Gust

JUNE 17, 2012

Money to build the business is the number one challenge for most startups. A large percentage of startups never apply to either. You need to explore more common and more productive approaches for getting your startup moving forward. Self-funding is the preferred source of cash for your startup – if you can do it.

Technical Review 164

Technical Review Bootstrapping Venture Capital Incubator 164

Gust

OCTOBER 4, 2012

People who tell you that VCs won’t look at a company with an even equity split are being silly. That has never once, in my experience, been even a slight hiccup, let alone a dispositive factor in a seed investment. That said, there is a core of truth in the concept that there always needs to be *some* way to make a decision.

Equity 125

Equity Founder Government Startup 125

Gust

NOVEMBER 14, 2011

Remember that up to this point, the investor has primarily seen and talked to the founder and CEO, and studied written documents. All private equity groups go about due diligence in their own way, but there are a few key areas of focus that entrepreneurs should always expect: • Team strength and health.

Technical Review 152

Technical Review Due Diligence Intellectual Property Private Equity 152

Gust

JUNE 16, 2023

When you run a startup, securing the right types of funding at the right moments can feel like a never-ending game of chess. And plenty of founders do sabotage the game: It’s estimated that 80% of startups don’t make it past the first year, and 90% fail over the long run.

Equity 91

Equity Security Founder Startup 91

Gust

DECEMBER 20, 2012

There is no specific ratio between “sweat equity” and cash in a venture, and that’s actually not a good way to think about the issue. The first is the entrepreneurial value of the founder(s) in a new venture. These are critically different, and have very different economic attributes attached to them.

Sweat Equity 136

Sweat Equity Equity Valuation Salary 136

Gust

NOVEMBER 8, 2012

The bottom line is that the very question you are asking is one of the trickiest things of all when it comes to startup founding.

Founder 134

Founder Option Pool Vesting Cofounder 134

Gust

NOVEMBER 8, 2012

As a business lawyer working with startups in technology and digital media every day, I’m fortunate to have a front-row seat as entrepreneurs create value out of thin air. Granted most startups will never become another Apple or Google. The Startup Visa movement is aimed at a pain point that is near and dear to my heart.

Silicon Valley 187

Silicon Valley San Francisco Intellectual Property Accredited Investor 187

Gust

DECEMBER 6, 2012

What’s an advisor to a startup deal? And it hurts the credibility of founders when they show off names that don’t really mean anything. . Advisors with small equity shares are good, and advisors with options are as good or even better. Equity is forever. Options can become equity. Advice is easy to get.

Startup 165

Startup Equity Capitalization Table Naming 165

Gust

OCTOBER 26, 2014

When someone asks me for the best way to fund a startup, I always say bootstrap it, meaning fund it yourself and grow organically. Bootstrapping avoids all the cost, pain, and distractions of finding angels or VCs, and allows you to keep control and all your hard-earned equity for yourself. Reinvest gross profit.

Bootstrapping 176

Bootstrapping Startup Merger Salary 176

Gust

JULY 12, 2012

It doesn’t give you more cash compensation, more equity ownership or more direct control over the operating business. If you are going to be a true co-founder (and 20% equity sounds like it), sharing over-all decision making about company direction, strategy, financing, staffing, etc. They don’t *join* it later.

Cofounder 107

Cofounder Founder Warrant Equity 107

Gust

NOVEMBER 11, 2011

Startups and investors discover each other, and the community wins because the event becomes visible evidence of new business and new jobs locally. Or the in-kind winning includes legal work or management consulting, but the startup that wins has its own providers. Investors and startup winner end up never agreeing on terms.

Software Review 79

Software Review Term Sheet Due Diligence Angel Investor 79

Gust

DECEMBER 7, 2014

In my experience, that’s actually the worst way to start, for reasons I will outline here, and also the least common way, according to an authoritative survey of new startups. Even a small investor in the early days will take a large equity percentage, due to that pesky valuation challenge.

Bootstrapping 191

Bootstrapping Entrepreneur Startup Burn Rate 191

Gust

DECEMBER 18, 2013

Assuming the company is able to make effective use of the seed money to greatly increase the value of the enterprise, all of that value therefore accrues to the founder, rather than the investor.

Valuation 150

Valuation Founder Seed Money Common Stock 150

Gust

APRIL 23, 2014

From a completely biased perspective, I’d nominate the nascent and not yet completely visible rise of online equity investing platforms. Note: The author of this answer is completely biased, as he is the founder and CEO of the aforementioned platform. original post can be found on Quora @ [link] *.

Angel Groups 127

Angel Groups Accredited Investor Private Equity Deal Flow 127

Gust

DECEMBER 8, 2013

If you really want to impress a startup founder as a potential employee, or you want to be a smart investor, you need to know the right questions to ask. These are the questions that get past the hype of a founder “vision to change the world,” and into the realm of real business strengths, weaknesses, and current health.

Due Diligence 174

Due Diligence Sweat Equity Intellectual Property Burn Rate 174

Gust

SEPTEMBER 5, 2012

How to finance a new seed-stage startup? 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. Convertible debt?

Finance 134

Finance Convertible Security Equity Seed Stage 134

Gust

DECEMBER 8, 2011

In Part I , I gave a quick summary of the who, when and why of forming and documenting a new startup company. This week we’ll delve into what , exactly, is necessary or desirable to lay a solid legal foundation for a startup to build upon. Pick a name for the new legal entity (e.g., Newco, Inc.”)

Intellectual Property 139

Intellectual Property Non-disclosure Agreement Delaware Stock 139

Gust

MAY 3, 2014

This is also (and even more so) true for other groups that seem to receive less than their proportionate share of equity investments: Blacks, Latinos, LGBTQ, etc. This is in comparison to the industry-wide rate of 0.25% for all companies. original post can be found on Quora @ [link] *.

Venture Capital 152

Venture Capital Portfolio Equity Programming 152

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

Gust

JUNE 7, 2014

9) Common Stock (including any Preferred that converted to Common, any exercised options, and all Founders stock) and Common stock warrants. Invested Interests company early stage funding investors startup starup' So, here is the typical payout order, from first to last: 1) Salaries owed to employees. 2) Secured creditors.

Warrant 157

Warrant Preferred Stock Early Stage Common Stock 157

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

Gust

MAY 24, 2012

Some commentators have suggested this is the wave of the future, signifying a shift in the balance of power from investors to founders of the relatively small, elite group of growth companies that make it to public markets. Options and warrants, when issued, are also typically exercisable for shares of Common Stock.

IPO 159

IPO Equity Common Stock Stock 159

Gust

NOVEMBER 29, 2011

In the sum, substantial amounts of money (as much as a million dollars) can be raised for each startup company. Those US residents who do not meet accredited standards have been precluded from investing in startup companies. The Pros: So, why should the “laws of the land” be altered to legalize crowd funding of US startup companies?

Securities and Exchange Commission 154

Securities and Exchange Commission Accredited Investor Angel Investor Due Diligence 154

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

DECEMBER 16, 2012

Every new startup I know dreams of being funded early by one of the 318,000 active Angel investors in the USA alone. Over the past 10 years, I have had the opportunity to see how the process works, several times from the startup side, and more recently from the Angel perspective (as a member of an Angel group screening committee).

Angel Investor 179

Angel Investor Intellectual Property Elevator Pitch Angel Groups 179

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

Valuation 98

Valuation Pre-Money Valuation Merger Vesting 98

Gust

JULY 8, 2012

If you are new to the entrepreneurial world of startups, you are likely confused by the terminology of seed-stage, lean startups, micro-VCs, and Super Angels. The good news is that he is all about helping early-stage startups. Early-stage startup. Every startup is early-stage to someone. Super Angels.

Early Stage 177

Early Stage Finance Seed Stage Entrepreneur 177

Gust

DECEMBER 27, 2011

A while back, I published an article on “ Startup Due Diligence Is Not a Mysterious Black Art ,” describing what investors do to validate your startup before they invest. Here is the inverse, sometimes called reverse due diligence, describing what you should do to validate your investor before signing up for an equity partnership.

Due Diligence 119

Due Diligence Entrepreneur Offshore Angel Groups 119

Gust

OCTOBER 12, 2011

That is obviously a challenge for the typical cash-strapped early stage startup that is seeking to raise more capital and is not in any kind of position to be repaying loans. Thus, it’s in everyone’s best interest to see the startup raise more capital rather than declaring default and demanding repayment.

Finance 107

Finance Term Sheet Pre-Money Valuation Early Stage 107

Gust

OCTOBER 5, 2011

Last week , we gave some attention to the “why” behind convertible note financing for early stage startups. Going back to Part I , recall that although a convertible note is technically a loan made to the startup, in practice these loans are rarely expected to be repaid. These deal terms are simple but significant.

Finance 79

Finance Preferred Stock Term Sheet Early Stage 79

Gust

OCTOBER 29, 2014

” If we’re talking about the US and you are NOT at the Accredited level ($1 million in investable assets, or $200,000 annual income), then for the moment you are actually not allowed to invest in privately held startups (emerging public companies, of course, you can buy on the stock market like everyone else.).

Accredited Investor 157

Accredited Investor Securities and Exchange Commission Technical Review Due Diligence 157

Gust

DECEMBER 27, 2012

The second reason is that investors want to know that YOU believe in your own startup…and the best way for you to demonstrate that is to show that you have personally put your own money where your mouth is. Start by letting absolutely everyone know that you’ve got a great startup looking for early investors. ” 10.

Software Review 164

Software Review Term Sheet Technical Review Angel Investor 164

Gust

OCTOBER 25, 2011

I’m an angel investor now, but I also had a small piece of co-founder equity in a software company that went public, and whole ownership of a software company that grew and prospered but remained private. That’s what we’re here for. But angel investment isn’t for everybody. My own experience keeps me open minded on this point.

Cofounder 133

Cofounder Angel Investor Equity Software 133

Gust

NOVEMBER 23, 2011

Startups and founders need to come to terms with the stark reality that the rules of the game may be changed mid-play. SOPA would disproportionately alter the risk profile for new startups, which are thinly capitalized compared to the giants like Google and Facebook.

IPO 110

IPO Prospectus SEC Intellectual Property 110

Gust

OCTOBER 20, 2011

Individual accredited investors in typical angel deals put personal capital at risk for an equity share of growth-oriented, start-up companies. For this round of investment, the angels collectively purchase 20-40% of the equity of the company and are seeking a return on investment of 20-30X in a period of five to eight years.

Valuation 146

Valuation Pre-Money Valuation Intellectual Property Technical Review 146

Gust

DECEMBER 31, 2012

The buzz from startup executives, especially high-tech ones, has long been that startups are no place for Baby-Boomers (1946-1964) – you must have the high energy and crazy determination to work 20-hour days to succeed. Richard Branson image via Wikipedia. Only the under-35 age group need apply. Angel investor. Interim executive.

Advisory Board 177

Advisory Board Angel Investor Startup Equity 177

Gust

SEPTEMBER 13, 2012

In general, and in a more-or-less-ideal world, companies should be prepared to give up roughly 20%-40% of equity for each round of early financing, where the size of each round is enough for the company to increase its valuation significantly. After Seed: 80%. After Series A: 64%. After Series B: 51%.

Option Pool 160

Option Pool Equity Valuation Startup 160