Both Sides of the Table

FEBRUARY 23, 2015

But not everybody has the right skills to build a highly successful and valuable startup from scratch. For some aspiring to be tech entrepreneurs, I often suggest a two-step process, as I argued in this post that “ The First Startup Founder You Need to Invest in Is You.” In fact, I would argue that most people don’t.

Technical Review 150

Technical Review Liquidation Preference Silicon Valley IP 150

ithacaVC

DECEMBER 14, 2011

Continuing with the “No Mess” theme of commenting on things that give VCs pause, I thought it would be good to touch on liquidation preference. Specifically, “too much” liquidation preference (I will use “LP” for liquidation preference). Ok, enough of the background.

Liquidation Preference 49

Liquidation Preference LP Preferred Stock Liquidity Event 49

Both Sides of the Table

SEPTEMBER 16, 2010

I know some people think the whole market has been disrupted and startups and funding work differently these days. Deep pockets – In the previous posts I’ve compared tech startup investing with poker taking analogies of The Big Short & Delivering Happiness. Tags: Startup Advice Tech Market Analysis VC Industry.

Cap Table 283

Cap Table Angel Investor Liquidation Preference Deal Flow 283

Both Sides of the Table

MAY 30, 2015

When you do a convertible note with a cap that converts into the next round of funding one of the unintended consequences is that if you’re successful and raise at a larger price than your cap the early angels often get “multiple liquidation preferences” on their dollars in. It’s the silent screwing that stings.

Liquidation Preference 150

Liquidation Preference Ratchet Angel Investor Entrepreneur 150

Both Sides of the Table

SEPTEMBER 5, 2012

To better understand the arguments for / against convertible equity I suggest you read my posts on those topics: Is convertible debt preferable to equity? Was Paul Graham right in his “high resolution” financing post? Convertible Notes Also Can Have Multiple Liquidation Preferences. That’s right.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Tim Keane

JANUARY 12, 2010

Startups and angels: Along the way to success. For angel groups, the distinction between groups and VCs on this issue is dwindling, especially as angel groups do bigger rounds of financing.   Note that this applies only to earl stage Series A-type equity financings and assumes no cash dividends are paid to investors.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

ReadWriteStart

SEPTEMBER 2, 2011

While certainly not every business needs to raise venture financing, it is the path for many high-growth technology startups. As Steve Blank explained earlier this week on ReadWriteStart from research at The Startup Genome Project : One of the biggest surprises is that success isn't about size of team or funding.

Cap Table 125

Cap Table Term Sheet Liquidation Preference Technical Review 125

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

Feld Thoughts

FEBRUARY 9, 2016

Mark Suster wrote a great post yesterday titled The Resetting of the Startup Industry. I watched, participated, and suffered through every type of creative financing as companies were struggling to raise capital in this time frame. Until you are consistently generating positive cash flow, you depend on someone else for financing.

Cap Table 70

Cap Table Down Round Liquidation Preference Founder 70

Both Sides of the Table

APRIL 14, 2010

That means that the likely have a minimum of $15 million in liquidation preferences. It will usually be higher because the liquidation preference has a dividend so if the deal is long in the tooth assume that the liquidation preference might be $20-22 million. Take liquidation preferences head on.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

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.

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Altgate

DECEMBER 15, 2010

@altgate Startups, Venture Capital & Everything In Between Skip to content Home Furqan Nazeeri (fn@altgate.com) ← No one wants to tell you your baby is ugly More on Liquidation Preferences → Pre-Money Valuation vs Number of Founders Posted on December 15, 2010 by admin Here’s a chart of the day worth sharing.

Pre-Money Valuation 66

Pre-Money Valuation Valuation Cofounder Founder 66

Startup Professionals Musings

JANUARY 27, 2012

As the company grows and the second or third group of investors comes in, the terms of each subsequent financing grow in size, scope, and the number of lawyers’ fingerprints on them. These “IV drip” financings may reduce risk for investors, but put more pressure on founders. Liquidation preference.

Term Sheet 223

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 223

Startup Professionals Musings

SEPTEMBER 14, 2010

As the company grows and the second or third group of investors comes in, the terms of each subsequent financing grow in size, scope, and the number of lawyers’ fingerprints on them. These “IV drip” financings may reduce risk for investors, but put more pressure on founders. Liquidation preference. Marty Zwilling.

Term Sheet 227

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 227

Up and Running

AUGUST 17, 2015

Additionally, I had already studied Economics and Finance during undergrad, making the academic part of an MBA seem a little redundant. C Corp versus LLC, non-competes, liquidation preferences, preferred versus common stock, and so on). It helps mitigate startup risk. Is business school really necessary?

Entrepreneur 60

Entrepreneur Cofounder Angel Investor eCommerce 60

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

www.readwriteweb.com

DECEMBER 29, 2011

While certainly not every business needs to raise venture financing, it is the path for many high-growth technology startups. Earlier this week on ReadWriteStart, Steve Blank used research at The Startup Genome Project and explained: One of the biggest surprises is that success isn't about size of team or funding.

Cap Table 47

Cap Table Term Sheet Liquidation Preference Technical Review 47

David Teten

AUGUST 21, 2019

Revenue-Based Investing (“RBI”) is a new form of VC financing, distinct from the preferred equity structure most VCs use. A company with that mindset is dramatically less risky, because it’s not dependent on the financing markets for continued viability. But this is the same for a VC round with a liquidation preference.

Revenue 60

Revenue Liquidation Preference Equity Cofounder 60

ithacaVC

APRIL 25, 2014

This cap table can be used by a pre-funded startup and then a financing can be layered in. The model includes a simple waterfall analysis using both participating and non-participating preferred (see line 44 and then columns M and O). Dealing with VCs Management Startup Life' Here are things to note: 1.

Cap Table 79

Cap Table Preferred Stock Pre-Money Valuation Liquidation Preference 79

Venture Chronicles

AUGUST 23, 2013

This is the 5th installment in the Startup Lessons series I have been writing in the wake of my experience with Get Satisfaction. This one will certainly inspire a lot of head shaking around the table as anyone who has been involved with a startup can relate to this. Where this all comes to a head is when a company is facing headwinds.

Management 66

Management Startup Liquidation Preference Dilution 66

genylabs.typepad.com

SEPTEMBER 24, 2011

Planning, Startups, Stories. I wont bother going into details on start-up financing terms ( see this post for an overview of typical VC terms) except to say if you dont know and understand: the firms cap table and valuation. where your stock sits in the liquidity preference stack. Small Business Blogs. OReilly Radar.

Equity 40

Equity Technical Review San Jose Stock 40

Growthink Blog

MAY 23, 2011

The typical wisdom regarding the appropriate financing course for a new company goes as follows: 1. This venture capital financing - usually between $3 and $10 million - is the first of a number of rounds of outside investment over a period of three to five years. My suggestions for the investors seeking emerging companies to back?

Angel Investor 112

Angel Investor Venture Capital Sweat Equity Cram Down 112

The Startup Lawyer

JULY 13, 2011

I’ve done quite a few recent seed deals using various ‘standard’ seed financing docs ( Series Seed , TechStars Series AA , etc.). While using these document sets can help reduce transaction costs and the time to close, a startup can run into trouble by trusting deal documents without verification.

Preferred Stock 68

Preferred Stock Liquidation Preference Participating Preferred Stock 68

K9 Ventures

MARCH 23, 2011

The convertible note was really intended as an instrument for a “bridge financing” – when an equity round was imminent, and likely to occur, but the company needed some money in between. In that case, it made good sense to have a debt instrument, where the note holder then converted into equity when the financing occurred.

Pre-Money Valuation 132

Pre-Money Valuation Valuation Equity Liquidation Preference 132

techcrunch.com

FEBRUARY 25, 2010

This is an anonymous guest post from a well known startup executive: When we split the atom, Einstein remarked that everything changed but our way of thinking. As Mark Suster recently noted , employees will never see a big payday at most startups unless the company shoots for the moon. Otherwise, nobody will want to work for a startup.

Liquidation Preference 63

Liquidation Preference Founder Option Pool Acquisition 63

SoCal CTO

JULY 13, 2010

Some great content around the intersection of startups and being a Startup CTO in June this year. This continues my series of posts: Top 29 Startup Posts May 2010 Startup CTO Top 30 Posts for April 16 Great Startup Posts from March There was some really great content in June. liquidation preference.

Cofounder 175

Cofounder Technical Cofounder Term Sheet Startup 175

Both Sides of the Table

SEPTEMBER 6, 2010

That said, don’t complicate the topic – If you’re the founder of a company you likely know a lot about things like Liquidation Preferences and how they affect value allocations when the company is sold. Tags: Startup Advice. Some founders err on the side of telling employees absolutely everything.

Stock Options 294

Stock Options Stock Valuation Liquidation Preference 294

K9 Ventures

JUNE 5, 2015

So while the infrastructure cost and startup costs may have declined, the operating costs have increased. In that presentation, I said that Seed is not the first round of financing any more and that K9’s investments were mostly “pre-seed”. Well, enter the Pre-Seed round, where the startup raises closer to $500K.

Seed Stage 48

Seed Stage Venture Capital Early Stage Valuation 48

Scott Edward Walker

AUGUST 31, 2011

Thanks, Scott Question We’re a startup based in Palo Alto, and we just received a Series A term sheet for a $725,000 investment. Which financing sources should they consider? But more importantly, a good startup lawyer will also discuss with you the business terms, including the structure of the deal.

Silicon Valley 45

Silicon Valley Term Sheet Liquidation Preference Redemption 45

Scott Edward Walker

DECEMBER 13, 2018

We had a busy 2018, including closing several significant M&A transactions and financings. An acquihire is essentially the acquisition of a startup for its talent/team (rather than for its products or services). The acquirer is typically a large successful company, and the target is typically a failing early-stage startup.

Founder 45

Founder Merger IP Liquidation Preference 45

Spencer Fry

APRIL 17, 2017

As a startup in 2017, having limited resources can in and of itself sink your entire ship. There are so many people, products, and startups that are vying for their attention, that it’s harder than ever to rise above the noise. But as an early stage startup, accountability is so important. Something has to give.

Bootstrapping 63

Bootstrapping Cap Table Liquidation Preference Cofounder 63

Feld Thoughts

FEBRUARY 28, 2023

Corporate law: In Germany, most companies in general and most VC-financed companies are structured in the legal form of a “Gesellschaft mit beschränkter Haftung” (GmbH). KG companies have decisive tax disadvantages for startups and are, therefore, rarely used in this area. BAND) and the Bundesverband Deutsche Startups e.V.

Germany 165

Germany Liquidation Preference Option Pool Advisory Board 165

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

Altgate

DECEMBER 16, 2010

@altgate Startups, Venture Capital & Everything In Between Skip to content Home Furqan Nazeeri (fn@altgate.com) ← More on Liquidation Preferences Happy Holidays → Where Do Tech VCs Invest? The data set is about 1,200 rounds of financing for US tech companies that completed the 2010 CompStudy survey.

Liquidation Preference 59

Liquidation Preference Early Stage Venture Capital Later Stage 59

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 maturity conversion : into Series AA Preferred Stock based on a $5M valuation.

Preferred Stock 60

Preferred Stock Liquidation Preference IPO Common Stock 60

ithacaVC

NOVEMBER 12, 2011

Typically, with convertible debt, the note holder expects the debt to convert into the next equity financing (often a Series A round). So, the debt holder ends up with Series A stock with a $1 value (and usually a 1X liquidation preference, in this hypo $1) for $.85. 85 a share (just divide the debt amount plus interest by $.85).

Warrant 49

Warrant Liquidation Preference Equity Stock 49

ithacaVC

JUNE 28, 2011

Let’s take the following hypo: you are the CEO of Company XYZ, and you just raised $2mm in a Series A financing. In the financing there are 3 institutional investors and 4 high net worth individuals. Let’s assume that future equity financings will be needed as usually is the case.

Warrant 53

Warrant Common Stock Liquidation Preference Institutional Investors 53