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.

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Vesting Common Stock Stock Founder Vesting 245

Austin Startup

JULY 22, 2021

million in funding Houston’s GroupRaise is a marketplace that helps groups of 20–200 people make reservations at restaurants willing to donate a percentage of the sales back to a charitable cause. Dallas’ ShearShare has a marketplace connecting stylists with available seats at salons and $2.3 million in funding.

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www.inc.com

SEPTEMBER 24, 2011

Sales & Marketing | Wednesdays. SALES & MARKETING. In the past few years, hundreds of small companies have been snatched up by private equity firms willing to agree to ever-rising valuations. The Goods: Your Business Toolbox | Thursdays. Finance | Tuesdays. Innovation | Fridays. Leadership & Managing | Tuesdays. Newsletters.

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Arizona Equity Iowa Venture Capital 40

Startup Professionals Musings

SEPTEMBER 26, 2015

Perhaps they're way off in their valuation (usually far too high), or paralyzed by fear at seeing the other terms, because they have no idea what's normal, and what's worth a fight to the death (their startup's). In very early startups, which have no valuation, the term sheet may specify a convertible note.

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Term Sheet Demand Preferred Stock Liquidation Preference 120

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.

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Stock Vesting Common Stock Founder Vesting 175

Startup Company Lawyer

MARCH 14, 2010

If I represent investors in a later Series A financing, I would probably use the existence of the drag-along as an excuse to implement a more aggressive drag-along provision — which does not require the approval of the holders of common stock to trigger. Co-sale rights. under $500K). Legal fees. Voting agreement.

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Finance Software Review Term Sheet Liquidation Preference 70

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. valuation. . If you missed it, you can read our announcement here.

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Portfolio SEC Common Stock Angel Investor 60

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.

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Stock Vesting Common Stock Founder Vesting 214

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.

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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. In the last decade, as the time startups have spent staying private has grown longer, secondary markets – where people can buy and sell pre-IPO stock — have emerged.

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Scott Edward Walker

APRIL 9, 2012

Part 2 will discuss the two most significant issues for founders in connection with the issuance of convertible notes: (i) the valuation cap and (ii) the discount (and how they interrelate). Why Can’t a Startup Issue Shares of Common Stock to Investors? Friends and family are also often issued shares of common stock.

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Lightspeed Venture Partners

OCTOBER 1, 2012

The company did $1M in sales last year, 90% from wholesale, and had a 10% profit margin. They wanted to get to $10M in sales and then get bought by a big food company. pre money valuation). Cuban has interest in a gluten free diet, and claimed that he liked the company, but his only concern was valuation.

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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.

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Finance Pre-Money Valuation Term Sheet Liquidity Event 79

The Startup Lawyer

JANUARY 10, 2012

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., The amount of the liquidation preference is usually expressed as a multiple, with the most common liquidation preference being “1X non-participating.”

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Liquidation Preference Pre-Money Valuation Participating Preferred Preferred Stock 73

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?

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Equity Vesting Cap Table Common Stock 98

Berkonomics

MAY 22, 2014

The sale of equity in private companies is regulated by the Securities Act of 1933, which requires that the company either register with the SEC or meet one of several exemptions (Regulation D). Bill Payne has been actively involved in angel investing since 1980, funding over 50 companies and mentoring over 100 more.

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Gust

JULY 23, 2012

To qualify for a deduction, the donation must be accompanied by an independent valuation appraisal. Private stock donations have languished despite enormous private company wealth for a few reasons: Few charities accept private stock donations. In fact, the contribution of early-stage company stock can have tremendous impact.

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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.

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Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

Both Sides of the Table

SEPTEMBER 5, 2012

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. They can occur legitimately in a company whose valuation skyrockets unexpectedly as in, “your last round was at $50 million and you want to raise 9 months later at $750 million.

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Ratchet Liquidation Preference Equity Stock 354

Scott Edward Walker

MAY 15, 2012

In other words, in the event of the startup’s “acquisition” (which is often broadly defined to include a merger, change of control or sale of substantially all its assets), the maturity date of the note would be accelerated, and the amount of the loan, plus interest, would become due at the closing of the acquisition.

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Finance Founder Accredited Investor Preferred Stock 64

Startup Company Lawyer

JANUARY 31, 2011

Optional maturity conversion : into Series AA Preferred Stock based on a $5M valuation. Optional change of control/IPO conversion : into common stock at the lesser of (A) fair market value (based on change of control or IPO), or (B) $5M valuation.

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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).

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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.

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Tim Keane

APRIL 12, 2006

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. It is used by some investors who like the deal but can’t come to terms on valuation.

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The Next Web

JUNE 15, 2012

After all, cash may be in short supply, but there’s a virtually endless amount of work to be done, from coding and web development, to PR, sales, general operations, or sage advice from an industry veteran. It’s a logical solution. Plan upfront. But beyond motivation, there are more pragmatic factors at play here too.

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Equity Stock Options Vesting Stock 116

www.paulgraham.com

APRIL 28, 2010

Another concept we need to introduce now is valuation. I say "in theory" because in early stageinvesting, valuations are voodoo. As a company gets more established,its valuation gets closer to an actual market value. As a company gets more established,its valuation gets closer to an actual market value. Better how?

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Technical Review Startup Software Review Angel Investor 76

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. Thus, I am raising my questions here.

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Acquisition San Jose Angel Investor IPO 31

Both Sides of the Table

SEPTEMBER 8, 2012

” If you remember the three rules of sales : it’s. We plan to raise at a $5 million pre-money valuation. In the document it outlines that you will issue stock at a $5m pre-money valuation and in recognition of the additional risks and commitments of early money you have allocated warrants to the first $150,000 of investors.

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Startup Company Lawyer

JANUARY 9, 2011

Tweaking convertible debt so that common stock (instead of preferred stock) is issued for the conversion discount in order to limit liquidation preference overhang. However, many seed equity financings don’t provide for anti-dilution protection, as the valuations are low to begin with.

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Liquidation Preference Finance Preferred Stock Common Stock 57

Gust

OCTOBER 3, 2011

This will usually be documented as either a straight sale of Common Stock (which is most typical) or else as Convertible Note which converts into the same security as the next professional round, but at a discount (which is actually better for everyone). From +/- $1.5m

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Finance Venture Capital Intellectual Property Early Stage 70