Startup Professionals Musings

JULY 19, 2013

Most entrepreneurs struggle with many startup Founders dilemmas in building their business, and these key dilemmas are probably the biggest source of pain and failure for the entrepreneur lifestyle. Should you start a company solo or find co-Founders to help you? The co-Founder relationship dilemma.

Founder 245

Founder Hockey Stick Cofounder Liquidity Event 245

Gust

DECEMBER 1, 2011

Notice what is missing from this list of priorities: The company itself – that is, a business entity, most often a corporation , that will own the entire business (however defined), issue equity to founders, take investment capital , enter into contracts, make sales, pay employees and contractors, and so forth.

IP 114

IP Intellectual Property Equity Liquidity Event 114

Berkonomics

JANUARY 7, 2021

How many of them, particularly in technology, were able to start a company, supply all the funding, and share no management tasks or equity with others, and still grow the company to any significant size, worthy of a multi-million-dollar opportunity to cash out at exit? Dividing equity among those that fill the management gap.

Liquidity Event 96

Liquidity Event Pre-Money Valuation Cofounder Initial Public Offering 96

Startup Professionals Musings

AUGUST 10, 2019

Most entrepreneurs struggle with many startup founders quandaries in building their business, and these key dilemmas are probably the biggest source of pain and failure for the entrepreneur lifestyle. Should you start a company solo or find co-founders to help you? The co-founder relationship dilemma.

Hockey Stick 243

Hockey Stick Cofounder Liquidity Event Startup 243

Berkonomics

AUGUST 3, 2023

Some businesses require very little capital and the founder can self-finance the enterprise and retain 100% of its ownership and control from ignition through liquidity event (startup through sale). Venture, private equity and more: Here we lump a large number of investor classes into one.

Private Equity 118

Private Equity Valuation Cap Table Accredited Investor 118

Startup Professionals Musings

DECEMBER 14, 2014

Most entrepreneurs struggle with many startup Founders dilemmas in building their business, and these key dilemmas are probably the biggest source of pain and failure for the entrepreneur lifestyle. Should you start a company solo or find co-Founders to help you? The co-Founder relationship dilemma.

Hockey Stick 268

Hockey Stick Cofounder Entrepreneur Liquidity Event 268

Startup Professionals Musings

AUGUST 19, 2017

Most entrepreneurs struggle with many startup founders dilemmas in building their business, and these key dilemmas are probably the biggest source of pain and failure for the entrepreneur lifestyle. Should you start a company solo or find co-founders to help you? The co-founder relationship dilemma.

Hockey Stick 144

Hockey Stick Cofounder Entrepreneur Liquidity Event 144

Berkonomics

FEBRUARY 3, 2022

First, the implied promise: Taking money from professional investors such as angels or VCs usually requires that you agree to seek an exit for those investors in your plan, often targeting five to seven years as the ideal period for growth before a liquidity event. For some, that comfort is worth forgoing building high equity value.

Liquidity Event 62

Liquidity Event Preferred Stock Dividend Equity 62

Hunter Walker

AUGUST 24, 2014

Did I work any less hard the next day because of my liquidity event? It’s for reasons like these that I support getting startup founders some liquidity during their company’s first few years, perhaps as early as Series A financing when appropriate.

Founder 108

Founder San Francisco Liquidity Event LP 108

Berkonomics

DECEMBER 17, 2020

Let’s take a few minutes to examine the kind of equity financing available to small or early stage businesses. In most cases, these applicants for equity funding must be rooted in technology to apply to this limited discussion. All angel groups will want to see the founders in person or by Zoom at sometime early in the process.

Equity 62

Equity Finance Liquidity Event Angel Groups 62

Startup Professionals Musings

MAY 18, 2015

Even though initial stock has no value or market, it is extremely valuable in dividing entity ownership between multiple co-founders, commensurate with their investment, contribution and role. Startup owners need to assume a three to five year wait for a liquidity event, such as acquisition or going public, before they can cash out.

Stock 120

Stock Vesting Common Stock Founder Vesting 120

Berkonomics

JUNE 12, 2014

It is rare when one person starts a company, supplies all the funding, and shares no management tasks or equity with others, and still grows the company to any significant size, worthy of a multi-million dollar opportunity to cash out at exit. So co-management is the second group to share in the bounty upon a liquidity event.

Liquidity Event 85

Liquidity Event Pre-Money Valuation Cofounder Initial Public Offering 85

View from Seed

MAY 19, 2015

At the seed stage, the founder’s or co-founders’ role in the company is essential and therefore carries a great deal of risk for missteps. Without a full corporate infrastructure of support, and more importantly, without extensive monetary resources, founders and employees must spend wisely. Taciturnity.

Seed Stage 120

Seed Stage Liquidity Event Cofounder Startup 120

Steve Blank

JULY 19, 2010

As a founder I fought with VC’s over vesting as they brought in a new CEO and walked me out the door. I’ll offer that both entrepreneurs and VC’s have the wrong model for founding CEO equity compensation. I’ll offer that both entrepreneurs and VC’s have the wrong model for founding CEO equity compensation. Preparing For Chaos.

Vesting 251

Vesting Liquidity Event Venture Capital Founder Vesting 251

Startup Professionals Musings

SEPTEMBER 7, 2015

I tell them that the projection process and results are most important for you the founder, to evaluate if there really is a business that can be built from the idea. I continually hear founders assert they will compete through lower margins and harder work. Show a liquidity event and investor return at the end of the period.

Liquidity Event 120

Liquidity Event Startup Initial Public Offering Equity 120

Startup Professionals Musings

FEBRUARY 13, 2016

How big is the funding request, and how much equity will you give? Quantify founder investments, both cash and sweat-equity. If you don’t plan a liquidity event, you won’t find many investors interested. Justify funding requirements, use of funds and specify a current valuation estimate.

Sweat Equity 120

Sweat Equity Advisory Board Liquidity Event Startup 120

Gust

JUNE 7, 2014

The technical term for this is the “liquidation waterfall”, because on a liquidation event (whether good, as in a large buyout, or bad, as in a distress sale, investors (and others) get paid out in a specified order. So, here is the typical payout order, from first to last: 1) Salaries owed to employees.

Warrant 157

Warrant Preferred Stock Early Stage Common Stock 157

Board Effect

MAY 13, 2019

What we’re really looking for is the baseline of management startups should afford their cap tables as they grow—in both size and the complexity of their equity structures. Managing cap tables presents much less of a challenge to founders in their “garage days”; offering up their blood, sweat, and tears in sacrifice to the startup gods.

Cap Table 40

Cap Table Management Liquidity Event Dilution 40

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?

Revenue 60

Revenue Liquidation Preference Equity Cofounder 60

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. Promissory notes come before any equity, and most late equity investments come before early equity investments, even of the same class of security.

Dividend 62

Dividend IRR Preferred Stock Participating Preferred 62

Berkonomics

JUNE 8, 2017

Some businesses require very little capital and the founder can self-finance the enterprise and retain 100% of its ownership and control from ignition through liquidity event (startup through sale). Venture, private equity and more: Here we lump a large number investor classes into one.

Private Equity 106

Private Equity Valuation Cap Table Accredited Investor 106

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.” In descending order of preference from the founders’ point of view: 1. a mix of cash and stock) received by other equity holders in the transaction.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Gust

SEPTEMBER 5, 2012

Convertible equity? The new form of convertible security or “convertible equity” is essentially a convertible note containing most of the usual terms — except it’s been stripped of the features that would make it a loan. How to finance a new seed-stage startup? Convertible debt?

Finance 134

Finance Convertible Security Equity Seed Stage 134

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

Berkonomics

JUNE 2, 2010

I discovered the power of employee feelings of ownership early in my management career, establishing an employee stock ownership plan (ESOP), once popular as incentive compensation as well as a tax write-off for corporations and even a way to slowly transfer ownership of a company from the founders to the employees.

Liquidity Event 86

Liquidity Event Stock Options IPO Stock 86

Gust

NOVEMBER 4, 2011

In brief, a cap acts to place a limit on the conversion price of a convertible note such that investors are guaranteed a minimum number of shares for their bridge loans if the startup does a priced equity round at a high pre-money valuation – “high” meaning above the cap, which is often a heavily negotiated term. (The by February 2006).

Valuation 98

Valuation Pre-Money Valuation Merger Vesting 98

Berkonomics

FEBRUARY 23, 2023

So, the question: load up with more equity and dilution? LivingSocial took in $583 million in capital in 2010 and 2011 with little left in time to show for the investment and tremendous dilution to the founders. Or sell now?

Dilution 62

Dilution Valuation Early Stage Equity 62

dondodge.typepad.com

JANUARY 15, 2011

Community is more powerful than money or technology » August 11, 2007 How much equity for investors and employees? How much equity should I give up? How much equity should I grant to early employees? No loss of equity, at least until they convert at Series A. How much equity should be given to employees?

Equity 40

Equity Employee Dilution Valuation 40

The Startup Lawyer

JUNE 9, 2010

A startup’s Series A financing shouldn’t be a large liquidity event or salary payday for the startup’s founders. While a startup typically receives millions of dollars in a Series A, if too much of that $$$ flows guaranteed to the founders, various incentives get out of whack. Case Study.

Salary 99

Salary Term Sheet Liquidation Preference Liquidity Event 99

Startup Professionals Musings

FEBRUARY 3, 2010

Most quality advisors know that chances of a liquidity event are rare. The stipend should be between $150 and $300 per hour with an equity kicker based on achieving goals. Only build an advisory board when you are ready to fully engage. ** Today's guest blog is by Bob Arciniaga, Founder of Advisory Board Architects (ABA).

Advisory Board 225

Advisory Board Startup Liquidity Event Stock 225

The Next Web

OCTOBER 7, 2013

They were referring to non-founder engineers, most commonly the first hire for technology businesses. is frequently granted ownership significantly less than that of the founders. However, at the very early stage, they are taking as much risk with their future as the founders. Engineer #1?

Engineer 129

Engineer Dilution Option Pool Vesting 129

Bryce Dot VC

MARCH 5, 2015

terms is the option for founders to make cash distributions to investors from profits as a return on their investment instead of selling out or taking their company public to create a liquidity event. Our terms suggest that the first 2x of our investment are paid out in a schedule of 80% to Indie.vc, 20% to the founders.

Distribution 40

Distribution Liquidity Event Salary Equity 40

The Next Web

SEPTEMBER 29, 2013

Weaknesses inside the founder team kill startups. The truth is, sometimes you need to replace your co-founders and start over. Usually it’s because the founders were doing exactly what they needed to do to raise money. Burning Up All of their Runway – Founders can also go out of business but then everyone loses.

Metrics 136

Metrics Cofounder Cram Down Liquidity Event 136

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

Growthink Blog

MAY 13, 2012

And they'll want to invest if they believe your company has great potential to achieve a liquidity event, and one that enables them to earn a significant return on their investment. The angels must believe in and be comfortable with both the founders and the key operating personnel of the company.

Angel Investor 93

Angel Investor Exit Strategy Liquidity Event Angel Groups 93

Berkonomics

JANUARY 20, 2010

Some businesses require very little capital and the founder is able to self-finance the enterprise and retain 100% of its ownership and control from ignition through liquidity event (startup through sale). For you who fit that description, nice work.

Private Equity 69

Private Equity Valuation Cap Table Accredited Investor 69

Berkonomics

AUGUST 27, 2015

He has served as advisor to and member of numerous financial exchanges, and was the founder and CEO of Arthur Lipper Corporation and co-founder and Chairman of New York & Foreign Securities Corporation. The Flipper’s executives usually have significant equity holdings, either actually owned or reflected in stock options.

Intellectual Property 48

Intellectual Property Balance Sheet Stock Options Valuation 48