Up and Running

DECEMBER 1, 2015

Of course, not every equity compensation story is a David Choe Story. If you’re thinking about extending equity to an employee or a vendor (as in the example above), you should know that the topic is multi-faceted. In this article, I’m going to examine: What equity compensation is. Different types of equity compensation.

Equity 60

Equity Employee Stock Options Vesting 60

Startup Professionals Musings

SEPTEMBER 27, 2023

When an entrepreneur first incorporates a business, they may find themselves the proud owner of 10 million shares of common stock, commonly called founder’s shares. Make sure the government waits for a stock sale to collect taxes. This is called stock dilution control. In the U.S.,

Stock 240

Stock .Net Vesting Founder Vesting 240

ReadWriteStart

JANUARY 28, 2022

With the rise of startups and growing businesses , it has become more critical for investors to have a thorough understanding of equity to be aware of all of the advantages they are receiving from the companies they have invested in. What is Company Equity? Types of equity. Common stock. Preferred shares.

Valuation 108

Valuation Equity Warrant Common Stock 108

View from Seed

DECEMBER 4, 2014

Editor’s note: Understanding how to divide founder equity at a startup can be tricky, even to the point of reaching emotional riffs between founders. Below, Lee Hower offers advice for approaching these equity discussions objectively and properly. Sometimes co-founders put off the equity split question for some time.

Equity 315

Equity Founder Sweat Equity Cofounder 315

Agile VC

DECEMBER 4, 2014

As a result, one of the trickier things co-founders tackle is determining the equity split amongst the founding group of individuals. Across both the startups I’ve personally been involved in (PayPal and LinkedIn) and the startups in which I’ve been an investor, I’ve seen a broad range of co-founder equity splits.

Cofounder 255

Cofounder Equity Founder Sweat Equity 255

Startup Professionals Musings

JANUARY 4, 2020

One of the big questions that every entrepreneur struggles with is how much funding they should request from investors in the first round. Ancillary objectives, like retiring existing debt, buying a building or paying salaries to people with equity ownership will not get traction. How much equity ownership are you willing to offer?

Startup 337

Startup Preferred Stock Exit Strategy Equity 337

Startup Professionals Musings

JANUARY 15, 2021

When an entrepreneur first incorporates a business, they may find themselves the proud owner of 10 million shares of common stock, commonly called founder’s shares. Make sure the government waits for a stock sale to collect taxes. This is called stock dilution control. In the U.S.,

Vesting 298

Vesting Dilution Stock Founder Vesting 298

Growthink Blog

JANUARY 24, 2011

I get the same question a lot from entrepreneurs raising equity capital (venture capital or angel funding). The question is whether they need to issue common or preferred stock. The answer depends on how and what rights are defined in the preferred stock. read more.

Preferred Stock 93

Preferred Stock Stock Common Stock Liquidation Preference 93

Agile VC

DECEMBER 4, 2014

As a result, one of the trickier things co-founders tackle is determining the equity split amongst the founding group of individuals. Across both the startups I’ve personally been involved in (PayPal and LinkedIn) and the startups in which I’ve been an investor, I’ve seen a broad range of co-founder equity splits.

Cofounder 173

Cofounder Equity Founder Sweat Equity 173

Both Sides of the Table

AUGUST 30, 2010

I’ve written about the topic of convertible debt at length before specifically about how angels & entrepreneurs should think about pricing. Convertible debt is an investment that “converts&# into equity in the future usually at a discount to your next funding round price and sometimes has a “cap&# (maximum price).

Equity 319

Equity Early Stage Angel Investor Valuation 319

David Teten

AUGUST 19, 2019

I’ve been a traditional equity VC for 8 years, and I’m now researching new business models in venture capital. Though RBI will displace some traditional equity VC, its much bigger impact will be to expand the pool of capital available for early-stage entrepreneurs. . So what is Revenue Based Investing?

Revenue 60

Revenue Term Sheet Founder Technical Review 60

Startup Professionals Musings

JANUARY 29, 2018

It’s great motivation for every entrepreneur to get that value up quickly. Unfortunately, in my years since as a small business advisor, I have seen too many founders squander this asset through a lack of understanding of some basic legal and operational issues, or by handing out nominally “free” stock to the wrong people at the wrong time.

Stock 129

Stock Vesting Preferred Stock Cofounder 129

The Next Web

JUNE 17, 2015

Giving up equity in your business, as an alternative to paying cash, often sounds like a great idea to cash-starved startups. But, giving up equity in your business is often a very big decision, and can come at a long-term price, both financially and operationally. I wouldn’t be giving out equity to any and all service providers.

Equity 60

Equity Valuation Preferred Stock Common Stock 60

Startup Professionals Musings

SEPTEMBER 26, 2015

Most entrepreneurs looking for an investor can tell you how much money they need, but few have given much thought to what they are willing to give up for it. Investors, on the other hand, look at the money figure, and even the equity, as the easy part. This is a loan with an option to convert to equity at a later date.

Term Sheet 120

Term Sheet Demand Preferred Stock Liquidation Preference 120

Berkonomics

FEBRUARY 3, 2022

I also recall vividly one of my first investments where the entrepreneur backed out of a sale to a well-known investment company at the last second, declaring his intention not to sell “his” company. For some, that comfort is worth forgoing building high equity value. A personal experience that relates.

Liquidity Event 62

Liquidity Event Preferred Stock Dividend Equity 62

Gust

SEPTEMBER 29, 2011

The most successful serial entrepreneurs in the world may found three or four, perhaps even eight or ten venture-backed startups over the course of their careers. A term sheet for a convertible note deal may run two or three pages, versus 8-10 pages for a typical Series A Preferred Stock financing.

Finance 178

Finance Term Sheet Preferred Stock Bridge Financing 178

Scott Edward Walker

JUNE 9, 2019

For example, if an investor owns 20% of the equity of a startup on a fully-diluted basis following the closing of a Series A round, it will have the right to purchase 20% of the shares of the preferred stock issued in the subsequent Series B round. This is a huge red flag and founders should push back very hard.

Preferred Stock 56

Preferred Stock Term Sheet Dilution Stock 56

Growthink Blog

MAY 10, 2012

When seeking equity investments, the source of capital is, for the most part, tied to the stage of capital being raised. You see, equity capital is raised in stages or rounds. Mezzanine Financing Most companies that raise equity capital and are eventually acquired or go public receive multiple rounds of financing first.

Equity 88

Equity Mezzanine Later Stage Venture Capital 88

Berkonomics

JANUARY 6, 2022

First, the marginal exit event: Sometimes the end game or sale of the company is not a happy event for the early investors, including the entrepreneur or the founders. Most sophisticated investors will take either a promissory note or preferred stock, both of which come before founder or management stock in a sale or liquidation.

Dividend 62

Dividend IRR Preferred Stock Participating Preferred 62

Startup Professionals Musings

MARCH 7, 2015

One of the big questions that every entrepreneur struggles with is how much funding they should request from investors in the first round. Ancillary objectives, like retiring existing debt, buying a building or paying salaries to people with equity ownership will not get traction. How much equity ownership are you willing to offer?

Preferred Stock 120

Preferred Stock Exit Strategy Equity Angel Investor 120

Both Sides of the Table

SEPTEMBER 8, 2012

If you do a capped note it’s bad for the entrepreneur. It has both a “full rachet” and “multiple liquidation preferences.” Here is what I recommend very often – privately – to startup entrepreneurs for angel funding. You can do it with equity & a price. Price the round.

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

Startup Company Lawyer

MARCH 14, 2010

After the recent announcement of the Series Seed Financing documents by Marc Andreesen, Brad Feld points out that there are now four sets of “open source&# equity seed financing documents: TechStars Model Seed Funding Documents (by Cooley). Y Combinator Series AA Equity Financing Documents (by WSGR). under $500K).

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Startup Professionals Musings

MAY 18, 2015

When an entrepreneur first incorporates his or her business, he or she may find him or herself the proud owner of 10 million shares of common stock, commonly called founder’s shares. Make sure the government waits for a stock sale to collect taxes. This is called stock dilution control. In the U.S.,

Stock 120

Stock Vesting Common Stock Founder Vesting 120

Agile VC

APRIL 17, 2011

Obviously most of these employees are working hard primarily for equity upside compensation, but Kayak’s personnel costs are roughly $200K/head so the company is highly productive on a per employee basis. One can infer valuations based on per share prices of preferred stock and oustanding common shares (~5.3M Read More ».

Pre-Money Valuation 113

Pre-Money Valuation Liquidation Preference Dividend Common Stock 113

VC Cafe

OCTOBER 23, 2010

While there aren’t many issues to negotiate in simple equity financing at that stage, there’s been some debate in the venture capital and angel community on whether startups should use series seed documents or capped convertible debt. Preferred Stock Purchase Agreement Series Seed Form SPA.

Early Stage 80

Early Stage Term Sheet Preferred Stock Equity 80

Scott Edward Walker

APRIL 9, 2012

ii) why are convertible notes issued instead of shares of common or preferred stock? Part 3 will cover certain special issues, such as (i) what happens if the startup is acquired prior to the note’s conversion to equity? (ii) ii) what happens if the maturity date is reached prior to the note’s conversion to equity?

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Gust

OCTOBER 5, 2011

In case it isn’t clear by now, angel investors aren’t in the business of making risky early stage investments in order to earn 6% interest on their money, or even 10%— the upside is all in conversion to equity—so the interest rate isn’t a major point of negotiation. per share for 2,000,000 shares of newly issued Series A Preferred Stock.

Finance 79

Finance Preferred Stock Term Sheet Early Stage 79

www.vccafe.com

MARCH 11, 2013

A group of Seedcamp entrepreneurs started a startup tools wiki for that purpose, and we thought it would be well suited here. YCombinator Series AA Equity Financing Documents. List of Angel/SuperAngel Investors for entrepreneurs. Founder Equity Issues. Founder Equity Issues. Venture Hacks equity section.

Software Review 53

Software Review Technical Review Startup 53

Berkonomics

MAY 22, 2014

The sale of equity in private companies is regulated by the Securities Act of 1933, which requires that the company either register with the SEC or meet one of several exemptions (Regulation D). The entrepreneur may have already raised half or more of the cash required in this round and is eager to top off the round.

Early Stage 79

Early Stage Accredited Investor SEC Private Placement 79

Berkonomics

OCTOBER 1, 2015

Sometimes the end game or sale of the company is not a happy event for the early investors, including the entrepreneur or the founders. Most sophisticated investors will take either a promissory note or preferred stock, both of which come before founder or management stock in a sale or liquidation.

Dividend 48

Dividend Preferred Stock IRR Participating Preferred 48

Business Plan Blog

NOVEMBER 13, 2013

Since investment in a startup is risky and most people are reluctant to contribute funds, startup entrepreneurs can use different ways to make funding from FFF look less risky. Convertible Debt” is a loan, which is automatically converted to equity at maturity or upon the closing of a round of financing. 3) Giving non-voting stock.

Finance 93

Finance Accredited Investor Angel Investor Seed Capital 93

Both Sides of the Table

MARCH 21, 2010

As startup entrepreneurs we all want to work with them because having their name as reference clients makes it so much easier for marketing, PR, selling to other customers, fund raising and even recruiting. I’ve already made clear that I think raising equity from “strategic money&# is an oxymoron. Common Mistakes.

Warrant 298

Warrant Dilution Startup Stock Options 298

K9 Ventures

MAY 14, 2011

This is probably the very first group that an entrepreneur who is starting out may approach for some funding for his or her idea. The incubators invest usually for an equity stake and buy equity at a extremely low valuation (for example, 7% for $15,000, which implies a pre-money valuation of less than $200,000). Common Stock.

Preferred Stock 125

Preferred Stock Seed Stage Incubator Early Stage 125

Gust

OCTOBER 21, 2011

This week we move on to something near and dear to the hearts of entrepreneurs and investors alike: The exit, more formally known as a “ liquidity event.” Entrepreneurs generally don’t ask for this kind of language, but most sophisticated investors will insist on it in one form or another. Most would agree this is not a fair outcome.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Both Sides of the Table

APRIL 14, 2010

It’s meant to be a bit provocative but the reality is that I give this advice to entrepreneurs all the the time and I usually leave the “e&# off of the end. I normally offer this advice in the capacity of really wanting to help entrepreneurs so please bear with me. Take liquidation preferences head on.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Pre-Money Valuation 289

Board Effect

MAY 10, 2019

It’s important to note that the structure and contents of a cap table are unique to how a company has chosen to divide its equity. Cap tables are also used to model waterfalls and what-if scenarios, giving companies a better understanding of how different events might impact shareholder payouts and equity dilution.

Cap Table 40

Cap Table Liquidation Preference Dilution Liquidity Event 40

Tim Keane

JANUARY 12, 2010

Please see later version of this post on May 16, 2010 Entrepreneurs are often not experts in the area of term-sheet negotiations and all of the surrounding issues.   Investors sometimes “present” the terms they’d like and expect the entrepreneurs to react. Term-sheets and Valuations: Thinking about Negotiations.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68