Startup Professionals Musings

JANUARY 15, 2021

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.

Vesting 298

Vesting Dilution Stock Founder Vesting 298

SoCal CTO

SEPTEMBER 27, 2011

Founders vs. Early Employees To help with this discussion, let me start with a definition of "early employee." The first few people into a startup are on a spectrum of founder vs. early employee. Founders are likely not paid for a long time and have a sizeable equity percentage for early risk and having the concept.

Early Stage 391

Early Stage Equity CTO Hire Sweat Equity 391

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

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

Steve Blank

JANUARY 22, 2014

The reality is that the super vast majority of liquidity events are M&A and the majority of those are in the under $100M range. Focus on capital efficient, scalable startups and founders. As a result, large multi-hundred million-dollar funds focused on early stage investing in the region can be challenging. Lessons Learned.

Early Stage 286

Early Stage Silicon Valley Oregon Technical Review 286

Berkonomics

JANUARY 7, 2021

So, co-management is the second group to share in the bounty upon a liquidity event. Email readers, continue here…] Often, if not co-founders, this group is rewarded through issuance of stock options from a pool of available options that usually totals 15-20% of the total company’s equity divided among all employees.

Liquidity Event 96

Liquidity Event Pre-Money Valuation Cofounder Initial Public Offering 96

Berkonomics

AUGUST 10, 2023

Investor-friendly clauses in agreement There are also clauses in many such investor documents that allow the investor to override the founder and force a sale of the company if a proposed sale is attractive to an investor for liquidity, even if the founder feels that there is much more potential if the business is not sold at the present time.

Liquidity Event 116

Liquidity Event Initial Public Offering Dividend Valuation 116

Up and Running

SEPTEMBER 19, 2017

That’s because obtaining a pre-money valuation for a concept level technology company in excess of $1 million is difficult, particularly for a startup founder without a proven track record. Under that scenario, the same $500,000 is only worth a 10-ish percent stake in the business, and the founder can retain far more control in the entity.

Private Equity 94

Private Equity Pre-Money Valuation Equity Startup 94

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

David Teten

MARCH 14, 2018

Managers of VC funds typically want to grow their business aggressively, just like the founders we back. Among the sites we have found most helpful with practical guides for founders: Biztree , First Search , Foundersuite , Goodwin Founders Workbench , Guides.co , Inc.com , and StartupRocket. .

Private Equity 60

Private Equity Venture Capital Equity Cofounder 60

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

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 109

Founder San Francisco Liquidity Event LP 109

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

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). For those of you who fit that description, nice work.

Private Equity 118

Private Equity Valuation Cap Table Accredited Investor 118

Hunter Walker

SEPTEMBER 29, 2022

So for the most part a venture investor holds their equity until the company exits via an acquisition, IPO, or some sort of other liquidity event (management buyout, whatever). We’re aligned with the founders and the rest of the cap table until we aren’t.

Venture Capital 122

Venture Capital Cap Table LP Equity 122

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. The customary vesting model has founders vest their stock over 4-years , and when the founding CEO gets in over their head the VC’s bring in professional management. Where’s My Liquidity Event. Preparing For Chaos.

Vesting 251

Vesting Liquidity Event Venture Capital Founder Vesting 251

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. What if you later decide to just keep control?

Liquidity Event 62

Liquidity Event Preferred Stock Dividend Equity 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

Haystack

MAY 9, 2019

Any billion-dollar liquidity event is a rare event, so it will get the Haystack blog treatment. It was just about three years ago when the startup world learned that Unilever had decided to plunk down a cool $1B to buy LA’s Dollar Shave Club. 3/ Markets Matter: I read that Gillette owns nearly half the U.S. razor market.

Acquisition 121

Acquisition Liquidity Event Venture Capital Vertical 121

Berkonomics

JUNE 12, 2014

So co-management is the second group to share in the bounty upon a liquidity event. Often, if not co-founders, this group is rewarded through issuance of stock options from a pool of available options that usually totals 15-20% of the total company’s equity divided among all employees. Think of it as the rule of the thirds.

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

Berkonomics

SEPTEMBER 10, 2020

For those of you who ever experience the muted thrill of today’s electronic closing, you can give a nod to those days when the sometimes-smoke-filled rooms were real and the tension palatable, when a closing was a face to face event. The post Shareholders and founders: The muted thrill of the deal closing.

Founder 62

Founder Investment Bankers New York Email 62

Berkonomics

APRIL 3, 2014

If you are starting a virtual company with your employees working from home locations, as many startups do, it should be the location of the founder. All angel groups will want to see the founders in person at sometime early in the process. Being located in a distant city greatly reduces the chance of funding success.

Equity 92

Equity Finance Liquidity Event Angel Groups 92

Hunter Walker

MARCH 8, 2014

There aren’t yet four layers of management between you and the founders. The Early Team Still There and They’ll Be Your Tribe for Years : The founders and early team are still in place because there hasn’t been a liquidity event and the work is still exciting for them.

Liquidity Event 134

Liquidity Event Early Stage Seed Stage Startup 134

Startup Professionals Musings

JUNE 6, 2016

Very few startup founders even want to stick around for the long haul, since their passion and expertise is in creating a new business, not managing people issues and repeatable processes. Almost every startup has multiple founders, with complementary skills. Look at yourself objectively, and analyze where you fit best.

Liquidity Event 120

Liquidity Event Startup Angel Investor Entrepreneur 120

Berkonomics

FEBRUARY 20, 2020

One of my company boards offered the founder with a 20% remaining interest after several rounds a reward for signing two large personal guarantees necessary to grow the business – in the form of a warrant to purchase common shares at today’s common share price. All entrepreneurs assume risk when starting and growing a business.

Warrant 62

Warrant Liquidity Event Stock Finance 62

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

Steve Blank

JULY 15, 2010

Number of Venture Backed Liquidity Events 1991-2000. Number of Venture Backed Liquidity Events 2000-2010. They’ve created virtual IPO’s for founders and employees via late-stage private financing. During the decade between 1991 and 2000, nearly 2000 venture backed companies went public. Source: NVCA.).

Venture Capital 297

Venture Capital IPO Liquidity Event Entrepreneur 297

Steve Blank

JUNE 11, 2013

Here’s a simple test: If you’re the founder of a startup, go to a whiteboard and diagram how a VC fund works. How much do they need to own at a liquidity event? The day you raise money from a venture investor, you’ve also just agreed to their business model. How do the fund and the partners make money? What is an IRR?

Venture Capital 333

Venture Capital IRR Liquidity Event Business Model 333

Berkonomics

JUNE 15, 2017

[Email readers, continue here…] There are also clauses in many such investor documents that allow the investor to override the founder and force a sale of the company if a proposed sale is attractive to an investor for liquidity, even if the founder feels that there is much more potential if the business is not sold at the present time.

Liquidity Event 97

Liquidity Event Initial Public Offering Dividend Valuation 97

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

Quantify founder investments, both cash and sweat-equity. If you don’t plan a liquidity event, you won’t find many investors interested. Since investors are buying a part of your company (not your product), this is the most important question, and is one often not answered.

Sweat Equity 120

Sweat Equity Advisory Board Liquidity Event Startup 120

Early Growth Financial Services

JULY 10, 2014

Too often, entrepreneurs neglect planning for and managing personal finances as they focus on building their business, lining up financing, and steering toward an eventual liquidity event. But it’s not too early to start thinking about your options and doing some advance strategizing.

Liquidity Event 41

Liquidity Event Management Stock Options Founder 41

Board Effect

MAY 13, 2019

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. When bootstrapping a startup, this is the bare minimum founders should have in place to avoid being caught off-guard by an angel investor.

Cap Table 40

Cap Table Management Liquidity Event Dilution 40

Both Sides of the Table

MARCH 3, 2013

I reinforced this view by referring to a very interesting article I had read by Andy Grove (co-founder & former CEO of Intel) on car batteries, china manufacturing and the problem of US outsourcing. He talked about a unique model where you don’t have to become liquid in venture capital and can target singles & doubles.

Bankruptcy 403

Bankruptcy Offshore Liquidation Preference Balance Sheet 403

Berkonomics

FEBRUARY 28, 2019

It’s a fact of life that a banker, lender or lessor will ask for a personal guarantee from the founder or entrepreneur most every time. A win-win for the investor and entrepreneur assuming the company does grow and have a liquidity event someday. But what if you’ve diluted your interest from 100% to something less than 50%?

Warrant 48

Warrant Liquidity Event Dilution Cofounder 48