Feld Thoughts

FEBRUARY 9, 2016

Once again, as we find ourselves in the middle of a significant public market correction, especially around technology stocks, there’s an enormous amount of noise in the system, as there always is. I suffered through the next financing after implementing a complex structure, or a sale of the company, or a liquidation.

Cap Table 70

Cap Table Down Round Liquidation Preference Founder 70

OnlyOnce

FEBRUARY 1, 2024

Sometimes when you’re doing a strategic acquisition and it’s an all-stock deal, you can insist as a term of the acquisition that the target company’s investors invest more capital into your company. Why would the cap table of the target company agree to this?

Cap Table 71

Cap Table Common Stock Acquisition Stock 71

Berkonomics

FEBRUARY 27, 2020

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?” To compound the problem, often stock is issued by the entrepreneur without filing any report of such issuance with the state of issue. How it happens.

Cap Table 62

Cap Table Private Placement SEC Accredited Investor 62

VC Adventure

AUGUST 15, 2018

As is true today, there was a requirement that options be priced at or above the “fair market value” of the underlying stock (otherwise there would be tax consequences to the optionee and sometimes to the company as well). Back in the olden days of venture capital, company boards had wide discretion in pricing company options.

Valuation 48

Valuation Common Stock Cap Table Software Review 48

ithacaVC

SEPTEMBER 4, 2011

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. That person is typically the inside finance person, but it does not really matter who so long is it is always current.

Cap Table 49

Cap Table Finance Option Pool Warrant 49

OnlyOnce

JULY 30, 2020

Sometimes you can have a major internal problem related to the cap table–a founder with a lot of stock needs liquidity or you need to push this person out of the company.

Cap Table 48

Cap Table Institutional Investors Startup Early Stage 48

The Next Web

OCTOBER 7, 2013

Cap tables sound intimidating. As stated earlier, investors will dilute ownership upon nearly every round of financing. Again this is somewhat simplified as the liquidity event (sale or IPO) may come as cash, stock, or a combination of the two. Stock is naturally more speculative as to value, public or private.

Engineer 129

Engineer Dilution Option Pool Vesting 129

Hunter Walker

AUGUST 8, 2023

At the time, this is last quarter and the stock market has trended upwards nicely since then (a potential leading indicator of private tech valuations), we all agreed venture portfolios were probably still 25-40% overvalued. Whatever gets reported is just the tip of the iceberg. As The Information proclaims, “ Unicorn Fire Sales Ahead.”

Portfolio 98

Portfolio Cap Table LP Valuation 98

Up and Running

JULY 2, 2014

This should be clearly spelled out in your Capitalization Table , or “Cap Table” as it’s commonly called. A Cap Table shows who owns the company, what the ownership shares are, and what the owners have invested in exchange for that share. Can they create and advise on a Capitalization Table?

Technical Review 118

Technical Review Angel Investor Due Diligence Dilution 118

Hunter Walker

SEPTEMBER 29, 2022

As an early stage fund, often buying 10–15% of a company during its seed financing, this meant we were often being asked if we wanted to sell portions of our stakes to other approved investors (let alone the random pings from market-makers unaffiliated with the company). You don’t try to reprice the company on your own.

Venture Capital 122

Venture Capital Cap Table LP Equity 122

Both Sides of the Table

AUGUST 2, 2014

Like inside bridge rounds where investors want to protect themselves from the company getting sold prior to the next financing and leaving the bridge funding without adequate returns. A founder wants his co-founder to leave and the stock agreement says you can take all of his unvested stock back and wants you as the VC to be the bad guy.

Cap Table 346

Cap Table Cofounder Stock Acquisition 346

Berkonomics

MARCH 8, 2012

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?” To compound the problem, often stock is issued by the entrepreneur without filing any report of such issuance with the state of issue.

Cap Table 74

Cap Table Private Placement SEC Accredited Investor 74

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). And even with the significant cost of credit card debt, many entrepreneurs aggressively use existing cards to finance a startup.

Private Equity 118

Private Equity Valuation Cap Table Accredited Investor 118

Business Plan Blog

NOVEMBER 13, 2013

The first milestone in a new startup’s financing is called ‘Seed Capital’ which refers to the initial investment raised by the founders from their friends and family, or commonly referred to as FFF (Friends, Family and Founders), who mostly use their personal assets. *The Convertible Debt Financing. Raising Seed Capital.

Finance 93

Finance Accredited Investor Angel Investor Seed Capital 93

ithacaVC

APRIL 5, 2011

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. It lists every owner out by amount owned, type of stock (common or preferred), and date purchased. It also lists out option holders and warrant holders.

Common Stock 45

Common Stock Stock Cap Table Preferred Stock 45

abovethecrowd.com

JUNE 2, 2021

These are the parties on the cap table prior to the transaction. They can’t sell the stock at this multiple and therefore that valuation is not available to them. That’s right, Party C, the group that Party B allocated stock to the night before at $67. Party B: The investment banks. Party A is locked up at time T+1.

IPO 82

IPO Customer Matching Silicon Valley 82

Startup Lessons Learned

MAY 4, 2021

And of course, I wasn't really interested in the finance side of it to me. Brian Chesky is always trying to figure out how to put stock in the hands of his community and how to bring community input into the governance, because that's such an important part of the ethos of Airbnb. ER : Don't get me started about stock exchanges.

IPO 113

IPO Cofounder Technical Review Government 113

David Teten

DECEMBER 3, 2019

Some notable metrics are revenue growth rates, free cashflow, leverage ratios, historical financing amounts, returns on marketing spend, customer acquisition costs, lifetime value of customers, customer churn rates, and team social scores. 645 Ventures released a cap table simulator to help level the playing field.

Technical Review 78

Technical Review Software Review Analytics Private Equity 78

View from Seed

OCTOBER 15, 2014

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. Finance is mission critical, for instance – it just appears on a recurring basis.

Seed Stage 331

Seed Stage Cap Table Metrics Preferred Stock 331

keen.io

FEBRUARY 5, 2013

For example: Don’t accept equity compensation (stock shares) without knowing the percentage of the company you’ll own. To begin answering this question, I started on a quest to understand startup financing. And they gave me a choice whether I’d want more stock or a higher salary.” First, I read Venture Deals by Brad Feld.

Salary 50

Salary Equity Startup San Francisco 50

Altgate

JUNE 25, 2012

Thanks to that one decision, he owns nearly four million shares of stock, worth in excess of $100 million. Instead, the dead equity languishes on the cap table, weighing down the startup and making it harder to attract and motivate the people who could impact its growth.

Equity 44

Equity Vesting Cap Table Technical Review 44

www.informationarbitrage.com

FEBRUARY 24, 2010

Read more » Recent Press The New York Times April 22, 2009 - A Company Plans to Market Illiquid Assets CNBC.com April 8, 2008 - Social Stock Picking Reuters April 6, 2009 - Bit.ly They might give them too much stock, and even have that stock not subject to vesting provisions. Solicit trusted advisors help with interviewing.

CTO Hire 40

CTO Hire Founder Cap Table Vesting 40

Austin Startup

AUGUST 20, 2017

Your Cap Table is something that deserves constant care and attention. Messy cap tables can come back to haunt you when you do a financing or sell the company. Startups often hand out shares, options, and warrants for employees and for contractors rendering needed services.

Technical Review 48

Technical Review Software Review Cap Table Securities and Exchange Commission 48

genylabs.typepad.com

SEPTEMBER 24, 2011

I often take stock in lieu of cash. I have a file drawer full of worthless stock certificates and I continue to add to it. Not all start-up stock is created equally. what kind of stock you are getting. where your stock sits in the liquidity preference stack. what kind of stock you are getting. Clean Energy.

Equity 40

Equity Technical Review San Jose Stock 40

Feld Thoughts

AUGUST 26, 2011

Since SayAhh is a C corporation that is incorporated in Delaware, they decided to have a very low non-zero par value for their shares, set at $0.00001, to prevent higher franchise stock taxes. When presented in the SCF, these transactions are broken down into three categories: operating, financing and investing activities.

Balance Sheet 128

Balance Sheet Cofounder Cap Table Delaware 128

Altgate

AUGUST 25, 2012

Thanks to that one decision, he owns nearly four million shares of stock, worth in excess of $100 million. Instead, the dead equity languishes on the cap table, weighing down the startup and making it harder to attract and motivate the people who could impact its growth.

Equity 28

Equity Vesting Cap Table Technical Review 28

ithacaVC

FEBRUARY 1, 2018

It is highly typical for a startup to have small investors on its cap table. The treatment of the friends, family and angels (FFA) as the startup matures and raises larger rounds of financing over time is interesting. Or the economy tanks or stock market tanks moving valuations down at inopportune times for the startup.

Preemptive Right 45

Preemptive Right Cap Table Valuation Dilution 45

Berkonomics

JUNE 8, 2017

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). And even with the significant cost of credit card debt, many entrepreneurs aggressively use existing cards to finance a startup.

Private Equity 106

Private Equity Valuation Cap Table Accredited Investor 106

venturehacks.com

MARCH 21, 2008

You get money, save stock, and amplify the advisor’s social proof in the process. 0.25% of a company’s post-Series A stock. Super advisors The super advisor can get as much stock as a board member: 1%-2% of a company’s post-Series A stock. Advisory shares are normal common stock. Compensation 7.

Advisory Board 44

Advisory Board Cap Table Vesting Equity 44

Eric Friedman

JUNE 27, 2016

I have seen what I call “predatory advisors” come in and really mess up a cap table by promising big intros and sales contracts only to disappear after the first 6-12 months. The funny thing about these moves is that it ends up being bad all around, even though the advisor thinks they are getting a great deal.

Equity 98

Equity Vesting Cap Table Common Stock 98

ithacaVC

SEPTEMBER 10, 2012

But here is one that I want to focus on in this post: “Can I ask for undiluted stock (non dilution clause)?” I am not even sure what “undiluted stock” is, but safe to say the person (I will call him Exec X) meant stock that his equity would not be dilutable in terms of ownership.

Dilution 53

Dilution Employee Cap Table Stock 53

abovethecrowd.com

APRIL 20, 2016

Why the Unicorn Financing Market Just Became Dangerous…For All Involved. The same thing happened to many Internet stocks. By the first quarter of 2016, the late-stage financing market had changed materially. You can no longer simply look at the cap table and estimate your return. This is uncharted territory.

IPO 40

IPO Term Sheet Valuation Silicon Valley 40

Hunter Walker

AUGUST 26, 2022

Our timing was brutal: the Box S-1 coincided with the start of a major market correction for SaaS stocks, and our newly revealed financials made us a natural poster company for that change in sentiment. In the process of investing, we became rather obsessed with helping founders build more diverse and impactful cap tables.

IPO 91

IPO Cofounder Early Stage Portfolio 91

Feld Thoughts

JUNE 2, 2015

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.”.

Liquidation Preference 70

Liquidation Preference Cap Table Angel Investor Post-Money Valuation 70

venturehacks.com

OCTOBER 21, 2010

You explain that the company currently has 6M shares outstanding so the investors must be valuing the company’s stock at $1.33/share: Reading on, the term sheet states, “The $8 million pre-money valuation includes an option pool equal to 20% of the post-financing fully diluted capitalization.&# share to $1.00/share:

Option Pool 68

Option Pool Pre-Money Valuation Dilution Valuation 68

Austin Startup

MAY 17, 2017

They’ll often ask for different variants of ‘information rights’ — which can include delivery of regular financials, and notification of major transactions (like financings). Their interests as an investor are more aligned with the new VCs investing in the Series A than they are with the Common Stock.

Seed Stage 48

Seed Stage Startup Cap Table Angel Investor 48

www.payne.org

SEPTEMBER 22, 2011

2 Stock Classes: Common and Preferred. 5 Stock vs Options. 6 Founders / Restricted Stock. The re-heating of the venture funded tech market has pushed a heat up of the hiring market, and Im getting more calls from friends asking for help understanding startup stock (equity) offers. Stock Classes: Common and Preferred.

Equity 56

Equity Employee Vesting Preferred Stock 56