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

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

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

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

Both Sides of the Table

SEPTEMBER 5, 2012

This time by the efforts of Adeo Ressi to introduce a new kind of structure called “ convertible equity.” My initial reaction to Adeo when we spoke was that while it may have solved some issues (debt versus equity) it didn’t solve the ones that I’ve been warning entrepreneurs about most loudly.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

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

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. million in sales.

Warrant 298

Warrant Dilution Startup Stock Options 298

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

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

Lightspeed Venture Partners

OCTOBER 1, 2012

The company did $1M in sales last year, 90% from wholesale, and had a 10% profit margin. They wanted to get to $10M in sales and then get bought by a big food company. Price is always a consideration in investing, but particularly so if the entrepreneurs have shown an interest in an early exit. The entrepreneur took this offer.

Pre-Money Valuation 158

Pre-Money Valuation Valuation Participating Preferred Preferred Stock 158

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

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

Gust

MAY 24, 2012

Yet I’m skeptical that a widespread shift will occur anytime soon, and for reasons discussed below, as much as I admire and advocate for talented entrepreneurs, I believe it would be a losing proposition for nearly all involved. Options and warrants, when issued, are also typically exercisable for shares of Common Stock.

IPO 159

IPO Equity Common Stock Stock 159

Startup Company Lawyer

JULY 20, 2009

At some point, however, an entrepreneur will need to formally incorporate a company. If there is more than one founder, the likelihood of an argument about how the equity should be split in the new company increases dramatically. Issuing stock options. Starting capital gains holding period in the event of a stock sale.

IP 67

IP Stock Options Preferred Stock Capital Gains 67

Tim Keane

APRIL 12, 2006

Ten questions the entrepreneur should ask the (prospective) investor. If they’re making it as part of a group that the entrepreneur likes, fine. If they are “solo,” though, the entrepreneur will want to know a lot about their attitudes and expectations, especially when things go wrong. » April 12, 2006.

Entrepreneur 60

Entrepreneur Valuation Sweat Equity Common Stock 60

Up and Running

MAY 23, 2016

To give you a better idea of what entrepreneurs in this industry are thinking about during each phase of the startup process, I interviewed SaaS entrepreneurs from all over the world, including our own COO Noah Parsons. In the tactics section, list your sales channels and describe how you will be selling your products.

Software Review 74

Software Review Software Delaware Forecast 74

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. why buy anything?

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

Gust

OCTOBER 3, 2011

For a first time entrepreneur trying to figure out the arcane world of startup financing, it can be very confusing to understand the roles that different types of investors play in funding promising companies, as well as the point in a company’s life at which they enter the stage. From +/- $1.5m

Finance 70

Finance Venture Capital Intellectual Property Early Stage 70

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. turn customer feedback into sales and relationships. YCombinator Series AA Equity Financing Documents. List of Angel/SuperAngel Investors for entrepreneurs. Founder Equity Issues.

Software Review 53

Software Review Technical Review Startup 53