. (I Optional equity conversion: on other equity financings with no conversion discount and no price cap.

Preferred Stock 60

Preferred Stock Liquidation Preference IPO Common Stock 60

www.payne.org

SEPTEMBER 22, 2011

Stock Classes: Common and Preferred. Most venture-funded startups have different classes of stock: common and various flavors of preferred. Your offer will almost surely be for common stock. If the company is acquired or liquidated, the preferred stock holders will get paid first. 1% ownership).

Equity 56

Equity Employee Vesting Preferred Stock 56

Startup Company Lawyer

FEBRUARY 21, 2010

I was speaking at an event last month to a group of CEOs and was surprised by the number of CEOs that were worried about the value of their common stock in a M&A transaction. Due to aggregate liquidation preferences that may exceed the acquisition price in an M&A deal, common stock may be rendered worthless.

Retention 31

Retention Liquidation Preference Employee Common Stock 31

The Next Web

JUNE 15, 2012

From Silicon Valley to Peoria, Illinois, cash-strapped startups look for inventive way to finance their business – often handing out equity to employees, consultants, vendors, and other service providers. It’s a logical solution. Plan upfront. But beyond motivation, there are more pragmatic factors at play here too.

Equity 116

Equity Stock Options Vesting Stock 116

Tim Keane

APRIL 12, 2006

What’s your attitude about “next round” financing? valuation than the previous round. Common stock is a vehicle for sharing risk equally with insiders who have more knowledge and ability to affect business results. Fewer investors will take common stock in early stage transactions. past round one.

Entrepreneur 60

Entrepreneur Valuation Sweat Equity Common Stock 60

Both Sides of the Table

SEPTEMBER 8, 2012

But Paul Graham really did have a point in his “ high resolution fundraising ” post – that there is a problem – particularly in angel financing – with herding cats. ” If you remember the three rules of sales : it’s. We plan to raise at a $5 million pre-money valuation. why buy anything?

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

Professor VC

FEBRUARY 18, 2011

A stock acquisition is a bet that would provide significant upside (and possible downside) opportunity. I was curious about the sale price (not announced in any of the acquisition articles), but was disclosed in Linked-Ins S1 filing at cash proceeds of $2,394,000. I also teach Entrepreneurial Finance at San Jose State.

Acquisition 31

Acquisition San Jose Angel Investor IPO 31

Gust

OCTOBER 3, 2011

For a first time entrepreneur trying to figure out the arcane world of startup financing, it can be very confusing to understand the roles that different types of investors play in funding promising companies, as well as the point in a company’s life at which they enter the stage. From +/- $1.5m

Finance 70

Finance Venture Capital Intellectual Property Early Stage 70

Startup Company Lawyer

JANUARY 9, 2011

Convertible debt with a price cap seems to be the preferred structure for early-stage financings. Over the last 12 months, I’ve noticed a trend where early-stage startup companies raise seed financings of between $250K and $1M using a convertible note with a price cap. Is a priced Series A financing a valid alternative?

Liquidation Preference 57

Liquidation Preference Finance Preferred Stock Common Stock 57