The Startup Lawyer

JUNE 22, 2010

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 per share, the discount may allow the angel investor to purchase the same Series A Preferred Stock at $0.75

Pre-Money Valuation 82

Pre-Money Valuation Angel Investor Preferred Stock Valuation 82

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. per share for 2,000,000 shares of newly issued Series A Preferred Stock.

Finance 79

Finance Preferred Stock Term Sheet Early Stage 79

Gust

OCTOBER 21, 2011

In Parts II and III, we looked at commonly used mandatory and voluntary conversion language in convertible notes. Investors would be repaid their principal, plus accrued interest, divided by the conversion price (let’s say 30% discount, so 1 – 0.3 = 0.7). a mix of cash and stock) received by other equity holders in the transaction.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

The Next Web

JUNE 17, 2015

And, on a similar note, I would limit equity conversations to service providers that are going to be long-term in nature, helping you build your business over time. Now that we understand which service providers we are willing to have equity conversations with, next we have to understand how to structure these deals.

Equity 60

Equity Valuation Preferred Stock Common Stock 60

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

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.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

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.

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

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. In addition, the conversion of an LLC to a C corp results in additional legal and accounting expense. Almost all technology startup companies that I work with are C corps. citizen/resident stockholders. Governance/Structure.

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

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

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

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

Scott Edward Walker

JULY 7, 2011

A redemption right is another feature of preferred stock and permits the investors to require the company to repurchase their shares after a specified period of time; it is, in effect, a “put” right – that is, the investors may elect to put their shares back to the company. Redemption Rights What Are Redemption Rights?

Term Sheet 49

Term Sheet Redemption Venture Capital Preferred Stock 49

The Startup Lawyer

FEBRUARY 4, 2011

The following are some issues to consider and actions to take before accepting an incubator’s offer: (1) Calculate Valuation and Determine Value. Pre-money valuations startups receive from incubators are typically low…really low. The “revised for the cash investment only&# pre-money valuation is $600,000. (2)

Incubator 105

Incubator Pre-Money Valuation Option Pool Advisory Board 105

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

Scott Edward Walker

SEPTEMBER 14, 2011

Here are the issues I have addressed to date: common mistakes dealing with VC’s valuation liquidation preferences stock options exploding term sheets and no-shop provisions anti-dilution provisions dividends Board control protective provisions drag-along provisions pay-to-play and pull-up provisions conversion rights non-contractual rights redemption (..)

Term Sheet 76

Term Sheet Due Diligence Liquidation Preference Redemption 76

Up and Running

SEPTEMBER 20, 2021

Furthermore, there are various forms of equity, such as preferred stock, common stock, and convertible notes, which influence the present and potential future investors. For instance, the cap table will help you with various possibilities while running business activities like available options and pre-money valuations faster.

Cap Table 112

Cap Table Pre-Money Valuation Stock Options Option Pool 112

thestartuplawyer.com

FEBRUARY 24, 2010

do not think being friends or relatives reduces the need for these difficult and/or awkward conversations. 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.

Cofounder 40

Cofounder Founder Preferred Stock Startup 40

Tim Keane

APRIL 12, 2006

We are open to them and prefer to begin to co-invest at. valuation than the previous round. We don’t like them and would prefer not to be involved. 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.

Entrepreneur 60

Entrepreneur Valuation Sweat Equity Common Stock 60

Hunter Walker

SEPTEMBER 29, 2022

There were examples of great investors who said “never sell early — you ride your winners as long as you can” and others who had *very* specific formulas for when they sell (when it hits X valuation, take Y percent off the table each subsequent round; always sell until you hit a certain return multiple for the fund, then hold after; and so on).

Venture Capital 122

Venture Capital Cap Table LP Equity 122

Scott Edward Walker

JUNE 9, 2011

Conversion Rights What Are Conversion Rights? As many of you know, VC investors are typically issued shares of preferred stock, not common stock. As many of you know, VC investors are typically issued shares of preferred stock, not common stock. What Are Optional Conversion Rights?

Term Sheet 60

Term Sheet Conversion Rights Venture Capital Liquidation Preference 60

abovethecrowd.com

FEBRUARY 24, 2015

An unprecedented 80 private companies have raised financings at valuations over $1B in the last few years. Lost in this conversation are the dramatic differences between a high priced private round and an IPO. Conversely, these late stage private rounds have no such pageantry or process. We are in a risk bubble.

IPO 40

IPO Liquidation Preference Valuation Technical Review 40

Both Sides of the Table

SEPTEMBER 8, 2012

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. And we know it’s a challenge to herd cats.

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

Startup Company Lawyer

JANUARY 9, 2011

A logical alternative to convertible debt is a priced Series A preferred stock financing. Mark Suster does a good job analyzing whether convertible debt is preferable to equity , and concludes that convertible debt is better. This leads me to believe that there is a mini-bubble in the early stage financing universe.

Liquidation Preference 57

Liquidation Preference Finance Preferred Stock Common Stock 57

techcrunch.com

SEPTEMBER 2, 2012

Sometimes these loans have a valuation cap and/or a discount. The point, he says, is to avoid time-consuming valuation negotiations and allowing a variable amount of capital to be raised. As a refresher, a convertible note is a loan that automatically converts into equity upon the closing of a Series A round of financing.

Equity 87

Equity San Francisco Technical Review Angel Investor 87

www.vccafe.com

MARCH 11, 2013

GetSatisfaction - conversations between companies / customers. Seed Stage Valuation Guide. Preferred Stock Purchase Agreement. valuations. online subscription management. FeeFighters â?? find the cheapest credit card processors. Customer Support. support, knowledgebase tool for your site. SnapEngage â?? Zendesk â??

Software Review 53

Software Review Technical Review Startup 53