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The Option Pool Shuffle

venturehacks.com

Use a hiring plan to justify a small option pool, increase your share price, and increase your effective valuation. Thanks! Am I correct?

Sizing Option Pools In Connection With Financings

A VC : Venture Capital and Technology

Investors like to require that an unissued option pool is in the pre-money valuation calculation when they put money into early stage companies. This post is about how to size the option pool. And the investors want the option pool to be in the pre-money valuation. Hopefully it will explain the issue.

Option Pools and VC Negotiations

Rob Go

In my last post about raising seed vs. jumping straight to A, I received a good comment from Chris Woods that my analysis neglected to include the impact of option pools that are created at each financing round. Essentially, the new investor wants there to be a certain % of options available to employees after they invest.

Introducing the Cap Table and Hiring the CTO

Feld Thoughts

Equity is split 55% and 45%, but where is that officially recorded? As first time entrepreneurs they did not create an employee options pool; we’ll fix that in a little while. They come up with two options: Hire Praveena as an employee and offer her stock options. Time to update the cap table.

Equity for Early Employees in Early Stage Startups

SoCal CTO

I was asked by a reader how much equity he should give out to early employees and to service providers in a very early stage startup. million.

How to Divide Equity to Startup Founders, Advisors, and Employees

thinkspace.com

How to Divide Equity to Startup Founders, Advisors, and Employees. Equity for Founders. From there you can get the percentage of equity.

What is the “maximum” amount (%) of a startup an investor should have?

Gust

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. Invested Interests Angels equity split investor equity ownership startup ownership VCs

Startup Equity For Employees

www.payne.org

Startup Equity For Employees. Stock vs Options. Salary vs Equity. The re-heating of the venture funded tech market has pushed a heat up of the hiring market, and Im getting more calls from friends asking for help understanding startup stock (equity) offers. Stock vs Options. Salary vs Equity. Contents.

Wenger: Presenting Option Grants to Boards

Ask The VC

Today’s VC post of the day is from Albert Wenger (USV) and titled  Presenting Option Grants to Boards. While there is no standard for how to present option grants, Albert lays out a very clear set of eight pieces of data he likes to see. The next two are footnotes for options grants that aren’t standard.

What is an effective “pre-incorporation-agreement” between possible founders of a startup?

Gust

Then sit down with your co-founders and divvy up the equity based on the contributions you all believe each of you will make…providing for reverse vesting, a large option pool, and a clear decision-making structure. Pivotal Moments equity Founder equity founder relationships founders incorporation agreement startups

The Right Way to Grant Equity to Your Employees

Fresh Inc.: The Staff Blog

The equity culture among young technology companies is almost universal. This pool should be reserved for non-executives.

Raising Funding From Family and Friends: Division of Equity

Business Plan Blog

Raising Funding From Family and Friends: Division of Equity. In exchange for their work, you offer equity in your company. Stage 1: Idea.

What’s In A Term Sheet?

Early Growth Financial Services

It could be the size of the option pool, or maybe the provisions around reverse vesting. discussed Change of Control, Reverse Vesting, and Liquidation Preferences in … Continue reading → Equity / Debt / Venture Funding You came, you pitched, you conquered. Congratulations! Most investors will expect this.

CMO CTO COO Equity and Compensation

SoCal CTO

I was just asked about a particular startup situation (seed stage, CMO hire, non-founder) and particularly what compensation and equity is appropriate.

Y Combinator's Sam Altman to Founders: You Get Too Much Equity

Fresh Inc.: The Staff Blog

At TechCrunch Disrupt event, investors push for changes to the way startups grant equity to their founders. asked Lee.

What is it Like to Negotiate a VC Round?

Both Sides of the Table

How much is in the option pool? Well, if you have an option pool of only 6% and have many more execs to hire to build out your team you’re going to ask for more options to be created in the future. Option pool (likely dilution in the future, which is a function of a higher price just not yet defined).

Raising Capital: 4 Things You Must Do

Fresh Inc.: The Staff Blog

Don''t spend all of your energy negotiating valuation when you could be talking about the options pool. Here are his tips: 1.

Punch & Pie: How Should Co-Founders Divide Equity?

Agile VC

Sometimes co-founders put off the equity split question for some time. Both of these are typically reflected in the founder equity split.

Doing Deals – 3 Tips for Entrepreneurs (Part 2)

Scott Edward Walker

As I saw first-hand in New York City representing big, successful private equity firms, the best dealmakers have an extraordinary ability to take their emotions out of transactions and remain extremely disciplined.  Accordingly, I thought it would be helpful to share three basic tips in connection with doing deals.  Tip #2: Don’t Blink First. 

Quick Post on Post-Money Valuations

Rob Go

When I first started out as a VC nearly 9 years ago, most early stage company valuations were expressed as pre-money valuations.

Entrepreneurs: Your instincts are always better than bad advice

The Next Web

Neil Rimer is a Partner and co-founder of Index Ventures. Alarm bells. For any founder, this type of structure should ring all kinds of alarm bells.

Cash-strapped? How to pay for services with your startup’s equity

The Next Web

Pitfalls in sharing equity. While equity can be a great tool for compensating early on, the drawbacks are significant. Plan upfront.

What to expect before accepting the offer to become Engineer #1 at a startup

The Next Web

In exchange, the engineer is likely offered the promise that his or her option shares will one day turn into big money. Engineer #1?

How to Evaluate an Offer from a Startup Incubator

The Startup Lawyer

If an incubator offers your startup $25,000 in exchange for 6% equity, the pre-money valuation is a whopping $391,667. Rather than assign a monetary value to the intangibles, a startup should instead assign an equity percentage value to intangibles like mentorship. Other incubators may want to set up an option pool.

The Equity Equation

venturehacks.com

The Equity Equation. As this nuclear winter of venture hacks continues, I thought you might enjoy our thoughts on Paul Graham’s The Equity Equation. ” Read the rest of The Equity Equation first; it is great. You have to pay market rates regardless of the equity equation. 2. The Option Pool Shuffle.

Should You Share Equity with Consultants?

www.inc.com

Should You Share Equity with Consultants? To grow his cash-strapped start-up, Parker ended up sharing equity -- not only with employees, but also with consultants and vendors. Parker found that equity as compensation helped build loyalty to his company -- even among consultants. But sharing equity can have pitfalls, too.

Changing Equity Structures for Early Startup Employees

www.instigatorblog.com

Those first employees will take 0.5-1% but they’re not going to be overwhelmed by it, or insanely incentivized by that equity alone.

Dear elizy: How should I split equity with my co-founders?  And how will that affect raising a seed round?

Hippoland

Bob and I were her students and will be graduating this year.  We plan to incorporate and work on this company full time, while Ada will work on it part-time, as she is a full-time tenured professor.   We are trying to decide how much equity to allocate to each person.  I would like to split the equity equally, since it seems only fair.

The Dilution Concern for Founders

Recent Buzzes - VC Experts, Inc.

This is not chopped liver, but it is a percentage that suffers by comparison to the employee option pool, for example. By Joseph W.

When The VC Asks: About Your Hiring Plan

Hunter Walker

recommend to founders that if there’s a unicorn you need who isn’t on founding team, (a) start identifying those people in advance of fundraising and (b) prepare to compensate them generously via equity. Building a senior team but pushing back on having a healthy employee option pool? Those people are out there. Sounds great.

Quick & Dirty How-To: Employee Stock Option Allocations

Christine.net

A great question came up recently in discussion with one of First Round's CEOs: how much equity should I allocate for hiring my next round of employees? Stock option comparables are hard to come by, so I thought I should post what I dug up for our CEO. Most option grants are near the bottom of the ranges. CEO 5 - 10. COO 2 - 5.

How to pick a co-founder

venturehacks.com

Venture Hacks Good advice for startups. Picking a co-founder is your most important decision. Date first. It’s not the person you like the most.

Twitter Link Roundup #202 – Small Business, Startups, Innovation, Social Media, Design, Marketing and More

crowdSPRING Blog

Model Equity Calculator for Founders with Option Pool Expansion – crowdspring.co/1fwUdsA. 1gNMc5E. 1eIUvyQ. 1bkxKuq. HS1w1L.

Cap Table Clean Up

ithacaVC

They are typically pretty simple:  (i) shares owned by founders and (ii) shares authorized for issuance in a stock option pool, some of which may be issued to employees already and some of which will be available for future issuance. times more equity than Founder X. Often times a plug is used around 10%. Back to our basics.

Angel Investing at Today's Market Rates is a Losing Proposition

Dshen

Dilution via option pools is also in the model, although we estimated the numbers based on our own experience. The model is just a model.

Anatomy of a Term Sheet: Conversion and Anti-dilution

VC Ready Blog

NOTE: This is the sixth post in our series about standard terms in early stage equity financings. Optional Conversion and Mandatory Conversion. The formula could be made broader by, for instance, including all shares of common stock that may be issued out of the company’s option pool (not just those covering option already granted).

How to Raise Money as a First Time Founder

The Next Web

convertible note is actually a debt instrument that converts to equity upon certain events occurring (usually a series A financing event).

How does funding work? Angel & VC investment in Nordic startups by the numbers

ArcticStartup

The advantage with government funding is that they often are without giving away any equity. million, for 20 percent of the equity.

Founders versus early employees

www.startupnorth.ca

Table 1: Options Grants in Silicon Valley for Series A from VentureHacks The numbers from VentureHacks are guidelines. They are rough estimates.Any one have sample option grants in Canada? would assume that they are very similar but given the lower valuations and this may change the salary/options mix. More equity? link].

How to Fund a Startup

www.paulgraham.com

Ifyour competitors offer employees stock options that might make themrich, while you make it clear you plan to stay private, yourcompetitors will get the best people. It costs you a little more equity, but being able to play the two firms off each other (as well as ask one if the other is being out of line) is invaluable. Whendel.icio.us