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. I’ve posted a sample convertible note term sheet on my website.) There are two principal reasons.

Finance 178

Finance Term Sheet Preferred Stock Bridge Financing 178

Gust

MAY 24, 2012

Options and warrants, when issued, are also typically exercisable for shares of Common Stock. By contrast, venture capital and angel investments normally take the form of Preferred Stock with rights and preferences set forth in the company’s Certificate of Incorporation and other governance documents.

IPO 159

IPO Equity Common Stock Stock 159

Early Growth Financial Services

FEBRUARY 3, 2015

From time to time on Founders Workbench we give a brief primer on common terms and issues in venture financings. This post by Ian Engstrand first appeared on Founders Workbench. management). management). Participating versus non-participating: what’s the difference?

Preferred Stock 28

Preferred Stock Stock Finance Participating Preferred 28

Startup Professionals Musings

DECEMBER 11, 2022

Naïve expectations on funding terms and process. Experienced entrepreneurs understand investor expectations of Board representation, preferred stock, and payments based on interim milestones. Future unproven projections don’t set today’s valuation. Ask only for the money you can justify.

Due Diligence 271

Due Diligence Intellectual Property Entrepreneur Preferred Stock 271

Both Sides of the Table

APRIL 6, 2020

For starters you will require investor consent to amend your governing documents and since some of these terms were negotiated to protect shareholder rights they may approve the changes and they may not. How do I amend my legal documents so that the Affiliate Rule doesn’t stop me from applying for a loan?

Programming 279

Programming Affiliate SBA Government 279

Steve Blank

APRIL 26, 2022

They offered desperate founders more cash but insisted on new terms, rewriting all the old stock agreements that previous investors and employees had. Other times it was simply a take-it-or-leave-it, here are the new terms. Some even insisted that all prior preferred stock had to be converted to common stock.

Cram Down 404

Cram Down Founder Venture Capital Recapitalization 404

Tim Keane

JANUARY 12, 2010

Term-sheets and Valuations: Thinking about Negotiations. Please see later version of this post on May 16, 2010 Entrepreneurs are often not experts in the area of term-sheet negotiations and all of the surrounding issues.   Investors sometimes “present” the terms they’d like and expect the entrepreneurs to react.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Startup Professionals Musings

JANUARY 4, 2020

Are you flexible on the terms of the investment? Most professional investors will expect preferred stock, a board seat, rights to later rounds and perhaps anti-dilution protection. If you refuse to offer these, or balk at negotiating even more restrictive terms, the amount of a viable investment will be compromised.

Startup 337

Startup Preferred Stock Exit Strategy Equity 337

www.quora.com

JANUARY 16, 2011

Find Questions, Topics and People Add Question Add Question Venture Capital Venture Capital Term Sheets Startups Term Sheets What are examples of good startup term sheets? Ycombinator open source term sheet is a good start for Seed deals. Brad Feld does the best blog term sheet series. org/index.php?op.

Term Sheet 41

Term Sheet Startup Angel Investor Wiki 41

Startup Professionals Musings

JANUARY 15, 2021

Facilitate an upgrade of founder’s common to founder’s preferred. Investors typically demand preferred stock to give them more control and first payouts, but these advantages can be at least partially offset (up to 20 percent) if you plan ahead. More board members is usually not better for the startup.

Vesting 298

Vesting Dilution Stock Founder Vesting 298

ReadWriteStart

JUNE 1, 2020

These tactics are primarily to gain market share and a dominant market position. ? Fund your short term operational expenses. The third reason is to fund your short term operational expenses or working capital. The shares given out can either be common stocks or preferred stocks. ? Debt investment.

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

Both Sides of the Table

JULY 29, 2010

We received so much positive feedback from our This Week in Venture Capital show walking through valuation calculations & term sheets that we decided to do a Q&A show this week to address topics that entrepreneurs want to learn about. The downside is that people need to buy their stock. We will continue to do more of this.

Venture Capital 282

Venture Capital Term Sheet Valuation Stock Options 282

Steve Blank

APRIL 10, 2019

But this level of commitment depends on whether employees perceive these practices to be fair , both in terms of the process and the outcomes. In the past the founders and employees were aligned with the same type of common stock grant, and it was the VCs who got preferential stock treatment. And you’re working just as hard.

Stock Options 333

Stock Options Stock Vesting Common Stock 333

Startup Professionals Musings

MARCH 14, 2020

Naïve expectations on funding terms and process. Experienced entrepreneurs understand investor expectations of Board representation, preferred stock, and payments based on interim milestones. Future unproven projections don’t set today’s valuation. Ask only for the money you can justify.

Due Diligence 308

Due Diligence Intellectual Property Preferred Stock Seed Stage 308

Gust

OCTOBER 5, 2011

In this installment, I’ll dig into the “how” by dissecting an example term sheet based on a real deal. For those playing at home, you may find it helpful to download the sample term sheet from my firm’s website and follow along with the commentary. These deal terms are simple but significant.

Finance 79

Finance Preferred Stock Term Sheet Early Stage 79

Startup Company Lawyer

AUGUST 31, 2012

” As a result, Ted introduced the Series Seed preferred stock documents as an alternative to convertible debt for early stage investments. Form of Convertible Security Term Sheet. Why convertible equity is better than preferred stock. The problem. These documents are available at the links below.

Convertible Security 73

Convertible Security Equity Security Preferred Stock 73

Scott Edward Walker

JUNE 9, 2011

Introduction This post originally appeared as part of the “ Ask the Attorney ” column I am writing for VentureBeat ; it is another installment of my ongoing series regarding venture capital term sheets. As many of you know, VC investors are typically issued shares of preferred stock, not common stock.

Term Sheet 60

Term Sheet Conversion Rights Venture Capital Liquidation Preference 60

YoungUpstarts

AUGUST 25, 2015

Stocks are issued at the time the company is formed, and more can be issued over time. You can control the power of your company’s stock by issuing different classes. Down the line, a potential buyer may prefer the predictable structure of a corporation. The ownership structure of an LLC is a blank slate.

LLC 100

LLC Technical Review Software Review Limited Liability Company 100

David Teten

AUGUST 19, 2019

John Borchers defines RBI as, “anchored around a model for providing long-term growth capital to a company that is paid back over time in the form of a modest, fixed percentage of monthly revenue. Feenix focuses solely on providing longer term growth capital to healthy companies looking to expand. He said, . “[W]e

Revenue 60

Revenue Term Sheet Founder Technical Review 60

David Teten

MARCH 14, 2018

The job of a VC is to invest in unprofitable businesses in anticipation of creating long term value. We all do that with our portfolio companies, but many VCs are not comfortable taking the short-term compensation hit by doing it internally within their management company. – Hire more non-Partner staff.

Private Equity 60

Private Equity Venture Capital Equity Cofounder 60

Gust

OCTOBER 21, 2011

Readers joining this series in progress may find it helpful to download the sample term sheet from my firm’s website and review the earlier posts covering the basics. In descending order of preference from the founders’ point of view: 1. The company pays off the notes immediately according to their terms, with prorated interest.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Scott Edward Walker

JULY 7, 2011

Introduction This post originally appeared in the “ Ask the Attorney ” column I am writing for VentureBeat ; it is part of my ongoing series regarding venture capital term sheets. Redemption Rights What Are Redemption Rights? What Does a Redemption Rights Provision Look Like?

Term Sheet 49

Term Sheet Redemption Venture Capital Preferred Stock 49

Up and Running

SEPTEMBER 20, 2021

Furthermore, there are various forms of equity, such as preferred stock, common stock, and convertible notes, which influence the present and potential future investors. Preference shares. A class of stock with special rights as described in your startup is called preference shares. Convertible notes.

Cap Table 112

Cap Table Pre-Money Valuation Stock Options Option Pool 112

Startup Professionals Musings

JANUARY 29, 2018

Otherwise, later stock value growth may be lost or used against you before you can capitalize on it. Buying back stock on the open market may cost a huge premium. Manage dilution with proper use of new investment terms. Negotiate an upgrade from common shares to preferred stock.

Stock 129

Stock Vesting Preferred Stock Cofounder 129

Scott Edward Walker

SEPTEMBER 14, 2011

Introduction This post originally appeared in the “ Ask the Attorney ” column I am writing for VentureBeat ; it is part of my ongoing series regarding venture capital term sheets. The Investors’ Right to Walk VC Term Sheets Are Non-Binding. VC Term Sheets Are Conditional.

Term Sheet 76

Term Sheet Due Diligence Liquidation Preference Redemption 76

Gust

OCTOBER 26, 2011

As we conclude our convertible note financing series, there are assorted terms commonly seen in term sheets and deal documents that are worth touching on briefly. Having made it almost to the end of our sample term sheet: Documentation. Returning to our sample term sheet: Note Purchase Agreement.

Finance 79

Finance Term Sheet Covenant Accredited Investor 79

Scott Edward Walker

JUNE 9, 2019

Over the past few weeks, two of my clients have received financing term sheets in which the investors requested super pro rata rights. Introduction. Accordingly, I thought it would be helpful for founders to discuss these rights and to point out the problems they create for startups. Pro Rata Rights.

Preferred Stock 56

Preferred Stock Term Sheet Dilution Stock 56

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. 5) Senior Preferred Stock and warrants. 6) Any preference multiple on (5).

Warrant 157

Warrant Preferred Stock Early Stage Common Stock 157

Both Sides of the Table

JULY 25, 2011

There were no explanations for all of the confusing details outlined in a term sheet. He gave me the human explanation for what the term meant. But know that every term in your term sheet is there as a result of some dispute of the past between shareholders or between shareholders & management. Drag along rights?

Liquidation Preference 304

Liquidation Preference Term Sheet Cap Table Participating Preferred 304

View from Seed

DECEMBER 4, 2014

But not all co-founders are equal in terms of title, ownership, responsibilities, and so forth. It’s also worth keeping in mind that regardless of how the founders’ common stock is divided, there will be future issuance of stock that will dilute the founders over the lifecycle of the company. Experience/Seniority/Role.

Equity 315

Equity Founder Sweat Equity Cofounder 315

Lightspeed Venture Partners

OCTOBER 7, 2012

Week three’s breakdown covered topics like how hard momentum is to turn around, and how participating preferred stock works. She things that it could sell well on QVC, and was willing to accept their terms of $40k for 33%. This time I’ll break down week four of this season. BACK 9 DIPS.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

Scott Edward Walker

APRIL 9, 2012

ii) why are convertible notes issued instead of shares of common or preferred stock? A convertible note is short-term debt that converts into equity. In the context of a seed financing, the debt typically automatically converts into shares of preferred stock upon the closing of a Series A round of financing.

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Startup Company Lawyer

MARCH 14, 2010

Founders Institute Plain Preferred Term Sheet (by WSGR – disclaimer, I represent the Founders Institute and was involved in drafting this document). This post assumes that you have a basic understanding of Series A financing terms. There is no real rule to what a particular series of preferred stock is called.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Berkonomics

FEBRUARY 3, 2022

Of course, you will find yourself in opposition to your investors and some of most of your board members if you do this after taking outside investment. You may recall my story of the company that was forced to grow to death by a famous venture capital investor expecting massive profit or nothing, with no expectations in between.).

Liquidity Event 62

Liquidity Event Preferred Stock Dividend Equity 62

Up and Running

AUGUST 28, 2019

Also avoid misleading terms like “bank” or “insurance,” which some states outright prohibit if not applicable to your type of business. . It is certainly typical to include initial investors and mentors on the board of a new company, so pick your friends wisely, and consider their long-term commitment to your company’s success. .

Delaware 83

Delaware Stock Nevada Technical Review 83

Agile VC

DECEMBER 4, 2014

But not all co-founders are equal in terms of title, ownership, responsibilities, and so forth. It’s also worth keeping in mind that regardless of how the founders’ common stock is divided, there will be future issuance of stock that will dilute the founders over the lifecycle of the company.

Cofounder 255

Cofounder Equity Founder Sweat Equity 255

VC Cafe

OCTOBER 23, 2010

And finally, to quote the authors: In sum, Series Seed creates a level playing field between capped debt and equity documents in terms of speed and cost. Seed Term Sheet Series Seed Term Sheet (v 2.0). Preferred Stock Purchase Agreement Series Seed Form SPA.

Early Stage 79

Early Stage Term Sheet Preferred Stock Equity 79