Gust

SEPTEMBER 29, 2011

For a traditional VC financing round structured as a sale of preferred stock, the best resources I can recommend are the Term Sheet Series by Brad Feld and Jason Mendelson and Startup Company Lawyer by Yokum Taku. (For more on working with startup lawyers, see Mark Suster’s classic post, How To Work With Lawyers At A Startup.).

Finance 178

Finance Term Sheet Preferred Stock Bridge Financing 178

Scott Edward Walker

APRIL 9, 2012

(ii) why are convertible notes issued instead of shares of common or preferred stock? Part 2 will discuss the two most significant issues for founders in connection with the issuance of convertible notes: (i) the valuation cap and (ii) the discount (and how they interrelate). A high strike price undermines that goal.

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Startup Company Lawyer

MARCH 14, 2010

To differentiate it from typical “Series A&# preferred stock, which comes with certain expectations with regard to rights. There is no real rule to what a particular series of preferred stock is called. Co-sale rights. a couple of million dollars), and (iv) is only investing a small amount (i.e.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

The Startup Lawyer

JANUARY 10, 2012

In most equity financing rounds, an investor will ask for (and get) a term called a liquidation preference. A liquidation preference is the amount that must be paid to a preferred stock holder before any sale proceeds may be paid to the holders of common stock (i.e., founders, option holders, etc.).

Liquidation Preference 73

Liquidation Preference Pre-Money Valuation Participating Preferred Preferred Stock 73

Lightspeed Venture Partners

OCTOBER 1, 2012

The company did $1M in sales last year, 90% from wholesale, and had a 10% profit margin. They wanted to get to $10M in sales and then get bought by a big food company. pre money valuation). Cuban has interest in a gluten free diet, and claimed that he liked the company, but his only concern was valuation.

Pre-Money Valuation 158

Pre-Money Valuation Valuation Participating Preferred Preferred Stock 158

Steve Blank

OCTOBER 24, 2017

This required a repeatable and scalable sales process, which required a professional sales staff and a product stable enough that customers wouldn’t return it. In the last decade, as the time startups have spent staying private has grown longer, secondary markets – where people can buy and sell pre-IPO stock — have emerged.

Founder 245

Founder Technical Review CTO Hire IPO 245

Berkonomics

DECEMBER 20, 2018

These are your candidates, because they are companies already absorbing much or all the marketing expense necessary to make sales of your invention. That party is only concerned with its royalty revenues and growth – and not profit from or valuation of its business. So, there you have it.

IP 54

IP Intellectual Property Investment Bankers Product 54

Both Sides of the Table

SEPTEMBER 5, 2012

What the entrepreneurs were really saying is, “I don’t want to take a lower valuation now, while I don’t have customers or a full team. They can occur legitimately in a company whose valuation skyrockets unexpectedly as in, “your last round was at $50 million and you want to raise 9 months later at $750 million.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

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

Berkonomics

DECEMBER 20, 2018

These are your candidates, because they are companies already absorbing much or all the marketing expense necessary to make sales of your invention. That party is only concerned with its royalty revenues and growth – and not profit from or valuation of its business. So, there you have it.

IP 48

IP Intellectual Property Investment Bankers Product 48

Berkonomics

MAY 22, 2014

The sale of equity in private companies is regulated by the Securities Act of 1933, which requires that the company either register with the SEC or meet one of several exemptions (Regulation D). Bill Payne has been actively involved in angel investing since 1980, funding over 50 companies and mentoring over 100 more.

Early Stage 79

Early Stage Accredited Investor SEC Private Placement 79

Scott Edward Walker

MAY 15, 2012

What Happens If a Startup is Acquired Prior to the Note’s Conversion to Shares of Preferred Stock? As discussed in part 1 , in the context of a seed financing, a convertible note is a loan that typically automatically converts into shares of preferred stock upon the closing of a Series A round of financing.

Finance 64

Finance Founder Accredited Investor Preferred Stock 64

Startup Company Lawyer

JANUARY 31, 2011

Optional maturity conversion : into Series AA Preferred Stock based on a $5M valuation. Optional change of control/IPO conversion : into common stock at the lesser of (A) fair market value (based on change of control or IPO), or (B) $5M valuation.

Preferred Stock 60

Preferred Stock Liquidation Preference IPO Common Stock 60

ithacaVC

DECEMBER 14, 2011

Specifically, “too much” liquidation preference (I will use “LP” for liquidation preference). As most of you probably know, LP is one of the fundamental economic attributes of preferred stock that preferred shareholders enjoy. Yet, it is able to attract more investment capital. It might be.

Liquidation Preference 49

Liquidation Preference LP Preferred Stock Liquidity Event 49

ithacaVC

DECEMBER 13, 2013

The share price is calculated by taking the pre-money valuation and dividing it by the number of shares outstanding pre-money. So Share Price (SP) = Pre-Money Valuation (PMV) / Shares Outstanding (SO). That is normal for a pre-money % as it will drop down to about 10% post money depending on size of round and valuation.

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

Startup Company Lawyer

JANUARY 11, 2010

50%) or warrant coverage are typically more company-favorable than a Series A financing where a valuation is set. For example, typical provisions in a company-friendly pre-Series A convertible bridge note financing may include a 20% conversion discount from the Series A price and a 2x return on a sale of company.

Angel Investor 39

Angel Investor Valuation Bridge Financing Preferred Stock 39

www.payne.org

SEPTEMBER 22, 2011

Your offer will almost surely be for common stock. Preferred stock classes typically go to investors, and in some cases founders (usually where the founders have already invested some of their own money to build the company). If the company is acquired or liquidated, the preferred stock holders will get paid first.

Equity 56

Equity Employee Vesting Preferred Stock 56

Startup Company Lawyer

FEBRUARY 21, 2010

Due to aggregate liquidation preferences that may exceed the acquisition price in an M&A deal, common stock may be rendered worthless. If you can’t figure this out yourself, you should probably build a liquidation preference spreadsheet to model how liquidation preferences work depending on M&A transaction value.

Retention 31

Retention Liquidation Preference Employee Common Stock 31

Tim Keane

APRIL 12, 2006

We are open to them and prefer to begin to co-invest at. valuation than the previous round. We don’t like them and would prefer not to be involved. It is used by some investors who like the deal but can’t come to terms on valuation. Preferred Stock is the most usual form of investment today. past round one.

Entrepreneur 60

Entrepreneur Valuation Sweat Equity Common Stock 60

Hunter Walker

SEPTEMBER 29, 2022

There were examples of great investors who said “never sell early — you ride your winners as long as you can” and others who had *very* specific formulas for when they sell (when it hits X valuation, take Y percent off the table each subsequent round; always sell until you hit a certain return multiple for the fund, then hold after; and so on).

Venture Capital 122

Venture Capital Cap Table LP Equity 122

www.paulgraham.com

APRIL 28, 2010

Another concept we need to introduce now is valuation. I say "in theory" because in early stageinvesting, valuations are voodoo. As a company gets more established,its valuation gets closer to an actual market value. As a company gets more established,its valuation gets closer to an actual market value. Better how?

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

Both Sides of the Table

SEPTEMBER 8, 2012

” If you remember the three rules of sales : it’s. We plan to raise at a $5 million pre-money valuation. In the document it outlines that you will issue stock at a $5m pre-money valuation and in recognition of the additional risks and commitments of early money you have allocated warrants to the first $150,000 of investors.

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

Startup Company Lawyer

JANUARY 9, 2011

A logical alternative to convertible debt is a priced Series A preferred stock financing. Mark Suster does a good job analyzing whether convertible debt is preferable to equity , and concludes that convertible debt is better. This leads me to believe that there is a mini-bubble in the early stage financing universe.

Liquidation Preference 57

Liquidation Preference Finance Preferred Stock Common Stock 57

Gust

OCTOBER 3, 2011

This will usually be documented as either a straight sale of Common Stock (which is most typical) or else as Convertible Note which converts into the same security as the next professional round, but at a discount (which is actually better for everyone). From +/- $1.5m

Finance 70

Finance Venture Capital Intellectual Property Early Stage 70

www.paulgraham.com

APRIL 28, 2010

You give a startup money and they give you stock. Youllprobably get either preferred stock, which means stock with extrarights like getting your money back first in a sale, or convertibledebt, which means (on paper) youre lending the company money, andthe debt converts to stock at the next sufficiently big fundinground. [

Angel Investor 63

Angel Investor Syndicate Syndication Dilution 63

www.vccafe.com

MARCH 11, 2013

turn customer feedback into sales and relationships. Seed Stage Valuation Guide. SaaS Sales Team Compensation â?? Preferred Stock Purchase Agreement. Startups For Sale. valuations. SnapEngage â?? live chat integrates with your apps. Zendesk â?? web help software. UserVoice â?? Kampyle â?? VC Experts.

Software Review 53

Software Review Technical Review Startup 53