K9 Ventures

JUNE 5, 2015

I still wanted K9 to be the first institutional money in a company and work with “frighteningly early-stage” companies. So in this post, I present the epilogue to The New Venture Landscape that highlights my take on what I think the venture landscape looks like today and what the implications are for founders, for GPs and for LPs.

Seed Stage 48

Seed Stage Venture Capital Early Stage Valuation 48

Both Sides of the Table

FEBRUARY 15, 2016

And recaps hurt founders so often people just avoid doing them. So if they’re in the mindset that they’re better off getting their $20 million back versus risking more capital then they may prefer just to sell your company for whatever you can get for it. Are Your Existing Investors Over Their Skis?

Burn Rate 150

Burn Rate Cap Table Valuation Software Review 150

Berkonomics

JULY 23, 2020

Does the board declare dividends upon the preferred stock invested in order to increase the amount paid out to the preferred – at the expense of the common – shareholders, which usually includes the founder(s)? There is a time for all investors and founders to celebrate. Can you protect the common shareholders?

Delaware 62

Delaware Liquidation Preference Preferred Stock Early Stage 62

Startup Company Lawyer

MARCH 14, 2010

Founders Institute Plain Preferred Term Sheet (by WSGR – disclaimer, I represent the Founders Institute and was involved in drafting this document). The primary rights in these documents, ranked in order of importance in my opinion are: Non-participating preferred liquidation preference. Legal fees.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Up and Running

AUGUST 17, 2015

Legal Aspects of Entrepreneurship: While the exact title and contents of this class may vary depending on the business school you attend, as a first time founder, it’s incredibly important to understand all of the legal considerations around starting your own company (e.g., It helps mitigate startup risk.

Entrepreneur 60

Entrepreneur Cofounder Angel Investor eCommerce 60

Scott Edward Walker

DECEMBER 13, 2018

The purpose of this post is briefly (i) to provide an overview of acquihires and (ii) to discuss the significant legal issues that founders must address. The acquirer is typically a large successful company, and the target is typically a failing early-stage startup. Will the Founders Receive any Purchase Price Proceeds?

Founder 45

Founder Merger IP Liquidation Preference 45

Gust

SEPTEMBER 17, 2014

Me: Raising convertible notes as a seed round is one of the biggest disservices our industry has done to entrepreneurs since 2001-2003 when there were “full ratchets” and “multiple liquidation preferences” – the most hostile terms anybody found in term sheets 10 years ago. But how do I offer cheaper prices to early investors?”

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

David Teten

AUGUST 21, 2019

Most founders who are raising capital look first to traditional equity VCs. Revenue-Based Investing (“RBI”) is a new form of VC financing, distinct from the preferred equity structure most VCs use. For more background, see Revenue-Based Investing: A New Option for Founders who Care About Control. But should they? Optionality.

Revenue 60

Revenue Liquidation Preference Equity Cofounder 60

techcrunch.com

FEBRUARY 25, 2010

This is probably why investors’ case for a company to sell early f ocuses exclusively on the founder : in most early-stage acquisitions, the liquidation preferences and deal-sweeteners only work for investors and founders. The two founders own 33%, and split $12 million.

Liquidation Preference 63

Liquidation Preference Founder Option Pool Acquisition 63

Both Sides of the Table

SEPTEMBER 2, 2009

If a company has reached a level of success, has been around for a few years and you believe the company has potential to break out into a much bigger company then you should let the founders take money off of the table. A friend of mine is a serial entrepreneur and is running a high-profile, early stage company in NorCal.

Founder 329

Founder Liquidation Preference Term Sheet Participating Preferred 329

Feld Thoughts

JUNE 2, 2015

Or, if you just want the paragraph, it’s: “If this note converts at a price higher than the cap that you have been given you agree that in the conversion of the note into equity you agree to allow your stock to be converted such that you will receive no more than a 1x non-participating liquidation preference plus any agreed interest.”.

Liquidation Preference 70

Liquidation Preference Cap Table Angel Investor Post-Money Valuation 70

Tim Keane

JANUARY 12, 2010

.   At the financial level , and assuming a harvest of the investment in the company without the need for further financing, two terms stand out as driving economics: the dividend and the liquidation preference.   A cumulative dividend can get to be very expensive and is not often a feature in early stage terms.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Berkonomics

AUGUST 29, 2013

Does the board declare dividends upon the preferred stock invested in order to increase the amount paid out to the preferred – at the expense of the common – shareholders, which usually includes the founder(s)?

Delaware 66

Delaware Liquidation Preference Liquidity Event Preferred Stock 66

genylabs.typepad.com

SEPTEMBER 24, 2011

Before you agree to take equity in lieu of cash, you need to understand that any individual early stage start-up company equity is most likely going to be worthless. where your stock sits in the liquidity preference stack. what rights and preferences the founders and the other investors have.

Equity 40

Equity Technical Review San Jose Stock 40

K9 Ventures

MARCH 23, 2011

An uncapped convertible note misaligns the incentives between the founders and the investors/note holders. The founders’ interest is to maximize the valuation of the company at the time of a follow-on financing, thereby minimizing founder dilution. Every first time founder needs to learn what it means to manage a board.

Pre-Money Valuation 132

Pre-Money Valuation Valuation Equity Liquidation Preference 132

Professor VC

APRIL 1, 2010

I prefer the traditional face to face where you can interact with the other panelists and audience, but was the first panel I did wearing my favorite flannel penguin pajamas. I take CFO roles in early stage companies and participate on the management team during the early financings and business model development phases.

Term Sheet 32

Term Sheet Angel Investor San Jose Venture Capital 32

Spencer Fry

APRIL 17, 2017

As a bootstrapped startup, the only accountability you have is to yourself and to your co-founder if you have one. But as an early stage startup, accountability is so important. Having great accountability. Other than that, your accountability is to your savings, checking, and credit cards. Nobody can tell you what to do.

Bootstrapping 63

Bootstrapping Cap Table Liquidation Preference Cofounder 63

VC Adventure

AUGUST 30, 2010

Paul Graham, founder of Y-Combinator , sent out a tweet on Friday saying: “Convertible notes have won. First a quick terminology recap (skip this paragraph if you’re already familiar with convertible debt vs. preferred equity). The most common forms of investment in early stage business are convertible debt and preferred equity.

Angel Investor 103

Angel Investor Early Stage Equity Valuation 103

Hunter Walker

NOVEMBER 23, 2015

I was one of the founders of Upstartle, had the idea and wrote the first version of Writely (I was interested in experimenting with what was then called AJAX and some new browser capabilities around text editing). So I shifted over into some more personal and cultural thoughts, and it just sort of took off from there.

Engineer 48

Engineer Liquidation Preference AJAX IPO 48

Gust

MAY 24, 2012

Some commentators have suggested this is the wave of the future, signifying a shift in the balance of power from investors to founders of the relatively small, elite group of growth companies that make it to public markets. Options and warrants, when issued, are also typically exercisable for shares of Common Stock.

IPO 159

IPO Equity Common Stock Stock 159

dondodge.typepad.com

JANUARY 15, 2011

Entrepreneurs face some pretty tough questions at a very early stage. How much equity should I grant to early employees? The second and third rounds of funding take additional shares of equity and dilute existing investors and founders. Dont worry about giving up too much equity at an early stage.

Equity 40

Equity Employee Dilution Valuation 40

abovethecrowd.com

FEBRUARY 24, 2015

In a February 6th article in Business Insider , Allyson Shontell discovered that a mere four months after adding $150 million to a total of $330 million in invested capital, the founder and CEO disclosed to its employees that “we have spent $200 million and we have not proven out our business model.”

IPO 40

IPO Liquidation Preference Valuation Technical Review 40

Austin Startup

AUGUST 1, 2017

This is most clearly highlighted in the “unicorn” boom we all saw over the past few years, where founders raised very large rounds, with terms very onerous to the underlying common stock, hoping they could eventually justify billion dollar valuations to skeptical acquirers or public market investors.

Liquidation Preference 48

Liquidation Preference Common Stock Valuation Silicon Valley 48

abovethecrowd.com

APRIL 20, 2016

All Unicorn participants — founders, company employees, venture investors and their limited partners (LPs) — are seeing their fortunes put at risk from the very nature of the Unicorn phenomenon itself. We have already seen examples of founders and management obtaining liquidity in front of investors.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Feld Thoughts

JULY 14, 2015

But instead of adding it on to the note or doing an equity round with a price, which could still be an early stage price but below the cap, they make the argument that since the company couldn’t raise a round, the company is worthless. So the new investment gets 60%, the founders get 39.9%, and the $1m of seed money gets 0.1%.

Recapitalization 70

Recapitalization Pre-Money Valuation Post-Money Valuation Angel Investor 70

K9 Ventures

OCTOBER 19, 2015

Note: If you’re a founder, stop reading this post now. ” Seeing something others don’t see is critical to early stage investing. That’s the conviction that it takes to be able to believe a founder (or two) who walk in and claim that they’re going to change the world. ” .

Venture Capital 48

Venture Capital Liquidation Preference Valuation Portfolio 48

www.paulgraham.com

APRIL 28, 2010

When youhear people talking about a successful angel investor, theyre notsaying "He got a 4x liquidation preference." The upperbound is obviously the total amount the founders want to raise.The lower bound is 5-10% of the total or $10,000, whicheveris greater. What makes a good founder? Bad founders seemhapless.

Angel Investor 63

Angel Investor Syndicate Syndication Dilution 63

Life Beyond Code

SEPTEMBER 27, 2011

And today, we have a group of early adopter premium members who are making good use of the program. When we were looking to talk to investors, Sramana introduced us to multiple investors and acted as an advisor helping us to navigate complex term sheet clauses like tranche financing and liquidation preferences.

Programming 116

Programming Silicon Valley Bootstrapping Technical Review 116