techcrunch.com

SEPTEMBER 2, 2012

There has been no shortage of controversy and criticism around the convertible note, a popular investing vehicle that’s used by seed stage and angel investors. → Learn More. As a refresher, a convertible note is a loan that automatically converts into equity upon the closing of a Series A round of financing.

Equity 87

Equity San Francisco Technical Review Angel Investor 87

Both Sides of the Table

JULY 29, 2010

The downside is that people need to buy their stock. I talked also about 409a valuations and why common stock purchases cost less than preferred stock purchases. If you are thinking about angel investors please read this piece I did on Angel Funding Advice. Do it early.

Venture Capital 282

Venture Capital Term Sheet Valuation Stock Options 282

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

The Startup Lawyer

JUNE 22, 2010

The main feature of the convertible note is that the debt investment made by the angel investor will typically later convert into equity. For this article, let’s assume this equity is the Series A Preferred Stock purchased by a venture capital fund. As a sweetener to the angel investor (i.e.,

Pre-Money Valuation 82

Pre-Money Valuation Angel Investor Preferred Stock Valuation 82

Berkonomics

JANUARY 6, 2022

Especially when outside investors, venture capitalists or angels have put in substantial money, and the sales price is not enough to give them a reasonable return for the time and money invested, these investors can be – in a word – greedy. The order of liquidation or payout.

Dividend 62

Dividend IRR Preferred Stock Participating Preferred 62

Startup Professionals Musings

AUGUST 1, 2016

After many years of working with angel investors seriously trying to find new ventures worthy of their hard-earned money, I find their frustration often exceeds that of entrepreneurs sincerely looking for financial help. Ask only for the money you can justify. Naïve expectations on funding terms and process.

Due Diligence 120

Due Diligence Intellectual Property Preferred Stock Seed Stage 120

Gust

SEPTEMBER 29, 2011

By contrast, venture capitalists and angel investors typically make scores or even hundreds of investments over the course of their careers. It should therefore come as no surprise that an asymmetry of information exists, mostly gleaned from experience, between founders and investors in a venture financing deal. (For

Finance 178

Finance Term Sheet Preferred Stock Bridge Financing 178

Berkonomics

JULY 23, 2020

Especially when outside investors, venture capitalists, or angels, have put in substantial money and the sales price is less than the value of their investment. Dig into investment agreements for those expensive clauses. There are some questions a distressed sale brings to mind.

Delaware 62

Delaware Liquidation Preference Preferred Stock Early Stage 62

Startup Professionals Musings

MARCH 11, 2013

For example, you and your partner may be perfectly happy with an LLC, but venture capital or Angel investors may insist on having “preferred” stock, forcing an upgrade to a C-Corp. Legal requirements and tax requirements change as a business grows, so your entity needs to be reviewed regularly.

LLC 234

LLC Nevada Delaware Limited Liability Company 234

ithacaVC

DECEMBER 22, 2012

There are many angel investors that rarely take or want a board seat. Dave McClure (500 Startups) and David Lee (SV Angels) are 2 examples, but there are many many others. There is not a “right” answer to this, but the positions are worth exploring. Might be kind of lonely, but completely legal.

Seed Stage 82

Seed Stage Preferred Stock Founder Angel Investor 82

Startup Professionals Musings

MARCH 7, 2015

Angel investors will perk up if you have a prototype or a few real customers, while venture capitalists will likely choose to wait until you have achieved several million in revenue or customer count. The average valuation for angel investments is $2 million, which will get you $500,000 for 20 percent of your startup.

Preferred Stock 120

Preferred Stock Exit Strategy Equity Angel Investor 120

Both Sides of the Table

SEPTEMBER 8, 2012

But Paul Graham really did have a point in his “ high resolution fundraising ” post – that there is a problem – particularly in angel financing – with herding cats. Since 2009 I have been counseling people to offer discounts to the first angel investors. They hate making decisions.

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

Business Plan Blog

NOVEMBER 13, 2013

Raising Angel Capital. Individual investors who provide financial funding to startups are called ‘Angel Investors.’ Angel investors may invest individually or as part of an angel group, which are usually local organizations made up of Accredited Investors*. 3) Giving non-voting stock.

Finance 93

Finance Accredited Investor Angel Investor Seed Capital 93

Scott Edward Walker

SEPTEMBER 21, 2011

Indeed, the ideal investor is an experienced, sophisticated angel who can add substantial value through his or her domain expertise and/or rolodex. A sophisticated angel investor understands how the startup game is played and the role that he plays. What about issuing shares of common stock?

Preferred Stock 45

Preferred Stock Angel Investor Entrepreneur Common Stock 45

Up and Running

DECEMBER 1, 2015

Typically, employers that offer employees equity compensation will do so in the form of common stock, preferred stock, or stock options. Offer equity if you plan for your company to grow quickly, or if you’re seeking investment from VCs or angel investors. Types of equity compensation.

Equity 60

Equity Employee Stock Options Vesting 60

Berkonomics

MAY 22, 2014

I am an angel investor, that is, an accredited investor who is assumed by the SEC and others to be sufficiently wealthy to afford to lose the investment and supposedly experienced enough to make good choices on fundable companies. The PPM does not meet the investing terms and conditions of the angels. Sounds simple, huh?

Early Stage 79

Early Stage Accredited Investor SEC Private Placement 79

Gust

OCTOBER 5, 2011

( Investors , of course, may disagree.). In case it isn’t clear by now, angel investors aren’t in the business of making risky early stage investments in order to earn 6% interest on their money, or even 10%— the upside is all in conversion to equity—so the interest rate isn’t a major point of negotiation.

Finance 79

Finance Preferred Stock Term Sheet Early Stage 79

Both Sides of the Table

AUGUST 30, 2010

Funnily enough I just answered this question yesterday on Quora when somebody asked, “Why would an early-stage investor specifically NOT prefer a convertible note structure to straight equity (e.g. a priced/valued preferred stock financing)?&#. Why many early-stage investors DO price rounds (e.g.

Equity 319

Equity Early Stage Angel Investor Valuation 319

www.quora.com

JANUARY 16, 2011

looking for good samples with founder friendly terms 11 Answers Mark Suster , Venture Capitalist, Angel investor & 72 votes by Ty Danco , Brandon Wu , Jen Cheng , (more) Ty Danco , Brandon Wu , Jen Cheng , Anon User, Chris Stewart , Tristan Louis , Ravi Kannan , Vin Turk , Shane Lennon , Nicholas Swanson , Sachin Agarwal , Mircea Pa?

Term Sheet 41

Term Sheet Startup Angel Investor Wiki 41

ReadWriteStart

JANUARY 28, 2022

These characteristics, comparable to those found in the fixed income market, can convert into common stock, call clauses, and other features. Warrants are a kind of equity that are often attached to a corporate bond issuance or preferred stock to make the transaction more appealing to investors.

Valuation 108

Valuation Equity Warrant Common Stock 108

Startup Company Lawyer

MARCH 14, 2010

Certain angel investors refuse to do convertible debt deals, but will be okay if there is a price cap. I think that the Series Seed documents are probably most appropriate in a friends and family equity seed financing, as opposed to a round led by a professional investor. Investors want additional protections.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

www.mattbartus.com

SEPTEMBER 24, 2011

First, you’d probably want them to receive common stock, not preferred stock (which is the likely next round). Angel Investors. All forms of creativity are welcome, but I do think it suffers a little bit from the complexity problem. What are the potential issues? Categories. Employment. Intellectual Property.

Equity 40

Equity Vesting Silicon Valley Intellectual Property 40

www.paulgraham.com

APRIL 28, 2010

If your friends or family happen to be rich, the line blurs betweenthem and angel investors. At Viaweb we got our first $10,000 ofseed money from our friend Julian, but he was sufficiently richthat its hard to say whether he should be classified as a friendor angel. Angel Investors Angels are individual rich people.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

Gust

AUGUST 6, 2014

25 individual angel investors funding a startup on a convertible note. two angel groups investing money in Series Seed Preferred stock purchase. a single venture capital fund putting in the full amount as Series A Convertible Preferred investment.

Term Sheet 170

Term Sheet Lead Investor Preferred Stock Common Stock 170

Growthink Blog

APRIL 7, 2010

million from three individual angel investors and one early-stage venture capital fund. The name "Series A" refers to the class of preferred stock that you sell to investors in return for their cash. If seeking angel funding: Download Growthink's Step-by-Step Guide to Raising Capital from Angel Investors.

Angel Investor 54

Angel Investor Preferred Stock Venture Capital Common Stock 54

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

Professor VC

JANUARY 17, 2008

Touched by an Angel. I think the title of this post is a TV show, but fitting as there has been much debate in the venture community as to the whether angel investors are good or bad for entrepreneurs and VCs. What would the VC corollary to Touched by an Angel, be. What does it take to be an Angel Investor?

Pre-Money Valuation 28

Pre-Money Valuation Angel Investor Angel Groups Valuation 28

Growthink Blog

MAY 10, 2012

Stage #2: Seed Funding Seed funding (also called seed capital) typically ranges from $100,000 to $500,000 and is often provided by angel investors, and is usually structured as convertible notes or common stock. The name is derived from the class of preferred stock investors receive in return for their capital.

Equity 88

Equity Mezzanine Later Stage Venture Capital 88

Startup Company Lawyer

JANUARY 9, 2011

I have also heard that many of the companies in the YC batch that Paul Graham was referring to have been dictating convertible debt terms with price caps in the high single digit million range when pitching to angel investors. A logical alternative to convertible debt is a priced Series A preferred stock financing.

Liquidation Preference 57

Liquidation Preference Finance Preferred Stock Common Stock 57

Berkonomics

AUGUST 29, 2013

Most all experienced VC and angel investors have found themselves in such a situation, since it is the unfortunate truth that half of their investments fail, on average, within the first several years of the investment. There are a number of questions a distressed sale brings to mind.

Delaware 66

Delaware Liquidation Preference Liquidity Event Preferred Stock 66

The Startup Lawyer

FEBRUARY 4, 2011

Most incubators take common stock and sit “side-by-side&# with the founders, but some may want some (weak) preferred stock and/or dilution protection. A startup that is accepted by an incubator may have an alternative funding offer from an angel investor. Other incubators may want to set up an option pool.

Incubator 105

Incubator Pre-Money Valuation Option Pool Advisory Board 105

Up and Running

MAY 23, 2016

Delaware law gives preferred stock investors of a corporation certain voting rights and control over the corporation. You could also go for a larger sum of capital right from the start by pitching an angel investor or a venture capitalist for funding. 11 Angel Investor Blogs You Should Be Reading.

Software Review 74

Software Review Software Delaware Forecast 74

Gust

OCTOBER 21, 2011

Assuming a hypothetical $100,000 investment at a 10% interest rate, this kind of payoff would yield a return of $5,000 ( 5% ) six months later – not exactly the kind of return angel investors are looking for when they make risky early stage investments. a mix of cash and stock) received by other equity holders in the transaction.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Both Sides of the Table

APRIL 14, 2010

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. Liquidation preference is the amount of money that an investor gets paid before the common stock (e.g.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Pre-Money Valuation 289

Startup Company Lawyer

JANUARY 11, 2010

After completing a lot of convertible debt deals over the last year on behalf of both companies and investors, I have refined some of my thoughts about pre-Series A convertible debt terms. Observation 1 — Convertible debt is a bad deal for angel investors. Assume the angel investor invests $500K.

Angel Investor 39

Angel Investor Valuation Bridge Financing Preferred Stock 39

Professor VC

DECEMBER 26, 2012

From an investor standpoint, I've discovered there actually can be greater leverage with convertible debt if the appropriate protections have been included. However, they now can still do this on someone else's dime, but it is the angel investor and not an employer. As an angel, do I take this kind of gamble?

Finance 48

Finance Angel Investor Private Equity Preferred Stock 48

The Startup Lawyer

MARCH 11, 2010

sophisticated investors will not invest via a convertible note. And since the people & groups behind these model seed funding docs are some of the most sophisticated angel investors in the world, preferred equity investment model docs are being released.

Delaware 49

Delaware Hockey Stick Preferred Stock Open Source 49