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Equity for Early Employees in Early Stage Startups

SoCal CTO

I was asked by a reader how much equity he should give out to early employees and to service providers in a very early stage startup.

How does equity dilution work for startups?

Gust

Equity dilution works when the same pie is divided among more people. Uncategorized company equity dilution founder investors startup

The two reasons early stage investors should be active investors

The Equity Kicker

Forgive me for that, but I do think we are in the vanguard of a trend towards ever more active investing. Uncategorized Venture Capital

The Truth About Early Stage Pre-Money Valuations

Ask the Angels

think there are three fundamental truths regarding the valuation of early stage businesses by potential investors: The first is that a pre-money valuation is ultimately an outcome of negotiation , rather than a mathematical calculation of discounted cash flow or any other metric of potential company performance. By Al Schneider.

The Dilution Concern for Founders

Recent Buzzes - VC Experts, Inc.

There are three phenomena that trivialize even the best of investment strategies: Dilution, Dilution, Dilution.". By Joseph W.

Quick Post on Post-Money Valuations

Rob Go

When I first started out as a VC nearly 9 years ago, most early stage company valuations were expressed as pre-money valuations.

The State of Early Stage in March 2014

Dshen

They wanted me to talk to them about the state of startup investing, and I chose to present on the state of early stage investing, the area where I do most of my work. The going rate for seed stage startups is generally $5-6M cap on a note, or pre-money, with jumps up to $8-12M. Each day, more and more investors emerge.

What Are Pre-Seed Rounds and Why Do They Exist?

View from Seed

After all, aren’t seed investors (like us) by definition supposed to be the first and earliest-stage investors? Tweet this.).

Early stage boards work for stock options, not cash.

Berkonomics

Many early stage CEOs and board members have asked for some guidance regarding pay and time commitments for board members.  Pay early stage board members of companies that are not lifestyle businesses one percent of the fully diluted equity in the form of an option that vests over four years of service. 

Anatomy of a Term Sheet: Conversion and Anti-dilution

VC Ready Blog

NOTE: This is the sixth post in our series about standard terms in early stage equity financings. Anti-dilution Provisions. While the timing of conversion is not a very hot topic in negotiating a term sheet, the anti-dilution provision can be if the investors decide to play hardball.

Top 100 venture VC investments each year average $100-150m gain

The Equity Kicker

The dangerous thing for early stage investors is dilution by later stage investors. That’s the Forward Partners way.

How to Configure Your Startup Team

Both Sides of the Table

I am fond of quoting that about 70% of my investment decision of an early-stage company is the team. Final startup grind from msuster.

What is it Like to Negotiate a VC Round?

Both Sides of the Table

In the old days there usually weren’t convertible notes on early-stage deals and there weren’t party rounds with 20 angels or 6 seed funds. So how DOES a VC think about financings at early stages? Option pool (likely dilution in the future, which is a function of a higher price just not yet defined).

Smart Entrepreneurs Build Startups Without Investors

Startup Professionals Musings

Investors expect nothing less than a full-time commitment, even in the early stages when the business model has not yet been proven.

A Look At Seed Funding Options for Your Startup

Early Growth Financial Services

Our Seed Funding Your Startup webinar with Kristine di Bacco, Associate Attorney at Fenwick & West and Sirk Roh, EGFS’ Chief Operating Officer, was a dive into the ins and outs of early-stage financing and a look at some of the key vehicles.

Are You Getting Your Fair Share Of Startup Equity?

Startup Professionals Musings

Of course, all co-founders need to remember that allocated percentages will be diluted as Angel and VC investors are brought in.

Value Inflection Points for Seed-Stage Startups

View from Seed

Often, when I speak to very early-stage founders, the conversation around value focuses on achievements. Get three paying customers.

The Trend Back Towards Smaller Seed Rounds

Rob Go

The actual profile of “seed stage” companies started to vary quite a bit as well. Dilution is the big question here.

The Silliness Of Recapping Seed Rounds

Feld Thoughts

Assuming equity is raised at or above that cap, the total dilution, before the new money, is 16.6% (equivalent to an equity financing of $1m at a $6m post money valuation. Here’s the scenario. company raises $1m of seed money from angels in a convertible note with a $6m cap. The product gets a lot better. It blew my mind.

How Much Founder Stock Should You Offer Co-Founders?

Startup Professionals Musings

Of course, all co-founders need to remember that allocated percentages will be diluted as angel and venture capital investors are brought in.

Stock 84

Avoid New Venture Shortcuts That Scare Away Investors

Startup Professionals Musings

At these stages, it’s all about you, and your ability to communicate and execute effectively. Ask only for the money you can justify.

What Is Venture Debt and How Should Startups Use It?

View from Seed

NVV: What stage of growth is appropriate for a company to have achieved prior to taking on venture debt? NVV: Is there any dilution?

Super Angels Are A Boon To Startups Needing Funding

Startup Professionals Musings

This can cause early investor dilution, lower ultimate returns or leave the startup stranded. Super Angels sometimes drive up valuations.

The Care and Feeding of Startup Advisory Boards

Seed Stage Capital

This is an often-overlooked, under-utilized, or completely neglected strategy for early stage companies. flameout Pets.com. Many Thanks!

The What & Why of Hiring a Great Startup COO

View from Seed

For most of my career, I’ve served startups and early-stage companies as an operating executive or advisor. Based on what criteria?

Building a High-Tech Startup Team

Business Plan Blog

Having too many co-founders will only lead to your eventual dilution. Early Stage. Have a diversified team. Seed to Series A.

The Truth About Convertible Debt at Startups and The Hidden Terms You Didn’t Understand

Both Sides of the Table

” And some seed stage investors told me, “I prefer not to fight over price now. Some thoughts on raising angel money. But how?

7 Criteria To Help Startups Find The Right Investor

Startup Professionals Musings

In all cases, investors tend to invest in people, more than the idea, or even the stage of execution. Let’s consider some basic definitions.

Dealing With a Tough Market

Rob Go

For early stage companies and for our new investment activity: I’m very bullish. Here’s how I’d break it down.

Always have 18 months of cash in the bank

Chris Dixon

It’s true that following the 18 month rule can be extra dilutive. The question of when to raise money is one of the few times that entrepreneurs and early-stage investors have somewhat divergent economic interests. More adventurous entrepreneurs might argue 18 months is too conservative. startups

How Smart Entrepreneurs Select VC / Angel Investors

Startup Professionals Musings

In all cases, investors tend to invest in people, more than the idea, or even the stage of execution. Let’s consider some basic definitions.

What is the Definition of a Seed Round or an A Round?

Both Sides of the Table

They want to be early. This is something I think entrepreneurs don’t totally understand and it’s worthwhile they do. Nobody cares.

Kryptonite Angel Round Terms

The Startup Lawyer

Here’s a list of the top 5 deal terms that cause harm to startups at the seed financing stage and therefore should be avoided: 5. Whatever the form of control, seed investment is way too early to be even thinking about losing any amount of control of your startup. It does not belong in any early stage deal. Control.

One of the Biggest Mistakes Enterprise Startups Make

Both Sides of the Table

If you’re an early-stage enterprise startup services revenue is exactly what you need. But while you’re early?

8 Tips On How Much Money To Ask For From Investors

Startup Professionals Musings

If your company is early stage and has a valuation under $1M, don’t ask for a $5M investment. Company stage. Type of investor.

Sizing Option Pools In Connection With Financings

A VC : Venture Capital and Technology

Investors like to require that an unissued option pool is in the pre-money valuation calculation when they put money into early stage companies. But early on in a company, you will need to and want to be more generous. And if you do it that way, you will end up with a lot less dilution. It is bullshit. It annoys me.

Your LTV Math is Wrong

Seeing Both Sides

The problem is that many early-stage companies have no idea what their average, long-term churn rate really is because they are simply too young.

Equity is the currency of early stage businesses.

Berkonomics

Email readers continue here.] An option plan should carve out an addition of about 15% of the “fully diluted” shares.  If there are 85,000 shares issued to the founders, then a plan calling for 15,000 shares in a pool reserved for future hires is appropriate, making the fully diluted shares 100,000.  There are some rules.  Ignition!

Crossing the Chasm is a Major Startup Challenge

Startup Professionals Musings

Everyone in the business world has heard of the old bestseller by Geoffrey A. Product development chasm. Marketing and sales chasm. Marty Zwilling.

“Seed Is the New Series A” – Making Sense of the Confusion

View from Seed

Some funds (and angels) are explicitly trying to invest before seed rounds, which suggests there is a stage before seed. Some thoughts: 1.