Founders – Use Your Down Round To Clean Up Your Cap Table

Feld Thoughts

“If you need to clean up your own cap table first – while very hard to do – it will make outside funding easier” Again, go read the post now – I’ll wait. Often, there will be asymmetry between them with your new liquidation preferences having a multiple on them where they participate for a while up to a cap. Deal with reality as a founder as well as an investor group and avoid this complexity – just clean up your cap table instead.

Introducing the Cap Table and Hiring the CTO

Feld Thoughts

As Finance Fridays continues, we are introducing the concept of the Cap Table. This week they set out to create their cap table and hire a CTO. Rather, it gets recorded in a document called the Capitalization Table (or “Cap Table”), which shows the ownership stake each person or entity has in the business. Time to update the cap table. When you read the cap table, think of it as a series of events that add new columns to the right.

Gust Launches Comprehensive Equity Management Platform for Cap Table Management and 409A Valuations

Gust

The post Gust Launches Comprehensive Equity Management Platform for Cap Table Management and 409A Valuations appeared first on The Gust Blog. Gust News Starting Your Company 409A valuations cap table management equity managementGust announces acquisitions of Sharewave and Preferred Return; creates the most robust and affordable equity management solution for early-stage startups.

Model Cap Table

ithacaVC

I thought it might be useful to post up a model cap table ( Cap Table Model with Waterfall ). This cap table can be used by a pre-funded startup and then a financing can be layered in. They are simple, but critical to understanding how the cap table works and how valuable the cap table can be to your understanding of your stock holdings.

Cap Table Clean Up

ithacaVC

When raising money from investors (angels or VC), it is critical to have a presentable and clean cap table. On a fully diluted pre-money basis, that would mean the option pool represents 14.5% (356,758/2,456,758) of the cap table. QUESTION #1: This leads to our cap table clean up question #1, namely is that the right allocation? Too much convertible debt on your cap table is a pain in the butt to deal with as it will drive down your valuation.

The “reverse” pitch: Who should you have on your cap table?

Version One Ventures

How do you decide who you should have in your cap table? The post The “reverse” pitch: Who should you have on your cap table? When we think about pitches, most of the focus is on entrepreneurs pitching investors for capital. But VC can be competitive, particularly for interesting deals, and in many cases, the pitch meeting is a two-way street. Some of the best later-stage investors walk founders through an institutionalized “reverse” pitch.

Beware the “dirty cap table.”

Berkonomics

When you seek professional investors, whether organized angels or venture capitalists, one of the early questions you are asked is “How have you financed the business so far?” Investors love to see entrepreneurs who have used their own money to ignite their businesses. But often, entrepreneurs turn to others for initial capital. Describing that capital using the phrase “friends, family and fools,” or “FFF,” has become as common as to be trite.

Reblog – Finance Fridays (Introducing the Cap Table and CTO)

ithacaVC

Here is the latest edition of Finance Fridays from Brad Feld called “Introducing the Cap Table and CTO” Every startup needs someone to be in charge of the Cap Table. When I was General Counsel at a tech company during the 1999 bubble times, I kept the company’s Cap Table. And now as a VC, I keep the Cap Table for a few of the company’s for which I am a board member. should have its own tab on the Cap Table.

That convert you raised last year is a part of your cap table

VC Adventure

This is typically reflected on cap tables in a completely separate tab to the spreadsheet that shows the debt total by investor and then some kind of interest calculation. Of course many entrepreneurs naturally focus on the main tab of their cap table spreadsheet that shows ownership by founder, investor, etc and for them this is the starting point of negotiating a round. This is especially true when the round price is significantly higher than the convert cap.

How I closed a round with 7 Investors and Survived [Guest post]

VC Cafe

101 funding Soomla Yaniv Nizan cap table Eyeview VC Funding is never easy. Even when you hear stories about entrepreneurs who walk out of a VC with a personal check from the managing director, it is usually after 6 months of pitching and hearing ''no''.

What is the Definition of a Seed Round or an A Round?

Gust

It is less about actual money and more about structure of your Cap Table. Invested Interests cap table venture capital Marc Andreessen kicked off another great debate on Twitter last night, one that I’ve been talking about incessantly in private circles for the past 2-3 years – what actually IS the definition of a seed vs. A-round. Cautionary note: No competent VC is actually fooled when you show up after raising $6M in seed financing and say you’re now raising an A!

Great, Simple Cap Table Tool for Startups from SMARTASSET

Scalable Startup

One of the top 3 to 5 worries when launching a startup is is “Who gets how much stock upon start or joining? Founders, Co-Founders, next employees, Investors, Etc. The founders of SmartAsset went through this process and decided to open it up to the world. These guys put together something very cool and it follows the “Give before you get” rule. They call it STARTUP ECONOMICS. Here it is… https://www.smartasset.com/infographic/startup.

What Happens When A Founder Wants To Stop Versus Pivot?

Hunter Walker

When they’re at seed stage, we’re deferring to the founders’ decisions but also trying to help them understand the challenges associated with a hard pivot if their cap table isn’t supportive of the direction.

Should you include a Series A investor in your seed round?

Version One Ventures

One of the most important decisions for a founder of an early stage company is deciding who should be on the cap table. Other A funds look to invest in seed rounds as a way to get a seat at the table, in order to have more options for a later round. in order to have a seat at the table for the next round. That’s why it’s critical to understand a the fund’s underlying philosophy on seed: is it true ownership or just a seat at the table? .

How Venture Capital Firms Work, for Entrepreneurs and Startups

OnlyOnce

I redacted our cap table and pictures of our VCs, but otherwise, feel free to use it with your own management team, or even your whole company.

As an investor, what are the most important items that a startup must have for you to invest?

Gust

Viable business structure and cap table. Large and growing market. Real domain expertise. Provable product need. Scalable business model. Competitive advantage. Platform/partnership/bizd ev/API strategy. External validation (ideally traction and/or passionate customers). Reasonable valuation. Proven team (tech/product/design/mark eting/sales/domain/etc.). But most important of all , it must have an entrepreneur on whom I’m willing to bet.

As a Seed Investor, Do I Want Softbank to Invest In My Best Companies Or Not?

Hunter Walker

Early Stage Hybrid Buyout a la Wag, Brandless, DoorDash : Softbank becomes the largest investor on the cap table, sometimes clears out the Board, and, if reporting is correct, doesn’t broadly offer secondary to earlier investors.

IRR 118

A New VC Crop of Series A Firms

Haystack

AngelList Syndicate Feedback From An Experienced Entrepreneur

Feld Thoughts

2) Keeping the number of entries on our cap table relatively small. We recently funded Blinkfire Analytics using our FG Angels Syndicate. The CEO and founder, Steve Olechowski , was co-founder / COO of FeedBurner, which Google acquired in 2007.

Startups Should Be Responsible for Explaining Equity to New Employees

View from Seed

This is not an argument for circulating the entire cap table or compensation calendar.

Equity 308

Doing The Right Thing In A Recap

Feld Thoughts

Given the amount raised, the new financing, and the cap, I would have asked the seed investors to waive the terms and instead accept a smaller percentage of the company than they would have otherwise gotten. Yesterday, I got the docs giving the seed investors, which included the FG Angels group, 12% of the post money cap table. Six weeks ago I wrote a post titled The Silliness Of Recapping Seed Rounds.

Why you should never have a data room — the most counter-intuitive fund-raising advice you’ll ever…

Both Sides of the Table

Your historical trading information including financials and a “customer file” which shows the history of your transactions so that investors can run “cohort” analyses Customer reference, personal references, key team members, compensation, cap table, stock option plan, etc.

“Convince Me” said the Investor. “No” said the Founder.

Hunter Walker

This was a man who, despite agreeing to take the meeting, established within the first few minutes of their conversation that he wasn’t someone who was likely to end up on her cap table and even more importantly, probably someone she didn’t want there.

The Market Holds The Best Fundraising Advice

Haystack

I am only participating in structured rounds where I know the other 1-2 investors around the table. I can’t afford — workwise or simply emotionally — to have a CEO I work with getting advice from 25 people all the time, because I now know from investment experience what happens in those situations: The noise of the cap table drowns out the signal from reality.].

Overview of Balance Sheet and Statement of Cash Flows

Feld Thoughts

Next week we will introduce the Cap Table, and show how it changes when adding a co-founder. When we were last with our SayAhh cofounders, they had implemented an accounting system and Jane had contributed $50,000 for a 55/45% equity split.

Walker Twitter Highlights: August 13th – September 15

Scott Edward Walker

Solid post for young founders=> Cap Tables, Share Structures, Valuations, Oh My! I’m using Twitter as a form of micro-blogging to share interesting articles, blog posts and video clips relating to startups, entrepreneurship and legal issues. Below are my four most popular tweets for the past month. Cheers, Scott. Top 4 Tweets. A Case Study of Early-Stage Funding [link]. Determination is the most important thing.”

What Do You Want From Me Besides Capital?

Hunter Walker

Who will hold the accountable to building something they’re proud of but remember we sit on the cap table, not the org chart. I live for that moment of flicker in an entrepreneur’s eye during a pitch discussion.

Sometimes a Good Loss is Better than a Bad Win

OnlyOnce

Or you negotiate the highest possible valuation from a new lead investor, only to discover that new lead investor, now on your Board, expects you to triple it in four years and is way out of alignment with the rest of your cap table.

The Silliness Of Recapping Seed Rounds

Feld Thoughts

A company raises $1m of seed money from angels in a convertible note with a $6m cap. Assuming equity is raised at or above that cap, the total dilution, before the new money, is 16.6% (equivalent to an equity financing of $1m at a $6m post money valuation. It usually happens in a later round, when the company is in fact worth much less than the liquidation preference overhang and insiders use a pay-to-play and a low valuation to reset the preferences and the cap table.

The Pre-money vs. Post-money Confusion With Convertible Notes

Feld Thoughts

Or, if you just want the paragraph, it’s: “If this note converts at a price higher than the cap that you have been given you agree that in the conversion of the note into equity you agree to allow your stock to be converted such that you will receive no more than a 1x non-participating liquidation preference plus any agreed interest.”. This can be especially confusing, and ambiguous, when there are multiple price caps.

New Meetup on Building Tech Tools for Private Equity+VC Investors

David Teten

As one of the lead engineers at ff Venture Capital , I spend most of my day building custom software solutions that enhance our firm’s process–tools that range from portfolio investment management to co-investor and cap table tracking and more.

What Acquihire Really Means

Feld Thoughts

Dodgeball.com: But really…When a public company with a market cap of $64.1 Often this was built on top of the concept that the acquiree brought to the table, but the core product was rarely used. Then acquires started using the concept of acquihire to try to shift consideration away from the cap table and instead increase the amount of “retention consideration” going to the remaining employees, independent of the capitalization of the company.

What are the regulatory barriers preventing the emergence of a liquid market for equity in seed stage startups?

Gust

But by far the biggest issue is that the very essence of public markets (and what makes them “public”) is that the SEC mandates an enormous amount of transparency, including complete quarterly financial statements, complete publication of the company’s cap table including all significant shareholders, and so forth.

Creative Common Stock

ithacaVC

I am a huge fan of simple cap tables. A cap table is a written record (in Excel, for example) of who owns stock in your company. One rule of simple cap tables is to issue “normal” stock to founders (common stock only) and investors (typically preferred stock, but sometimes common stock to early friends and family). It lists every owner out by amount owned, type of stock (common or preferred), and date purchased.

4 Unlikely Items SMBs Should Budget For & Why

YoungUpstarts

By Will Reynolds, CEO of SecureDocs. Starting a business does not have to be particularly expensive. Many companies are successfully bootstrapped from the outset and the list of major expenses fairly predictable, for example salaries and office rent.

An Alternative to Board Decks Some Seed VCs Actually Prefer

View from Seed

Examples of housekeeping include the following list, though not every item will appear every time: Finance: Cash out date, burn rate, 409A valuation, cap table, common/preferred stock dashboard.

Dear elizy: How should I split equity with my co-founders?  And how will that affect raising a seed round?

Hippoland

Secondly, even if you are ok with either arrangement you have proposed, it is a major red flag to investors to have much of the cap table locked up with dead-beat co-founders / professors / advisors who are not working day-to-day on the company. You will have tremendous difficulty raising money with this kind of cap table, and investors will make you restructure your cap table. Dear elizy : I started a company in school with two co-founders.

Giving Visionary Women Their Due

Hunter Walker

While reading Brotopia, we were also helping theSkimm finish up their new financing , with Google Ventures and Spanx founder Sara Blakely joining the cap table. Even though I finished reading Emily Chang’s Brotopia last month, it’s lingered.

One Book Every Entrepreneur and VC Should Own

Both Sides of the Table

To this day I’m still surprised how few CEOs really understand the differences between 2x liquidation preference and a liquidation preference with a 2x cap. Or what “flat spots&# on a cap table are. This article originally ran on TechCrunch.

Should you raise money or bootstrap?

Hippoland

But unless you have found fast growth channels, your people and marketing dollars end up not being put to very efficient use, and you are actually no better off than if you had bootstrapped your company but you have given away more of your cap table.

The Resetting of the Startup Industry

Both Sides of the Table

If you need to clean up your own cap table first – while very hard to do – it will make outside funding easier. Much has changed in the past four months of the technology startup world and how outsiders value the business.

A VC Puts On His Equity Crowdfunding Hat

YoungUpstarts

Plus, if the business doesn’t raise enough the capital in the first round to become self-sustaining, the crowdfunding round’s cap table and/or terms may make the deal unattractive or not doable for follow-on, institutional investors. By Tom Walker, CEO Rev1 Ventures.

Equity 201

The Rainy Day Fund of Reputation

This is going to be BIG.

What happens when a founder has that rare wealth of riches when they're choosing who they're going to allow onto their cap table? The tables turn and the one being pitched to becomes the one pitching. Every time you slip an obnoxious term into a cap table, or take six positive meetings before ultimately passing for a reason that should have come out in meaning one, you're debiting your rep.