Both Sides of the Table

JULY 29, 2010

We received so much positive feedback from our This Week in Venture Capital show walking through valuation calculations & term sheets that we decided to do a Q&A show this week to address topics that entrepreneurs want to learn about. on the entrepreneur side of the table) when I raised at too high of a price. This is wrong.

Venture Capital 282

Venture Capital Term Sheet Valuation Stock Options 282

David Teten

MARCH 14, 2018

. – Build out low-cost force multipliers such as scouts , Advisors, Entrepreneurs in Residence, Venture Partners, and so on. Typically these outside resources are paid only on a success basis, so the marginal cost is low. . All of the strategies above have very modest fixed cost.

Private Equity 60

Private Equity Venture Capital Equity Cofounder 60

Startup Company Lawyer

AUGUST 31, 2012

Over the past few years, convertible debt has emerged as a quick and inexpensive method for startup companies to raise money from angel investors and early stage venture funds. ” As a result, Ted introduced the Series Seed preferred stock documents as an alternative to convertible debt for early stage investments.

Convertible Security 73

Convertible Security Equity Security Preferred Stock 73

Startup Professionals Musings

MARCH 11, 2013

One of the first questions that I get from many entrepreneurs is “How should I set up my company to minimize my setup costs, tax liabilities, and risk of lawsuits?” If you aren’t so sure, need something fast, or need to keep your costs low, then an LLC is the best legal and taxable entity to facilitate your startup.

LLC 234

LLC Nevada Delaware Limited Liability Company 234

Startup Professionals Musings

MAY 18, 2015

When an entrepreneur first incorporates his or her business, he or she may find him or herself the proud owner of 10 million shares of common stock, commonly called founder’s shares. Startup owners need to assume a three to five year wait for a liquidity event, such as acquisition or going public, before they can cash out.

Stock 120

Stock Vesting Common Stock Founder Vesting 120

Startup Professionals Musings

JANUARY 29, 2018

It’s great motivation for every entrepreneur to get that value up quickly. Unfortunately, in my years since as a small business advisor, I have seen too many founders squander this asset through a lack of understanding of some basic legal and operational issues, or by handing out nominally “free” stock to the wrong people at the wrong time.

Stock 129

Stock Vesting Preferred Stock Cofounder 129

Startup Professionals Musings

AUGUST 1, 2016

After many years of working with angel investors seriously trying to find new ventures worthy of their hard-earned money, I find their frustration often exceeds that of entrepreneurs sincerely looking for financial help. For seed stage funding, entrepreneurs should be looking to friends and family, crowd funding, and relevant institutions.

Due Diligence 120

Due Diligence Intellectual Property Preferred Stock Seed Stage 120

Lightspeed Venture Partners

OCTOBER 7, 2012

Week three’s breakdown covered topics like how hard momentum is to turn around, and how participating preferred stock works. As he said, “Great innovations solve problems or reduce costs. In this way, they remind me of the Lifter Hamper entrepreneur. The entrepreneur was clearly desperate. BACK 9 DIPS.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

View from Seed

DECEMBER 4, 2014

Editor’s note: Understanding how to divide founder equity at a startup can be tricky, even to the point of reaching emotional riffs between founders. In addition to being a co-founder of NextView Ventures, Lee was an early member of PayPal and a founding team member at LinkedIn, so he speaks as both a former entrepreneur and a VC.

Equity 315

Equity Founder Sweat Equity Cofounder 315

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

Startup Professionals Musings

MARCH 7, 2015

One of the big questions that every entrepreneur struggles with is how much funding they should request from investors in the first round. Here is where projections of cost, pricing, volumes and cash flow are critical. This is all about setting a credible current value on your startup -- not future value.

Preferred Stock 120

Preferred Stock Exit Strategy Equity Angel Investor 120

VC Cafe

OCTOBER 23, 2010

B ack in March, Andreessen Horowitz and Fenwick & West, LLP published a series of documents that would help structure early stage investments in startups. Fred Wilson , Paul Graham and Seth Levine all agree that as an entrepreneur one would prefer uncapped convertible debt to equity, but investors typically won’t go for it.

Early Stage 80

Early Stage Term Sheet Preferred Stock Equity 80

David Teten

AUGUST 19, 2019

Though RBI will displace some traditional equity VC, its much bigger impact will be to expand the pool of capital available for early-stage entrepreneurs. . However, many industry experts question the accuracy of early-stage market data, given many startups are no longer filing their Form Ds. So what is Revenue Based Investing?

Revenue 60

Revenue Term Sheet Founder Technical Review 60

Agile VC

APRIL 17, 2011

AGILEVC My idle thoughts on tech startups. Obviously most of these employees are working hard primarily for equity upside compensation, but Kayak’s personnel costs are roughly $200K/head so the company is highly productive on a per employee basis. Im a former Silicon Valley entrepreneur turned East Coast VC. Author howerl.

Pre-Money Valuation 113

Pre-Money Valuation Liquidation Preference Dividend Common Stock 113

Tim Keane

JANUARY 12, 2010

Startups and angels: Along the way to success. Please see later version of this post on May 16, 2010 Entrepreneurs are often not experts in the area of term-sheet negotiations and all of the surrounding issues.   Investors sometimes “present” the terms they’d like and expect the entrepreneurs to react. times at six years.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Agile VC

DECEMBER 4, 2014

Across both the startups I’ve personally been involved in (PayPal and LinkedIn) and the startups in which I’ve been an investor, I’ve seen a broad range of co-founder equity splits. This needn’t be some terribly complex formula that tries to do a cost accounting of everyone’s contribution to the decimal point.

Cofounder 255

Cofounder Equity Founder Sweat Equity 255

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?

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Both Sides of the Table

SEPTEMBER 5, 2012

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. A standard entrepreneur retort I heard back then (2008-09) was “I don’t know what my company is worth now.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Agile VC

DECEMBER 4, 2014

Across both the startups I’ve personally been involved in (PayPal and LinkedIn) and the startups in which I’ve been an investor, I’ve seen a broad range of co-founder equity splits. This needn’t be some terribly complex formula that tries to do a cost accounting of everyone’s contribution to the decimal point.

Cofounder 173

Cofounder Equity Founder Sweat Equity 173

Up and Running

DECEMBER 1, 2015

Typically, employers that offer employees equity compensation will do so in the form of common stock, preferred stock, or stock options. It’s called restricted stock because it often comes with restrictions, such as vesting. See Also: 10 Tips for Dealing With Startup Stock Options.

Equity 60

Equity Employee Stock Options Vesting 60

Startup Company Lawyer

MARCH 14, 2010

My general opinion is that anything that makes the financing process faster and easier or otherwise educates entrepreneurs is a good thing. (A In addition, I think that a “peace treaty&# between early-stage investors and startup companies on standard terms (at least at a term sheet level) is a step in the right direction.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Lightspeed Venture Partners

OCTOBER 1, 2012

Price is always a consideration in investing, but particularly so if the entrepreneurs have shown an interest in an early exit. The entrepreneur was seeking $100k for 20% of the company. Barbara noted that the entrepreneur had been unlucky, and that luck doesn’t change, which is why he should sell the company to them.

Pre-Money Valuation 158

Pre-Money Valuation Valuation Participating Preferred Preferred Stock 158

Startup Company Lawyer

JULY 20, 2009

Founders of startup companies often wait to incorporate a company until they are confident that their concept is viable or fundable. At some point, however, an entrepreneur will need to formally incorporate a company. Issuing stock options. Several reasons exist for taking the step to incorporate. Obtaining visas.

IP 67

IP Stock Options Preferred Stock Capital Gains 67

ReadWriteStart

JANUARY 28, 2022

With the rise of startups and growing businesses , it has become more critical for investors to have a thorough understanding of equity to be aware of all of the advantages they are receiving from the companies they have invested in. Why do startups issue company equity? You have a financial stake in a startup if you have equity.

Valuation 108

Valuation Equity Warrant Common Stock 108

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. Practical Market Research Resources for Entrepreneurs. How to Write a Business Plan in Under an Hour.

Software Review 74

Software Review Software Delaware Forecast 74

abovethecrowd.com

FEBRUARY 24, 2015

Buying into such a notion is dangerous – dangerous for the entrepreneur and dangerous for the investor. As a simple example, many investors and entrepreneurs do not realize that coupon or discount use is a contra-revenue event when it comes to revenue recognition. You must subtract it from your top-line revenue.

IPO 40

IPO Liquidation Preference Valuation Technical Review 40

techcrunch.com

SEPTEMBER 2, 2012

Although these types of notes are relatively easy and cheap to form, many have argued that these types of vehicles are not startup-friendly for a variety of reasons, which we’ll explain below. He claims that anecdotal evidence suggests that there are as many as 30,000 startups carrying as much as $50 billion in convertible debt today.

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