Gust

SEPTEMBER 29, 2011

In a convertible debt financing, the investment is made without placing an explicit valuation on the startup; instead, the investor makes the company a loan, which will convert as part of the next priced equity round into the type of security issued to investors in that round, whomever they may be.

Finance 178

Finance Term Sheet Preferred Stock Bridge Financing 178

Gust

JUNE 7, 2014

2) Secured creditors. 3) Un-secured trade creditors. But for a company with multiple rounds of equity and/or debt funding, things can rapidly get so complicated that the only way to figure out who gets what, when, is to use a specialized computer or web-based program: *original post can be found on Quora @ [link] *.

Warrant 157

Warrant Preferred Stock Early Stage Common Stock 157

Gust

DECEMBER 8, 2011

Readers can anticipate my next point in continuing the analogy: It makes no more sense for a non-lawyer to prepare fundamental legal, governance, equity and intellectual property documents than it would for a patient to self-diagnose and begin taking prescription-strength antibiotics or other medications. Newco, Inc.”) Newco, Inc.”)

Intellectual Property 139

Intellectual Property Non-disclosure Agreement Delaware Stock 139

Gust

MAY 24, 2012

As a quick review, most startups begin life as corporations with a single class of equity securities, referred to as Common Stock , issued to founders, employees, and outside service providers. Options and warrants, when issued, are also typically exercisable for shares of Common Stock.

IPO 159

IPO Equity Common Stock Stock 159

Gust

JULY 19, 2012

1) Non-equity, creative project crowdfunding portals, which are currently allowed and are not subject to legislation under the JOBS Act. 2) Pure-play equity crowdfunding portals as directly envisioned by the JOBS Act. I believe this is likely to continue, and that at least the two leaders will be very successful.

Accredited Investor 144

Accredited Investor SEC Equity Early Stage 144

Gust

NOVEMBER 29, 2011

But, in the US, only wealthy accredited investors * have been allowed by the Securities and Exchange Commission (SEC) to invest in entrepreneurs and their startup companies (without extensive disclosure of the business plan and risks inherent to such new ventures).

Securities and Exchange Commission 154

Securities and Exchange Commission Accredited Investor Angel Investor Due Diligence 154

Gust

OCTOBER 5, 2011

Let’s dive in, taking it from the top: Type of Security : Convertible Promissory Notes, bearing interest at a simple interest rate of 8%. At least one well-known Silicon Valley venture accelerator is using a document referred to as a “ convertible security ” rather than “convertible promissory note.”

Finance 79

Finance Preferred Stock Term Sheet Early Stage 79

Gust

DECEMBER 8, 2013

The intent of this question is to determine the level of commitment of founders, both cash and “sweat equity,” and how much others have already invested into this plan. As an employee, you salary will likely be low, your job security low, so the job title better be large, and the stock options better be large.

Due Diligence 174

Due Diligence Sweat Equity Intellectual Property Burn Rate 174

Gust

JULY 18, 2012

For startups, it’s also important to understand that Board approval is required for a corporation to issue any new shares of stock or other equity instruments such as stock options. For that reason, approval of the latest employee stock option grants recommended by the CEO is a routine action item at most startup Board meetings.

Stock Options 188

Stock Options SEC Stock Government 188

Gust

NOVEMBER 23, 2011

What may appear to be a hypertechnical set of amendments to obscure code sections ( Section 12(g)(1)(B) of the Securities Exchange Act of 1934 , anyone?) targets the Exchange Act requirement that is reportedly forcing Facebook to go public in early 2012.

IPO 110

IPO Prospectus SEC Intellectual Property 110

Gust

JANUARY 5, 2012

Securities Exchange Act of 1934, section 12(g), generally limits a privately held company to fewer than 500 shareholders. Most recently, the number of shareholders issue has arisen as Congress considers legalizing crowdfunding which may allow hundreds or even thousands of smaller investors to make equity investments in startups.

SEC 131

SEC Angel Groups Technical Review Private Equity 131

Gust

OCTOBER 29, 2014

This will be changing next year, however, because of a new law called the JOBS Act of 2012 , which establishes a new, limited type of Crowdfunding for small companies and non-Accredited investors. Once the U.S.

Accredited Investor 157

Accredited Investor Securities and Exchange Commission Technical Review Due Diligence 157

Gust

OCTOBER 8, 2014

Securities and Exchange Commission provides certain limited exceptions to allow individuals to invest in non-public companies. These are “publicly tradable companies”, and what makes them so are the extensive rules surrounding disclosure, transparency, trading and other aspects of their corporate existence.

Securities and Exchange Commission 128

Securities and Exchange Commission Equity Security 128

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

OCTOBER 26, 2011

When a company is asked to make legal representations about its standing, prior equity and debt issuances, corporate governance formalities and so forth, if taken seriously, matters of “deferred maintenance” often surface and must be handled before closing.

Finance 79

Finance Term Sheet Covenant Accredited Investor 79

Gust

OCTOBER 3, 2011

Once in, this money stays in, and is part of what makes up your Founder’s Equity (along with your work and your intellectual property.). From $25,000 – $150,000 you will likely be rounding up friends and family to put in the first outside cash on top of yours.

Finance 70

Finance Venture Capital Intellectual Property Early Stage 70