Startup Professionals Musings

JANUARY 15, 2021

It’s disconcerting for most to realize that these shares are initially worth nothing, and the challenge is to get that value up as quickly as possible, without losing it just as quickly to investors, lazy partners, and taxation. This is the purpose of a vesting schedule, which issues allocated stock over time.

Vesting 298

Vesting Dilution Stock Founder Vesting 298

Startup Professionals Musings

MAY 8, 2022

The downside is loss of control and financial dilution. Old co-workers or new friends with complementary skills usually make the best partners. You have very little money, and you don’t want to give away your equity. Giving equity is realistic, but base it on contribution and role, with vesting after time and milestones.

Founder 325

Founder Hockey Stick Cofounder Liquidity Event 325

www.inc.com

SEPTEMBER 24, 2011

Should You Share Equity with Consultants? To grow his cash-strapped start-up, Parker ended up sharing equity -- not only with employees, but also with consultants and vendors. Parker found that equity as compensation helped build loyalty to his company -- even among consultants. But sharing equity can have pitfalls, too.

Fractional CTO 40

Fractional CTO Equity Iowa Technical Cofounder 40

www.mattbartus.com

SEPTEMBER 24, 2011

Equity for Consultants – Keep it Simple! posted Feb 3 in Equity , People issues. I can’t tell you how often a client calls me up and says something like this: “Matt, we have this great new consultant who is going to make introductions to us to [pick type of business partner]. link] mattbartus.

Equity 40

Equity Vesting Silicon Valley Intellectual Property 40

David Teten

SEPTEMBER 2, 2017

It’s hard enough to get a job at a venture capital or private equity firm; it’s even more complex to join as a Partner. Also see Preqin’s Key Due Diligence Considerations for Private Equity Investors. . VC and private equity are very illiquid on both the investing and the personnel side. So assessing fit is critical.

Private Equity 60

Private Equity Venture Capital Equity Partner 60

Startup Professionals Musings

JANUARY 29, 2018

Now is the time to talk to a qualified attorney, and get some discipline in place for the following strategies: Manage founder’s shares like gold with partners. Even though initial stock has no market value today, it is extremely valuable in dividing equity ownership between co-founders, investors, and early partners.

Stock 129

Stock Vesting Preferred Stock Cofounder 129

Startup Professionals Musings

AUGUST 10, 2019

The downside is loss of control and financial dilution. Old co-workers or new friends with complementary skills usually make the best partners. You have very little money, and you don’t want to give away your equity. Giving equity is realistic, but base it on contribution and role, with vesting after time and milestones.

Hockey Stick 243

Hockey Stick Cofounder Liquidity Event Startup 243

www.instigatorblog.com

OCTOBER 23, 2010

Changing Equity Structures for Early Startup Employees Tweet Recently someone asked me for advice on how much equity they should give to their early employees. 1% but they’re not going to be overwhelmed by it, or insanely incentivized by that equity alone. I do believe that early employees should trade salary for equity.

Equity 41

Equity Employee Startup Vesting 41

Startup Professionals Musings

MAY 18, 2015

It’s disconcerting for most to realize that these shares are initially worth nothing, and the challenge is to get that value up as quickly as possible, without losing it just as quickly to investors, lazy partners and taxation. This is the purpose of a vesting schedule, which issues allocated stock over time.

Stock 120

Stock Vesting Common Stock Founder Vesting 120

Both Sides of the Table

MAY 9, 2011

Conventional wisdom says that you gain far more in working as a team than you lose by diluted by half before you start. You often have very limited perspective on whether this person will continue to be a great partner 2 years down the line, 4 years down the line, 8 years down the line. Give them a large sum of equity.

Cofounder 393

Cofounder Founder Vesting Founder Vesting 393

Startup Professionals Musings

DECEMBER 14, 2014

The downside is loss of control and financial dilution. Old co-workers or new friends with complementary skills usually make the best partners. You have very little money, and you don’t want to give away your equity. Giving equity is realistic, but base it on contribution and role, with vesting after time and milestones.

Hockey Stick 268

Hockey Stick Cofounder Entrepreneur Liquidity Event 268

Startup Professionals Musings

AUGUST 19, 2017

The downside is loss of control and financial dilution. Old co-workers or new friends with complementary skills usually make the best partners. You have very little money, and you don’t want to give away your equity. Giving equity is realistic, but base it on contribution and role, with vesting after time and milestones.

Hockey Stick 144

Hockey Stick Cofounder Entrepreneur Liquidity Event 144

Startup Professionals Musings

JULY 19, 2013

The downside is loss of control and financial dilution. Old co-workers or new friends with complementary skills usually make the best partners. You have very little money, and you don’t want to give away your equity. Giving equity is realistic, but base it on contribution and role, with vesting after time and milestones.

Founder 245

Founder Hockey Stick Cofounder Liquidity Event 245

Both Sides of the Table

MARCH 21, 2010

I’ve heard the following so many times that it still makes me scratch my head, “if those guys are going to get rich off of our backs then we’re going to look like fools if we don’t have equity.&#. I’ve already made clear that I think raising equity from “strategic money&# is an oxymoron.

Warrant 298

Warrant Dilution Startup Stock Options 298

The Next Web

OCTOBER 7, 2013

Quite frankly, waiting provides more assurance around employment risk without the commensurate sacrifice in equity comp. Every time a startup raises capital, all common shareholders are diluted. After a year, shares will vest in monthly or quarterly splits until the full grant is vested.

Engineer 129

Engineer Dilution Option Pool Vesting 129

venturehacks.com

SEPTEMBER 22, 2011

The Equity Equation. As this nuclear winter of venture hacks continues, I thought you might enjoy our thoughts on Paul Graham’s The Equity Equation. ” Read the rest of The Equity Equation first; it is great. You have to pay market rates regardless of the equity equation. Venture Hacks Good advice for startups.

Equity 40

Equity Cap Table Valuation RSS 40

Berkonomics

NOVEMBER 23, 2023

Here is the warning: The execution of equity allocations and of a good incentive program using equity is often mismanaged, damaging the corporate capitalization structure and even affecting the outcome of subsequent investment into the company. … Equity is divided between the founders and the business begun.

Equity 62

Equity Stock Options Vesting Early Stage 62

thinkspace.com

SEPTEMBER 7, 2012

How to Divide Equity to Startup Founders, Advisors, and Employees. The part that I’d like to zero in on is when you’ve got a high growth company what are some of the best practices out there to distribute equity to the founders, advisors, and employees? Equity for Founders. Equity for Employees. Bookkeeper.

Equity 62

Equity Employee Founder CTO Hire 62

David Teten

OCTOBER 1, 2015

Not surprisingly, the list above also is ranked from least to most equity stake in an investment for the investor, relative to the cash they invest. How would one set up such a startup to eventually raise capital from outside VCs, who will be wary of ‘dead equity’ (i.e., equity that belongs to departed cofounders)? The cliffs?

Software Developers 60

Software Developers Software Development Software Review Technical Cofounder 60

blog.simeonov.com

FEBRUARY 22, 2010

Most partners, be they lawyers or VCs, tend to tweak the standard with their own language. In one case the CEO had a different vesting schedule because he had spent a lot more time than the rest of the founding team on the idea. It outlines key points of agreement between founders around IP ownership, equity ownership, vesting, etc.

Founder 44

Founder Vesting Agile Startup 44

discuss.joelonsoftware.com

NOVEMBER 1, 2010

where I can learn about how to build a sweat equity team? Rather, it is a proposal for sweat-equity investors. Im confident that this business will be able to compensate these two additional principles along the way, after initial risk of investing their time, and will later reward their vesting with an exit strategy.

Sweat Equity 40

Sweat Equity Equity Angel Investor Affiliate 40

Berkonomics

SEPTEMBER 28, 2017

For those negotiating equity allocations it covers some of the most complex issues to address in the process. Here’s an example: First, a brand-new enterprise is often formed from the efforts of several “partners”, each with an expertise valued by the others. Equity is divided between the founders and the business begun.

Early Stage 102

Early Stage Equity Stock Options Vesting 102

Small Business Force

AUGUST 11, 2009

In the early growth stages of your company, don't be overly concerned with the percentage of equity you retain. The name of the game is how much the equity is worth, not how much you have. With each dilution, should come more value. That is, with most option programs, typically, there is a vesting period.

Vesting 32

Vesting Equity Valuation Dilution 32

www.paulgraham.com

APRIL 28, 2010

Whatkind of anti-dilution protection do they want? The fund managers, who are called"general partners," get about 2% of the fund annually as a managementfee, plus about 20% of the funds gains. Not all the people who work at VC firms are partners. Its the partners who decide, and they view things witha colder eye.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

Berkonomics

MAY 12, 2010

First, a brand new enterprise is often formed from the efforts of several “partners”, each with an expertise valued by the others. Equity is divided between the founders and the business begun. An option plan should carve out an addition of about 15% of the “fully diluted” shares.

Early Stage 85

Early Stage Equity Stock Options Vesting 85

maplebutter.com

JANUARY 8, 2013

What is the best advice you can give for finding a business partner? Don’t quickly choose any business partner. The key is to ask the right people what they think – not your friends, parents or partner. Ideally you can pay them based + equity so that you’ll get their attention and focus on the project. A few nuggets.

Technical Review 44

Technical Review Startup Cofounder Software Review 44

venturehacks.com

OCTOBER 21, 2010

Reading on, the term sheet states, “The $8 million pre-money valuation includes an option pool equal to 20% of the post-financing fully diluted capitalization.&# First, the option pool only dilutes the common stockholders. Third, if you sell the company before the Series B, all un-issued and un-vested options will be cancelled.

Option Pool 68

Option Pool Pre-Money Valuation Dilution Valuation 68

Startup Professionals Musings

NOVEMBER 8, 2010

One of the first tough decisions that startup founders have to make is how to allocate or split the equity among co-founders. Another common “failure to start” situation I see is one where the “idea person” insists that the idea is 90% of the value (and 90% of the equity). Startup decisions only get harder later, never easier.

Equity 228

Equity Intellectual Property Cofounder CTO Hire 228

NZ Entrepreneur

JULY 12, 2018

Founders can be reluctant to give up equity and control of their idea to bring in a co-founder alongside them to share in the decision making, as well as the highs and lows. What happens if they don’t work out after six months, yet they hang around forever on the cap table, through an equity stake they never really earned?

Cofounder 44

Cofounder Founder Vesting Cap Table 44

Both Sides of the Table

FEBRUARY 14, 2016

” “Mark has a vested interest in talking down valuations of startups.” Many experienced partners are funds have 7-10 boards and most of these will need more capital. In the case of startups the “buyer” is the VC looking to part cash for “purchasing” equity in your startup.

Valuation 150

Valuation Down Round Startup Later Stage 150

Startup Professionals Musings

APRIL 23, 2012

One of the first tough decisions that startup founders have to make is how to allocate or split the equity among co-founders. Another common “failure to start” situation I see is one where the “idea person” insists that the idea is 90% of the value (and 90% of the equity). Startup decisions only get harder later, never easier.

Intellectual Property 252

Intellectual Property Equity Cofounder CTO Hire 252