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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. Founders vs. Early Employees To help with this discussion, let me start with a definition of "early employee." I'll get to service providers in a later post. million.

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Want to Know How VC’s Calculate Valuation Differently from Founders?

Both Sides of the Table

Things like “ participating preferred stock &# in legalese unsurprisingly never actually call out, “hey, this is the participating preferred language.&# We got a3x participating liquidation preference with interest (not participating with a 3x cap, but 3x participating. I turned them down.

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So What is The Right Level of Burn Rate for a Startup These Days?

Both Sides of the Table

The earlier the round, the less capital you need and the more reasonable your valuation the less time that is needed generally to raise capital. In other words, raising $2 million at a $6 million pre-money valuation has always been easier & quicker than raising $20 million at any valuation.

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

Both Sides of the Table

Because convertible debt deals often have both a ‘full ratchet’ and often have ‘multiple liquidation preferences’ “ Yup. So Investor A might have bought 20% of your company in 2012 and in 2013 with no addition money invested suddenly owns 40% of your company. That’s right.

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Term-sheets and Valuations: Thinking about Negotiations - Startups.

Tim Keane

An average of these ranges results in a pre-money valuation of about $4MM.   If similarly situated companies are seeing $3.5MM pre-money valuations, this might become the target valuation.   A cumulative dividend can get to be very expensive and is not often a feature in early stage terms.

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Thoughts on Convertible Notes

K9 Ventures

It is in essence equivalent to being a Liquidation Preference that is typically seen in a preferred equity financing. In the early stages of the company the Board of Directors need not be about “control”, but it does need to be about learning and about discipline. Where are you going?

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How much equity for investors and employees?

dondodge.typepad.com

Community is more powerful than money or technology » August 11, 2007 How much equity for investors and employees? Entrepreneurs face some pretty tough questions at a very early stage. Should I take Angel or VC money? How much money should I raise? How much equity should I grant to early employees?

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