Both Sides of the Table

SEPTEMBER 18, 2014

On the phone … Me: So, you raised venture capital? 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. About $1 million.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Both Sides of the Table

APRIL 14, 2010

If you want to raise venture capital more easily the advice could be quite practical and counter-intuitive. Many companies that are raising B or C venture capital rounds right now raised their initial money in 2005-2008. Liquidation preference is the amount of money that an investor gets paid before the common stock (e.g.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

ReadWriteStart

JUNE 1, 2020

The shares given out can either be common stocks or preferred stocks. ? Debt investment. Under this category, you have the angel investors who would invest their own money and Venture Capital or VC firms, who manage funds aimed towards specific startup sectors and stages. Equity investors. Debt investors.

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

Scott Edward Walker

JUNE 9, 2011

Introduction This post originally appeared as part of the “ Ask the Attorney ” column I am writing for VentureBeat ; it is another installment of my ongoing series regarding venture capital term sheets. As many of you know, VC investors are typically issued shares of preferred stock, not common stock.

Term Sheet 60

Term Sheet Conversion Rights Venture Capital Liquidation Preference 60

K9 Ventures

OCTOBER 19, 2015

Note: If you’re a founder, stop reading this post now. If you’re even remotely connected to the “industry” of Venture Capital, you need to read Howard Marks’ It’s Not Easy memo. If you build a good company, investors will hunt you down.

Venture Capital 48

Venture Capital Liquidation Preference Valuation Portfolio 48

Up and Running

SEPTEMBER 19, 2017

That’s because obtaining a pre-money valuation for a concept level technology company in excess of $1 million is difficult, particularly for a startup founder without a proven track record. Under that scenario, the same $500,000 is only worth a 10-ish percent stake in the business, and the founder can retain far more control in the entity.

Private Equity 94

Private Equity Pre-Money Valuation Equity Startup 94

www.inc.com

SEPTEMBER 24, 2011

Dave Graham Business Venture Capital Private Equity GlobalLogic Inc. Venture Capital Firms. 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. Were not a venture capital firm.".

Arizona 40

Arizona Equity Iowa Venture Capital 40

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

Startup Company Lawyer

AUGUST 31, 2012

” The theory is that the number of seed stage Series A deals led by venture capital firms is decreasing, meaning that it will be difficult for startups to raise a new round of financing. ” However, I believe that YC realizes that having debt outstanding that may need to be repaid is not a good situation for founders.

Convertible Security 73

Convertible Security Equity Security Preferred Stock 73

Both Sides of the Table

MAY 13, 2013

I’m supposed to believe that my best innovation can only come from scores of startup founders who just made millions and have now become CVOs at my company? If the money comes from professional investors it usually has a “liquidation preference” meaning that their money comes out before the founders or common stock. (If

Liquidation Preference 357

Liquidation Preference Early Stage Retention Lock-up Period 357

YoungUpstarts

JUNE 26, 2020

Sangha was a graduate of University of Pennsylvania and his first venture capital investor turned out to be an alumni. Setting aside the issues of valuation of common stock vs. preferred stock, what I really didn’t understand was that a valuation is a set of expectations. Who is in your tribe? In the U.S.,

Finance 205

Finance Silicon Valley Valuation Startup 205

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). If you don’t, please educate yourself on this site, Venture Hacks and the term sheet series by Brad Feld/Jason Mendelson, among other places. under $500K). Legal fees.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Startup Professionals Musings

SEPTEMBER 26, 2015

Here is a summary of the key terms to expect on the term sheet, or the contract between the founder and investor: Consideration given for the money invested. Type of stock assigned to the investor. Investors typically demand preferred stock, to give themselves certain voting and liquidation privileges over later shareholders.

Term Sheet 120

Term Sheet Demand Preferred Stock Liquidation Preference 120

www.mattbartus.com

SEPTEMBER 24, 2011

Perspectives on issues affecting founders, startups and investors from a veteran startup lawyer in Silicon Valley. First, you’d probably want them to receive common stock, not preferred stock (which is the likely next round). Cooley Report Reviews Second Quarter Venture Capital Financing Trends.

Equity 40

Equity Vesting Silicon Valley Intellectual Property 40

Scott Edward Walker

APRIL 9, 2012

Venture capital funds, seed funds, super angels, angel groups, incubators, and “friends and family” are all playing the seed financing game and investing early in startups in an attempt to land the next Facebook. and (iii) what securities laws do founders need to worry about in connection with the issuance of convertible notes?

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Scott Edward Walker

JUNE 9, 2019

Accordingly, I thought it would be helpful for founders to discuss these rights and to point out the problems they create for startups. This is a huge red flag and founders should push back very hard. In short, super pro rata rights are another example of investors trying to take advantage of inexperienced founders.

Preferred Stock 56

Preferred Stock Term Sheet Dilution Stock 56

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. It must be paid out before the common shares, which are typically held by the founders and other employees.” But this time he missed a few things.

Dividend 45

Dividend Liquidation Preference Common Stock Venture Capital 45

Gust

SEPTEMBER 17, 2014

Me: So, you raised venture capital? 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. On the phone …. We raised a seed round.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Growthink Blog

MAY 10, 2012

If it's not your plan to get venture capital down the road, then you'll probably stop in Stage 2-receiving enough funding to boost your marketing, sales, and infrastructure to grow organically from there to the point where you are satisfied or ready to sell. So during this round, you'll be testing what works and what doesn't.

Equity 88

Equity Mezzanine Later Stage Venture Capital 88

blog.simeonov.com

FEBRUARY 22, 2010

Simeon, can you tell us how you structure ownership and control so you can fire your co-founders if necessary? The first part will dispel some myths, address the lifecycle of founder agreements and the key compensation and control parameters in them. Let’s start by dispelling some myths: There is a standard founder agreement.

Founder 44

Founder Vesting Agile Startup 44

Growthink Blog

APRIL 7, 2010

million from three individual angel investors and one early-stage venture capital fund. For those of you who don't understand the term "Series A," the Series A round is the name given to your first significant round of venture financing. read more.

Angel Investor 54

Angel Investor Preferred Stock Venture Capital Common Stock 54

ReadWriteStart

MAY 8, 2012

Regardless of whether you’re raising venture capital, approaching angels or still trying to figure out where to get started, it’s critical to stay level-headed about what you’re really pitching - and what it’s actually worth. Gina Mancuso , Founder and CEO of LoveThatFit. Avichal Garg , Co-Founder and CEO of Spool.

Cofounder 140

Cofounder Startup San Francisco Silicon Valley 140

K9 Ventures

MAY 14, 2011

The limited partners may themselves run the gamut from individuals, family offices, venture capital funds to institutional LPs. This now means that they will slowly start behaving less like Angels, and more like institutional venture capital funds. Common Stock. Convertible Note or Preferred Stock.

Preferred Stock 125

Preferred Stock Seed Stage Incubator Early Stage 125

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

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. The reason is thatinvestors need to get their capital back.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

thestartuplawyer.com

FEBRUARY 24, 2010

He obviously never launched a startup and got shafted by a co-founder. He obviously never launched a startup and got shafted by a co-founder. You can start by examining every aspect of the co-founder relationship. In fact, if your co-founder is a friend or relative, that should trigger even more issues and discussions.

Cofounder 40

Cofounder Founder Preferred Stock Startup 40

Tim Keane

JANUARY 12, 2010

  I’ve sat down with entrepreneurs and a copy of a term sheet guide I like [ “Term Sheets & Valuations - A Line by Line Look at the Intricacies of Venture Capital Term Sheets & Valuations ” by Alex Wilmerding, Aspatore Press.] These include: ·       Vesting of Founder Stock.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

abovethecrowd.com

MAY 20, 2013

Private companies typically have capitalization structures that are very complex. 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. 1) Structural Challenges.

Merger 53

Merger Institutional Investors Liquidation Preference Preferred Stock 53

Professor VC

MARCH 12, 2015

As with all M&A exits, there was a round of congratulatory messages to the founder in the Silicon Valley echo chamber. If I''m going to pay a fee and carry, would prefer to invest in a venture capital fund, as the investments are being managed by professionals and have a duty to look out for LP interests.

Syndicate 28

Syndicate Syndication Silicon Valley Common Stock 28

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

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

ithacaVC

FEBRUARY 23, 2011

The MCOP can serve a critical role as founders and other management team members are diluted down by rounds of financing or if their equity is not in the money. The more the company raises the higher the ALP, and thus the higher the hurdle before the common stock held by founders and stock options held by other employees are in the money.

Liquidation Preference 55

Liquidation Preference Management Preferred Stock Dividend 55

Gust

OCTOBER 21, 2011

In descending order of preference from the founders’ point of view: 1. a mix of cash and stock) received by other equity holders in the transaction. To understand why, consider what would happen without such a provision if the startup turned out to be an overnight sensation acquired by Google for $30 million six months later.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

The Entrepreneurial Mind

MARCH 10, 2010

In return for this investment, JumpStart Foundry will receive a collective 10% ownership in the Common Stock of the company. Traditional venture capital funds require investments to be at least $1-5 million in size. The fund intends to help launch or "jump-start" emerging new business concepts.

Nashville 53

Nashville Tennessee Early Stage Common Stock 53

Professor VC

JULY 25, 2013

Mike Markkula presenting Steve Jobs with first investment in Apple I recently watched an excellent documentary on PBS, Something Ventured: Risk, Reward, and the Original Venture Capitalists. Angel Investors Silicon Valley term sheets venture financing venture capital' Startup outcomes tend to be very binary.

Term Sheet 46

Term Sheet Silicon Valley Syndicate Syndication 46

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. The Most Important Venture Capital Statistic.

Acquisition 31

Acquisition San Jose Angel Investor IPO 31

Gust

OCTOBER 3, 2011

If a company is appropriate for angel financing , for example, it is highly unlikely that it would also be in a position to raise venture capital, and vice versa. 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.). From +/- $1.5m

Finance 70

Finance Venture Capital Intellectual Property Early Stage 70