Gust

APRIL 9, 2014

Equity dilution works when the same pie is divided among more people. Over time, other people receive pieces of equity in exchange for work (employee stock options), money (seed, angel and venture investors), services (attorneys, directors, etc.). Uncategorized company equity dilution founder investors startup'

Dilution 150

Dilution Equity Vesting Stock Options 150

Gust

APRIL 11, 2014

Let’s get right down to business: Dilution of founders’ and other early shareholders’ equity in startups is frequently a subject of intense interest and debate. That’s the concept of what some call mathematical dilution. That is not economic dilution, but rather its opposite ( accretion ).

Dilution 162

Dilution Equity Pre-Money Valuation Prospectus 162

Gust

OCTOBER 18, 2014

What this investor is seeking is called “permanent, full-ratchet, anti-dilution protection”, and that is neither (a) in line with the market, nor (b) practical. That’s why anti-dilution provisions are typically only applicable to the next financing. So, no , you simply can’t give him what he wants.

Dilution 137

Dilution Ratchet Equity Finance 137

Gust

OCTOBER 17, 2011

Define equity type. Anti-dilution protection. But some dilution is almost inevitable. This does not mean that if you have eight angels in your company, you will have to seat all eight of them on your board. But the lead angel would certainly ask to be given a seat. Right of first refusal.

Term Sheet 158

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 158

Gust

MAY 11, 2014

A grant is not an equity investment, so the entrepreneur doesn’t have to give up a stake in the company either. To the investors, it means less dilution and lower overall risk. In the US, many entrepreneurs see grants as “free money,” since they are not loans and don’t have to be repaid. Research related tax credits and incentives.

Seed Money 164

Seed Money SBIR Dilution Government 164

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

Gust

SEPTEMBER 17, 2014

And now I have to explain to team that they’re taking more dilution than they expected if we do a down round. Me: More dilution? But lawyers will charge much more for equity.” Try doing THAT with equity. But people seem pretty focused on that number. Raising lower seems kind of like something is wrong. A down round?

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153