Hunter Walker

SEPTEMBER 29, 2022

Starting a venture capital blog post with 1970s country music lyrics is pretty uncommon, but so is writing about when and why an investor might choose to sell equity before the company exits. And finally, a more robust (but still somewhat opaque) secondary market emerged for transacting equity among parties. You might think, “Hunter!

Venture Capital 122

Venture Capital Cap Table LP Equity 122

Up and Running

SEPTEMBER 20, 2021

The use of a cap table for a company comes into play when it has to track the total amount of shares, the value of shares, and the equity ownership of all the shareholders. The data of the company, such as debt and the company’s equity ownership, is laid out with the help of a cap table. Convertible notes. Total share ownership.

Cap Table 112

Cap Table Pre-Money Valuation Stock Options Option Pool 112

Berkonomics

JANUARY 6, 2022

First, the marginal exit event: Sometimes the end game or sale of the company is not a happy event for the early investors, including the entrepreneur or the founders. Most sophisticated investors will take either a promissory note or preferred stock, both of which come before founder or management stock in a sale or liquidation.

Dividend 62

Dividend IRR Preferred Stock Participating Preferred 62

Austin Startup

OCTOBER 27, 2017

TL;DR : “Founder friendliness” should mean not being hostile, but also not being submissive, to founders. Out of State VCs When you’re not CEO Material Preferred Stock v. The truth is, I’ve put my fair share of founders in their place, when appropriate. Good entrepreneurs and advisors know that.

Founder 48

Founder Cap Table Preferred Stock Common Stock 48

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. For example, an investor that agrees to purchase 20% of the equity in a Series A round requests the right to purchase up to 50% of the subsequent Series B round. Pro Rata Rights.

Preferred Stock 56

Preferred Stock Term Sheet Dilution Stock 56

Agile VC

APRIL 17, 2011

Kayak was started here in my backyard of Boston… co-founder & CTO Paul English and the product/engineering team is based here in Concord MA. Co-founder & CEO Steve Hafner and the business team are based in Norwalk, CT. Series A Preferred. liquidation preference, 6% accumulated dividend (1). as of 12/31/09).

Pre-Money Valuation 113

Pre-Money Valuation Liquidation Preference Dividend Common Stock 113

Scott Edward Walker

APRIL 22, 2012

(ii) why are convertible notes issued instead of shares of common or preferred stock? This part 2 will address the economics of a convertible note seed financing and the three key economic terms: (i) the conversion discount, (ii) the conversion valuation cap and (iii) the interest rate. What Is a Conversion Discount?

Pre-Money Valuation 72

Pre-Money Valuation Finance Liquidation Preference Founder 72

Scott Edward Walker

MAY 15, 2012

Part 2, entitled “ Convertible Note Seed Financings: Econ 101 for Founders ,” addressed the economics. What Happens If a Startup is Acquired Prior to the Note’s Conversion to Shares of Preferred Stock? There are generally three different approaches: 1) Money Back, Plus Interest (Founder-Friendly).

Finance 64

Finance Founder Accredited Investor Preferred Stock 64

Gust

SEPTEMBER 29, 2011

It should therefore come as no surprise that an asymmetry of information exists, mostly gleaned from experience, between founders and investors in a venture financing deal. A term sheet for a convertible note deal may run two or three pages, versus 8-10 pages for a typical Series A Preferred Stock financing.

Finance 178

Finance Term Sheet Preferred Stock Bridge Financing 178

Scott Edward Walker

APRIL 9, 2012

As a result, the pendulum has swung dramatically in the founders’ favor, and the issuance of convertible notes for seed financing has never been more prolific. ii) why are convertible notes issued instead of shares of common or preferred stock? A convertible note is short-term debt that converts into equity.

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Gust

OCTOBER 5, 2011

In case it isn’t clear by now, angel investors aren’t in the business of making risky early stage investments in order to earn 6% interest on their money, or even 10%— the upside is all in conversion to equity—so the interest rate isn’t a major point of negotiation. This paragraph is the heart of the whole deal.

Finance 79

Finance Preferred Stock Term Sheet Early Stage 79

Startup Company Lawyer

MARCH 12, 2009

Any company that raises venture financing will need to be a C corp in order to issue preferred stock. If founders want the benefit of flow through tax treatment with respect to losses prior to an outside financing, an S corp election may make sense as long as there are no entity or non-U.S. such as incentive stock options.

LLC 61

LLC Stock Options Preferred Stock Stock 61

Business Plan Blog

NOVEMBER 13, 2013

Most startup founders do not have enough capital to launch their companies and need to raise money at some point. Convertible Debt” is a loan, which is automatically converted to equity at maturity or upon the closing of a round of financing. Various terms such as price cap, discount, conversion to equity, etc.,

Finance 93

Finance Accredited Investor Angel Investor Seed Capital 93

The Startup Lawyer

JUNE 22, 2010

The main feature of the convertible note is that the debt investment made by the angel investor will typically later convert into equity. For this article, let’s assume this equity is the Series A Preferred Stock purchased by a venture capital fund. Convertible Note Discount. Incentive Misalignment.

Pre-Money Valuation 82

Pre-Money Valuation Angel Investor Preferred Stock Valuation 82

Berkonomics

OCTOBER 1, 2015

Sometimes the end game or sale of the company is not a happy event for the early investors, including the entrepreneur or the founders. Most sophisticated investors will take either a promissory note or preferred stock, both of which come before founder or management stock in a sale or liquidation.

Dividend 48

Dividend Preferred Stock IRR Participating Preferred 48

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

Up and Running

MAY 23, 2016

“If you can fix a problem for someone and do it better, quicker, and/or cheaper than your competitor, you’re off to a good start.” – Gabriel Kuperman, founder and CEO of CuePin. We created UpKeep to fill this void—a cloud-based solution that was affordable for any size business.” – Ryan Chan, founder of UpKeep.

Software Review 74

Software Review Software Delaware Forecast 74

Business Plan Blog

APRIL 10, 2012

According to their blog, “a convertible note is short-term debt that converts into equity. In the context of a seed financing, the debt typically automatically converts into shares of preferred stock upon the closing of a Series A round of financing.” and (iii) what are the advantages of issuing convertible notes? Interested?

Finance 40

Finance Preferred Stock Equity Stock 40

ithacaVC

DECEMBER 13, 2013

They are typically pretty simple: (i) shares owned by founders and (ii) shares authorized for issuance in a stock option pool, some of which may be issued to employees already and some of which will be available for future issuance. If no additional equity is ever granted to Founder X and Founder Y, then Founder Y will ALWAYS own 1.63

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

ithacaVC

APRIL 5, 2011

One rule of simple cap tables is to issue “normal” stock to founders (common stock only) and investors (typically preferred stock, but sometimes common stock to early friends and family). So, we needed a solution. I hope the investor agrees. I am curious to see how it works out.

Common Stock 45

Common Stock Stock Cap Table Preferred Stock 45

www.vccafe.com

MARCH 11, 2013

.” Hackernews list of “Tools of the Trade” for startups - includes over 150 SaaS tools used by startups, and over 150 comments with interesting insights from founders. GetSatisfaction - conversations between companies / customers. YCombinator Series AA Equity Financing Documents. Founder Equity Issues.

Software Review 53

Software Review Technical Review Startup 53

Both Sides of the Table

APRIL 14, 2010

It will usually be higher because the liquidation preference has a dividend so if the deal is long in the tooth assume that the liquidation preference might be $20-22 million. Liquidation preference is the amount of money that an investor gets paid before the common stock (e.g. Take liquidation preferences head on.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

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. If an incubator offers your startup $25,000 in exchange for 6% equity, the pre-money valuation is a whopping $391,667. Other incubators may want to set up an option pool.

Incubator 105

Incubator Pre-Money Valuation Option Pool Advisory Board 105

Tim Keane

JANUARY 12, 2010

The investors and the entrepreneurs are – or should be – aware that the price of the company’s equity is set by the market – in simplest terms, what an informed buyer is willing to pay.   Note that this applies only to earl stage Series A-type equity financings and assumes no cash dividends are paid to investors.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Gust

OCTOBER 26, 2011

The purchase agreement sets forth the terms of the investment, often including the mandatory and voluntary conversion provisions we’ve covered in this series, as well as customary representations and warranties of the Company and the investors. See discussion of amendments below.) merger or acquisition).

Finance 79

Finance Term Sheet Covenant Accredited Investor 79

Professor VC

DECEMBER 26, 2012

I did finally chime in on the twitter discussion yesterday: I first blogged about this topic almost two years ago when I called out the large number of convertible debt seed financings that weren't going to have any conversion event. If not, move on and join another team or come up with another idea with the same or different co-founders.

Finance 48

Finance Angel Investor Private Equity Preferred Stock 48