Gust

SEPTEMBER 29, 2011

The most successful serial entrepreneurs in the world may found three or four, perhaps even eight or ten venture-backed startups over the course of their careers. For more on working with startup lawyers, see Mark Suster’s classic post, How To Work With Lawyers At A Startup.). Knowledge is power.

Finance 178

Finance Term Sheet Preferred Stock Bridge Financing 178

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

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. Individual investors who provide financial funding to startups are called ‘Angel Investors.’ Among the most common methods of funding used by startups when raising seed capital is “Convertible Debt Financing.”

Finance 93

Finance Accredited Investor Angel Investor Seed Capital 93

Agile VC

APRIL 17, 2011

AGILEVC My idle thoughts on tech startups. At the end of the day Kayak’s playing a key role in the online travel process, but it appears more of the revenue comes from filling top of the conversion funnel rather than the middle or bottom of it. How to Evaluate Firms for a Seed VC. How To Think About The Future. April 17, 2011.

Pre-Money Valuation 113

Pre-Money Valuation Liquidation Preference Dividend Common Stock 113

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. ii) why are convertible notes issued instead of shares of common or preferred stock? What is a Convertible Note?

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Both Sides of the Table

SEPTEMBER 5, 2012

This time by the efforts of Adeo Ressi to introduce a new kind of structure called “ convertible equity.” My initial reaction to Adeo when we spoke was that while it may have solved some issues (debt versus equity) it didn’t solve the ones that I’ve been warning entrepreneurs about most loudly.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Both Sides of the Table

MARCH 21, 2010

This is part of my ongoing series on Startup Advice. As startup entrepreneurs we all want to work with them because having their name as reference clients makes it so much easier for marketing, PR, selling to other customers, fund raising and even recruiting. Large companies can be strange sometimes. Sometimes it actually does.

Warrant 298

Warrant Dilution Startup Stock Options 298

Gust

OCTOBER 5, 2011

Last week , we gave some attention to the “why” behind convertible note financing for early stage startups. Going back to Part I , recall that although a convertible note is technically a loan made to the startup, in practice these loans are rarely expected to be repaid. These deal terms are simple but significant.

Finance 79

Finance Preferred Stock Term Sheet Early Stage 79

Startup Company Lawyer

MARCH 12, 2009

Almost all technology startup companies that I work with are C corps. Any company that raises venture financing will need to be a C corp in order to issue preferred stock. In addition, the conversion of an LLC to a C corp results in additional legal and accounting expense. such as incentive stock options.

LLC 61

LLC Stock Options Preferred Stock Stock 61

The Startup Lawyer

JUNE 22, 2010

If you follow this blog, you know that I think convertible debt is a good structure for a startup’s angel round. The main feature of the convertible note is that the debt investment made by the angel investor will typically later convert into equity. of the startup immediately after the Series A round.

Pre-Money Valuation 82

Pre-Money Valuation Angel Investor Preferred Stock Valuation 82

Tim Keane

JANUARY 12, 2010

Startups and angels: Along the way to success. 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.   Posted at 04:19 PM in Funding startups | Permalink. TrackBack URL for this entry: [link].

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

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

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

The Startup Lawyer

FEBRUARY 4, 2011

Great news — your startup just got accepted to an incubator! 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. Pre-money valuations startups receive from incubators are typically low…really low.

Incubator 105

Incubator Pre-Money Valuation Option Pool Advisory Board 105

Scott Edward Walker

MAY 15, 2012

What Happens If a Startup is Acquired Prior to the Note’s Conversion to Shares of Preferred Stock? As discussed in part 1 , in the context of a seed financing, a convertible note is a loan that typically automatically converts into shares of preferred stock upon the closing of a Series A round of financing.

Finance 64

Finance Founder Accredited Investor Preferred Stock 64

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.” Business Planning Startup Tips' Interested?

Finance 40

Finance Preferred Stock Equity Stock 40

The Startup Lawyer

FEBRUARY 13, 2012

Conversely, if you are raising a small convertible note round (sub $100k), then a couple extra interest points may not be that material. The convertible note interest should also accrue until the note converts into equity or is paid out at the sale of the company.

Preferred Stock 73

Preferred Stock Dividend Equity Stock 73

Both Sides of the Table

APRIL 14, 2010

In straight preferences the investors only get this money in a “downside&# scenario as protection that they get their money back if your company isn’t successful. Take liquidation preferences head on. Existing investors won’t want to have these conversations. The list goes on. Legacy deals have “hair.&#.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

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

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). The investor deserves to get preferred stock ultimately (remember, that was the goal of the convertible debt).

Common Stock 45

Common Stock Stock Cap Table Preferred Stock 45

Austin Startup

OCTOBER 27, 2017

Out of State VCs When you’re not CEO Material Preferred Stock v. Common Stock Ask the Users Because we’re known as Startup/VC lawyers who don’t represent VCs (just companies), I often get asked about my thoughts on “founder friendliness.” Good entrepreneurs and advisors know that. Background reading: Local v.

Founder 48

Founder Cap Table Preferred Stock Common Stock 48

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. Preference shares. Common shares.

Cap Table 112

Cap Table Pre-Money Valuation Stock Options Option Pool 112

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

Professor VC

DECEMBER 26, 2012

A good place to start for data is CBInsights' Seed Investing Report- Startup Orphans and the Series A Crunch. 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.

Finance 48

Finance Angel Investor Private Equity Preferred Stock 48

Tim Keane

APRIL 12, 2006

Startups and angels: Along the way to success. It also gives investors information about your intellectual integrity and some glimmer of how you will face adversity in the startup process. Fewer investors will take common stock in early stage transactions. Preferred Stock is the most usual form of investment today.

Entrepreneur 60

Entrepreneur Valuation Sweat Equity Common Stock 60

Up and Running

MAY 23, 2016

To give you a better idea of what entrepreneurs in this industry are thinking about during each phase of the startup process, I interviewed SaaS entrepreneurs from all over the world, including our own COO Noah Parsons. Eric Ries, a Silicon Valley entrepreneur and author of The Lean Startup, popularized this strategy for web applications.

Software Review 74

Software Review Software Delaware Forecast 74

Both Sides of the Table

SEPTEMBER 8, 2012

I recently wrote about my views that startups rounds should be priced. Here is what I recommend very often – privately – to startup entrepreneurs for angel funding. You can do it with equity & a price. They share in liquidation preferences pari passu and they vote as a single class. And a few others.

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

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

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

techcrunch.com

SEPTEMBER 2, 2012

Convertible Equity, A Better Alternative To Convertible Debt? As a refresher, a convertible note is a loan that automatically converts into equity upon the closing of a Series A round of financing. First, with convertible debt, startups generally have to pay simple (not compounded) interest on the amount of the loan.

Equity 87

Equity San Francisco Technical Review Angel Investor 87

www.vccafe.com

MARCH 11, 2013

Startup Resources (Updated Mar 2013). Venture Capital Cafe > Startup Resources (Updated Mar 2013). VC & Startup Resources. Seed Startups. VC Cafe covers early stage Israeli and European tech & mobile startups. Hundreds of startups featured since 2005, will yours be next? About VC Cafe.

Software Review 53

Software Review Technical Review Startup 53