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).

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Both Sides of the Table

AUGUST 30, 2010

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). a priced/valued preferred stock financing)?&#. prefer equity to convertible debt): If you’re an early stage investor (e.g.

Equity 319

Equity Early Stage Angel Investor Valuation 319

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. It should therefore come as no surprise that an asymmetry of information exists, mostly gleaned from experience, between founders and investors in a venture financing deal.

Finance 178

Finance Term Sheet Preferred Stock Bridge Financing 178

www.mattbartus.com

SEPTEMBER 24, 2011

Perspectives on issues affecting founders, startups and investors from a veteran startup lawyer in Silicon Valley. Equity for Consultants – Keep it Simple! posted Feb 3 in Equity , People issues. for every hour works, consultant accrues [hourly wage]in debt that will convert to equity in the next round).

Equity 40

Equity Vesting Silicon Valley Intellectual Property 40

Business Plan Blog

NOVEMBER 13, 2013

Most startup founders do not have enough capital to launch their companies and need to raise money at some point. Individual investors who provide financial funding to startups are called ‘Angel Investors.’ Convertible Debt Financing. Convertible debt provides startups with a relatively easy way to procure financing.

Finance 93

Finance Accredited Investor Angel Investor Seed Capital 93

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. How Easily Can You Source Capital From Professional Investors?

Equity 60

Equity Valuation Preferred Stock Common Stock 60

Scott Edward Walker

APRIL 9, 2012

Introduction We are in the golden age of seed financing. Venture capital funds, seed funds, super angels, angel groups, incubators, and “friends and family” are all playing the seed financing game and investing early in startups in an attempt to land the next Facebook. This post was originally published on TechCrunch.]

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Gust

OCTOBER 5, 2011

Last week , we gave some attention to the “why” behind convertible note financing for early stage startups. As with so many subjects in law and finance, mastering the jargon is half the battle. This may seem like a no-brainer now that you understand the basic structure of a convertible debt financing.

Finance 79

Finance Preferred Stock Term Sheet Early Stage 79

Scott Edward Walker

JUNE 9, 2019

Over the past few weeks, two of my clients have received financing term sheets in which the investors requested super pro rata rights. Accordingly, I thought it would be helpful for founders to discuss these rights and to point out the problems they create for startups. Introduction. Pro Rata Rights.

Preferred Stock 56

Preferred Stock Term Sheet Dilution Stock 56

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

JUNE 7, 2014

5) Senior Preferred Stock and warrants. 6) Any preference multiple on (5). 7) Junior Preferred Stock and warrants. 8) Any preference multiple on (7). 9) Common Stock (including any Preferred that converted to Common, any exercised options, and all Founders stock) and Common stock warrants.

Warrant 157

Warrant Preferred Stock Early Stage Common Stock 157

Scott Edward Walker

MAY 15, 2012

This post is the third part of a three-part primer on convertible note seed financings. Part 1, entitled “ Everything You Ever Wanted To Know About Convertible Note Seed Financings (But Were Afraid To Ask) ,” addressed the basics. Part 2, entitled “ Convertible Note Seed Financings: Econ 101 for Founders ,” addressed the economics.

Finance 64

Finance Founder Accredited Investor Preferred Stock 64

Early Growth Financial Services

OCTOBER 2, 2014

Lately I‘ve been getting more and more questions about convertible equity: “What is it?” In short, convertible equity is a form of financing that gives investors the right to preferred stock once a triggering event occurs. of all financings. and “Should I use it?” So what’s that mean?

Equity 44

Equity Preferred Stock Seed Stage Founder 44

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

Scott Edward Walker

APRIL 22, 2012

This post is the second part of a three-part primer on convertible note seed financings. Part 1, entitled “ Everything You Ever Wanted To Know About Convertible Note Seed Financings (But Were Afraid To Ask) ,” addressed certain basic questions, such as (i) what is a convertible note? (ii) What Is a Conversion Discount?

Pre-Money Valuation 72

Pre-Money Valuation Finance Liquidation Preference Founder 72

www.payne.org

SEPTEMBER 22, 2011

Startup Equity For Employees. 2 Stock Classes: Common and Preferred. 5 Stock vs Options. 6 Founders / Restricted Stock. 7 Salary vs Equity. Important disclaimer: Ive got experience negotiating stock compensation packages from both sides of the table. From Payne.org Wiki. 3 Dilution. 4 Vesting.

Equity 56

Equity Employee Vesting Preferred Stock 56

VC Cafe

OCTOBER 23, 2010

B ack in March, Andreessen Horowitz and Fenwick & West, LLP published a series of documents that would help structure early stage investments in startups. Fred Wilson , Paul Graham and Seth Levine all agree that as an entrepreneur one would prefer uncapped convertible debt to equity, but investors typically won’t go for it.

Early Stage 79

Early Stage Term Sheet Preferred Stock Equity 79

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

Business Plan Blog

APRIL 10, 2012

Techcrunch just began a 3-Part series addressing convertible note seed financing that we feel our readers would be very interested in. But wait, what’s convertible note seed financing?? According to their blog, “a convertible note is short-term debt that converts into equity. Business Planning Startup Tips' Interested?

Finance 40

Finance Preferred Stock Equity Stock 40

Startup Company Lawyer

MARCH 12, 2009

Almost all technology startup companies that I work with are C corps. Any company that raises venture financing will need to be a C corp in order to issue preferred stock. In any event, the S corp election can be easily revoked at the time of a financing. Businesses that plan to use equity incentives (e.g.

LLC 61

LLC Stock Options Preferred Stock Stock 61

Tim Keane

JANUARY 12, 2010

Startups and angels: Along the way to success. The investors and the entrepreneurs are – or should be – aware that the price of the company’s equity is set by the market – in simplest terms, what an informed buyer is willing to pay. By Tim Keane, Angel Investor, Golden Angels Investors, LLC.   First , dividends.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

The Startup Lawyer

FEBRUARY 4, 2011

Great news — your startup just got accepted to an incubator! But before your startup signs up and cashes that $[XX,000] check, your startup’s co-founders should sit down and evaluate the incubator’s offer. Pre-money valuations startups receive from incubators are typically low…really low.

Incubator 105

Incubator Pre-Money Valuation Option Pool Advisory Board 105

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

The Startup Lawyer

JUNE 22, 2010

If you follow this blog, you know that I think convertible debt is a good structure for a startup’s angel round. The main feature of the convertible note is that the debt investment made by the angel investor will typically later convert into equity. of the startup immediately after the Series A round.

Pre-Money Valuation 82

Pre-Money Valuation Angel Investor Preferred Stock Valuation 82

Gust

JULY 18, 2012

Yet I’ve rarely seen entrepreneurs more fired up than when recounting war stories of startups whose founders had control of the company wrested from them, were forced to take financing or compensation deals on outrageously onerous terms , or worst of all, fired from their own companies.

Stock Options 188

Stock Options SEC Stock Government 188

Feld Thoughts

SEPTEMBER 27, 2011

In today’s installment of our convertible debt series, we cover a specific case where the company is acquired before the debt converts into equity. In the case of an early-stage startup that hasn’t issued preferred stock yet, the debt converts into stock of the acquiring company (if it’s a stock deal) at a valuation subject to a cap.

Conversion 96

Conversion Sales Later Stage Preferred Stock 96

The Startup Lawyer

JANUARY 10, 2012

In most equity financing rounds, an investor will ask for (and get) a term called a liquidation preference. A liquidation preference is the amount that must be paid to a preferred stock holder before any sale proceeds may be paid to the holders of common stock (i.e., founders, option holders, etc.).

Liquidation Preference 73

Liquidation Preference Pre-Money Valuation Participating Preferred Preferred Stock 73

K9 Ventures

MAY 14, 2011

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). The companies go through a 3-6 month long startup bootcamp and then typically try to raise angel/seed funding. Common Stock. Board Seats.

Preferred Stock 125

Preferred Stock Seed Stage Incubator Early Stage 125

ithacaVC

JUNE 20, 2011

Cost is the overriding issue for startups when it comes to properly engaging a lawyer. Here are 5 clues that you need a good startup lawyer (and this is just 5 out of many): 1. Lawyer time required (including vesting agreements for founders): 3 to 6 hours. You might be doing a convertible debt round or an equity round.

Stock Options 58

Stock Options Vesting Subscription Agreement Founder Vesting 58

Startup Company Lawyer

JANUARY 31, 2011

Automatic conversion: on a $1M equity financing with no conversion discount and no price cap , provided that the transaction documents provide for a right to purchase a pro rata share of future financings. (I Optional equity conversion: on other equity financings with no conversion discount and no price cap.

Preferred Stock 60

Preferred Stock Liquidation Preference IPO Common Stock 60

ithacaVC

APRIL 5, 2011

One rule of simple cap tables is to issue “normal” stock to founders (common stock only) and investors (typically preferred stock, but sometimes common stock to early friends and family). The investor deserves to get preferred stock ultimately (remember, that was the goal of the convertible debt).

Common Stock 45

Common Stock Stock Cap Table Preferred Stock 45

Both Sides of the Table

APRIL 14, 2010

In straight preferences the investors only get this money in a “downside&# scenario as protection that they get their money back if your company isn’t successful. Tags: Entrepreneur Advice Raising Venture Capital Start-up Advice Startup Advice. The list goes on. Legacy deals have “hair.&#. But pass they will.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

K9 Ventures

NOVEMBER 21, 2011

Let’s say you’re the founder (I use a solo-founder in my example to keep things simple, but this could just as well apply to a founding team) of a startup called Blood, Sweat and Tears, Inc. They want to keep the founders “all-in” in the startup, because they feel that otherwise the founders won’t be motivated enough.

Founder 87

Founder Common Stock Preferred Stock Stock 87

K9 Ventures

NOVEMBER 21, 2011

Let’s say you’re the founder (I use a solo-founder in my example to keep things simple, but this could just as well apply to a founding team) of a startup called Blood, Sweat and Tears, Inc. They want to keep the founders “all-in” in the startup, because they feel that otherwise the founders won’t be motivated enough.

Founder 84

Founder Common Stock Preferred Stock Stock 84

ithacaVC

FEBRUARY 23, 2011

The MCOP can serve a critical role as founders and other management team members are diluted down by rounds of financing or if their equity is not in the money. As the investors’ aggregate liquidation preference (ALP) increases typically the need for a MCOP also increases. A few key points to consider: 1.

Liquidation Preference 55

Liquidation Preference Management Preferred Stock Dividend 55

The Startup Lawyer

MARCH 11, 2010

A variety of model startup seed funding docs have been released in the past year or so: TechStars Series AA Preferred , YCombinator Series AA Preferred , and TheFunded Founder Institute’s Plain Preferred. When an issue like this occurs at your startup, you’ll be glad your documents are “complicated.&#.

Delaware 49

Delaware Hockey Stick Preferred Stock Open Source 49

The Startup Lawyer

MARCH 11, 2010

A variety of model startup seed funding docs have been released in the past year or so: TechStars Series AA Preferred , YCombinator Series AA Preferred , and TheFunded Founder Institute’s Plain Preferred. When an issue like this occurs at your startup, you’ll be glad your documents are “complicated.&#.

Delaware 45

Delaware Hockey Stick Preferred Stock Open Source 45