Gust

APRIL 9, 2014

Equity dilution works when the same pie is divided among more people. Because the total percentage of equity will always equal exactly 100%, every time anyone gets another piece, by definition it “dilutes” all of the previous equity holders. Uncategorized company equity dilution founder investors startup'

Dilution 150

Dilution Equity Vesting Stock Options 150

Gust

NOVEMBER 1, 2011

in the case of one investment round, no subsequent investment and therefore no dilution). The selling price can be estimated by establishing a reasonable expectation for revenues in the year of the sale and, based on those revenues, estimating earnings in the year of the sale from industry-specific statistics.

Venture Capital 161

Venture Capital Valuation Pre-Money Valuation Post-Money Valuation 161

Gust

MARCH 16, 2014

Stock dilution control. Everyone wants to minimize dilution of shares, so this special clause is common. These have less to do with the type of stock and more to do with who the person is and how strategic they are to the organization.

Stock 175

Stock Vesting Common Stock Founder Vesting 175

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

MAY 24, 2012

A typical series of Preferred Stock in a venture-backed startup carries a liquidation preference, anti-dilution rights, dividend preference, a separate vote to fill its own seat(s) on the Board of Directors, “protective provisions” requiring the company to obtain a separate vote of the Preferred to take certain corporate actions, and more.

IPO 159

IPO Equity Common Stock Stock 159