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) what happens if the maturity date is reached prior to the note’s conversion to equity?

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Feld Thoughts

SEPTEMBER 27, 2011

Some sort of conversion does occur. In the case of an early-stage startup that hasn’t issued preferred stock yet, the debt converts into stock of the acquiring company (if it’s a stock deal) at a valuation subject to a cap. If it’s not a stock deal, then one normally sees one of the above scenarios.

Conversion 96

Conversion Sales Later Stage Preferred Stock 96

Hunter Walker

SEPTEMBER 29, 2022

As more growth and crossover investors came into the startup ecosystem they were often eager to put capital to work and happy to consolidate their positions with common or preferred shares from early employees, founders and previous investors. We’re aligned with the founders and the rest of the cap table until we aren’t.

Venture Capital 122

Venture Capital Cap Table LP Equity 122

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. We plan to raise at a $5 million pre-money valuation. They share in liquidation preferences pari passu and they vote as a single class.

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

View from Seed

OCTOBER 15, 2014

Over the summer, based on feedback from our portfolio and the broader startup community, NextView created pre-formatted board deck templates for seed-stage startups — part of our Growth Guides series. A seed-stage mobile startup’s housekeeping section might look something like this: Section 3: Core Metrics.

Seed Stage 331

Seed Stage Cap Table Metrics Burn Rate 331

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.

Pre-Money Valuation 72

Pre-Money Valuation Finance Liquidation Preference Founder 72

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

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. For this article, let’s assume this equity is the Series A Preferred Stock purchased by a venture capital fund. For example, if a venture capital fund purchases Series A Preferred Stock at $1.00

Pre-Money Valuation 82

Pre-Money Valuation Angel Investor Preferred Stock Valuation 82

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

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

The Next Web

JUNE 17, 2015

Giving up equity in your business, as an alternative to paying cash, often sounds like a great idea to cash-starved startups. When you can, raising capital from a professional third-party investor is always preferred. This typically comes down to the security, voting rights and valuation of the deal. cash only.

Equity 60

Equity Valuation Preferred Stock Common Stock 60

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

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. citizen/resident stockholders.

LLC 61

LLC Stock Options Preferred Stock Stock 61

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. We’ll adjust the liquidation preference when the new investor comes in.&# Every investor says this. Take liquidation preferences head on.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

Business Plan Blog

APRIL 10, 2012

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.” In layman’s terms, investors will give money to a startup but instead of getting money back, they get preferred stock in return. Interested?

Finance 40

Finance Preferred Stock Equity Stock 40

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

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). For clarity, it is impossible to issue stock without putting a value on the company.

Common Stock 45

Common Stock Stock Cap Table Preferred Stock 45

thestartuplawyer.com

FEBRUARY 24, 2010

Contact The Startup Lawyer: Home Page About Contact FAQs Glossary Ryan Roberts Law: Home Page Social Networks: Facebook Twitter LinkedIn Flickr Delicious Digg Last.FM 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.

Cofounder 40

Cofounder Founder Preferred Stock Startup 40

Scott Edward Walker

SEPTEMBER 14, 2011

Once a startup has executed a term sheet, it has lost all of its negotiating leverage. What Are the Key Issues for Founders? Indeed, some very pro-entrepreneur investors, like Fred Wilson , do not require no-shop provisions (see rule #4 in Fred’s post “ Competing To Win Deals ”).

Term Sheet 76

Term Sheet Due Diligence Liquidation Preference Redemption 76

Startup Company Lawyer

JANUARY 11, 2010

As I have written previously , I think that convertible notes with even large conversion price discounts (e.g. 50%) or warrant coverage are typically more company-favorable than a Series A financing where a valuation is set. If the investor had invested $500K in a Series A Preferred Stock at a $4.5M a price cap).

Angel Investor 39

Angel Investor Valuation Bridge Financing Preferred Stock 39

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. We are open to them and prefer to begin to co-invest at. valuation than the previous round. How do you approach valuation?

Entrepreneur 60

Entrepreneur Valuation Sweat Equity Common Stock 60