Agile VC

DECEMBER 4, 2014

As a result, one of the trickier things co-founders tackle is determining the equity split amongst the founding group of individuals. Across both the startups I’ve personally been involved in (PayPal and LinkedIn) and the startups in which I’ve been an investor, I’ve seen a broad range of co-founder equity splits.

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Cofounder Equity Founder Sweat Equity 173

Up and Running

SEPTEMBER 19, 2017

When you accept outside money, particularly a private equity (PE) investment, however, that changes. In this article, I’ll provide some personal stories of how investors have navigated the balance between raising private equity capital and not losing control of their startup. You make all the decisions, when you want, how you want.

Private Equity 94

Private Equity Pre-Money Valuation Equity Startup 94

Startup Professionals Musings

SEPTEMBER 27, 2023

When an entrepreneur first incorporates a business, they may find themselves the proud owner of 10 million shares of common stock, commonly called founder’s shares. This is called stock dilution control. Otherwise, people with no ongoing effort (“free riders”) will own the value growth that you are adding after their departure.

Stock 240

Stock .Net Vesting Founder Vesting 240

www.inc.com

SEPTEMBER 24, 2011

Will Work for Equity. Why Arizona Bay started taking stock from its customers instead of cash. Dave Graham Business Venture Capital Private Equity GlobalLogic Inc. Determined not to miss another opportunity, Graham has begun waiving fees and instead taking equity in clients he thinks have a good shot at success.

Arizona 40

Arizona Equity Iowa Venture Capital 40

VC Adventure

AUGUST 15, 2018

Most boards did some level of work to determine the FMV of a company’s stock but generally options were priced between 10% and 15% of a company’s then preferred price (because common equity sits behind preferred equity there is typically a discount applied to the FMV of common stock to account for this “overhang”).

Valuation 48

Valuation Common Stock Cap Table Software Review 48

The Startup Lawyer

DECEMBER 10, 2015

A startup founder’s desire to hold equity better than plain-vanilla common stock isn’t new. Several years ago, Series FF stock for founders was all the rage when it came to founder liquidity at subsequent financing rounds. We implemented Series FF for a handful of clients back then but we haven’t done so recently.

Common Stock 40

Common Stock Stock Founder Equity 40

www.mattbartus.com

SEPTEMBER 24, 2011

Equity for Consultants – Keep it Simple! posted Feb 3 in Equity , People issues. for every hour works, consultant accrues [hourly wage]in debt that will convert to equity in the next round). First, you’d probably want them to receive common stock, not preferred stock (which is the likely next round).

Equity 40

Equity Vesting Silicon Valley Intellectual Property 40

ithacaVC

APRIL 5, 2011

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). So, we needed a solution. I hope the investor agrees.

Common Stock 45

Common Stock Stock Cap Table Preferred Stock 45

Startup Professionals Musings

JANUARY 15, 2021

When an entrepreneur first incorporates a business, they may find themselves the proud owner of 10 million shares of common stock, commonly called founder’s shares. This is called stock dilution control. Otherwise, people with no ongoing effort (“free riders”) will own the value growth that you are adding after their departure.

Vesting 298

Vesting Dilution Stock Founder Vesting 298

Feld Thoughts

DECEMBER 28, 2011

If accepted, each company will receive an equity investment of $20,000 in exchange for six percent of the company in common stock, which will be held by TechStars. Microsoft’s Kinect Accelerator is powered by TechStars and applications for the Kinect Accelerator are now being accepted through January 25, 2012.

Intellectual Property 134

Intellectual Property Common Stock Seattle Cofounder 134

Eric Friedman

JUNE 27, 2016

Bigger/better advisors who get more equity have things like; excellent domain expertise to help you avoid pitfalls, deep connections within the industry to help with the intros, partnerships, and more. As a potential advisor looking to get involved with the company; MORE EQUITY! This leaves plenty of room for a final 4th advisor for

Equity 98

Equity Vesting Cap Table Common Stock 98

Both Sides of the Table

MAY 27, 2013

In addition to helping manage the board Chris also helps represent the interests of the angel investors / common stock holders. And you can often throw in a separate action like approving stock-option grants, getting approval for CAPEX spend, discussing fund raising timing – whatever. That in itself is quite a challenge.

Advisory Board 365

Advisory Board CTO Hire Fractional CTO Los Angeles 365

Austin Startup

JULY 6, 2018

The below outlines how I would approach the decision: Cash and Equity. Very simply, what are you giving and what are you getting in return in terms of cash and equity for joining the program? More traditional and comprehensive programs often require 5–8% of common stock, but often provide between $20K and $100K up-front as well.

Dilution 48

Dilution Startup Technical Review Equity 48

Steve Blank

APRIL 26, 2022

Some even insisted that all prior preferred stock had to be converted to common stock. For the common shareholders (employees, advisors, and previous investors), a cram down is a big middle finger, as it comes with reverse split – meaning your common shares are now worth 1/10th, 1/100th or even 1/1000th of their previous value.

Cram Down 404

Cram Down Founder Venture Capital Recapitalization 404

The Next Web

JUNE 17, 2015

Giving up equity in your business, as an alternative to paying cash, often sounds like a great idea to cash-starved startups. But, giving up equity in your business is often a very big decision, and can come at a long-term price, both financially and operationally. I wouldn’t be giving out equity to any and all service providers.

Equity 60

Equity Valuation Preferred Stock Common Stock 60

Agile VC

APRIL 17, 2011

Obviously most of these employees are working hard primarily for equity upside compensation, but Kayak’s personnel costs are roughly $200K/head so the company is highly productive on a per employee basis. Interesting to note that Hafner and English own common stock but also made meaningful investments in the Series A & B rounds.

Pre-Money Valuation 113

Pre-Money Valuation Liquidation Preference Dividend Common Stock 113

Scott Edward Walker

OCTOBER 19, 2020

Usually this is done as part of the founder’s Restricted Stock Purchase Agreement pursuant to which the IP is contributed to the startup as full or partial consideration for the shares of common stock issued to him in a tax-free transaction under Section 351 of the Internal Revenue Code.

IP 52

IP Software Review Founder Technical Review 52

Growthink Blog

JANUARY 24, 2011

I get the same question a lot from entrepreneurs raising equity capital (venture capital or angel funding). The question is whether they need to issue common or preferred stock. The answer depends on how and what rights are defined in the preferred stock.

Preferred Stock 93

Preferred Stock Stock Common Stock Liquidation Preference 93

Growthink Blog

MAY 10, 2012

When seeking equity investments, the source of capital is, for the most part, tied to the stage of capital being raised. You see, equity capital is raised in stages or rounds. Mezzanine Financing Most companies that raise equity capital and are eventually acquired or go public receive multiple rounds of financing first.

Equity 88

Equity Mezzanine Later Stage Venture Capital 88

www.payne.org

SEPTEMBER 22, 2011

Startup Equity For Employees. 2 Stock Classes: Common and Preferred. 5 Stock vs Options. 6 Founders / Restricted Stock. 7 Salary vs Equity. Important disclaimer: Ive got experience negotiating stock compensation packages from both sides of the table. Stock Classes: Common and Preferred.

Equity 56

Equity Employee Vesting Preferred Stock 56

Scott Edward Walker

SEPTEMBER 28, 2011

Indeed, you must make sure that all of the shares of common stock issued by the corporation to the founders are subject to vesting restrictions – which means that ownership of the shares would vest over time (instead of all of the shares being owned outright on day one). Vesting Restrictions.

Vesting 89

Vesting Software Review IP Intellectual Property 89

Both Sides of the Table

SEPTEMBER 18, 2014

If you want to give them a 50% discount offer them $1 of common-stock warrants (no liquidation preference) for every $1 of stock they buy. If you want to give them a 33% discount you offer them half of a $1 common-stock warrant for every $1 share they purchase. “But lawyers will charge much more for equity.”

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Berkonomics

MARCH 8, 2018

Give one percent equity to each outside board member vesting over four years of service. Pay early stage board members of companies that are not lifestyle businesses one percent of the fully diluted equity in the form of an option that vests over four years of service. Here is my best advice, based upon many boards and many years.

Early Stage 102

Early Stage Vesting Stock Options Preferred Stock 102

Gust

JUNE 7, 2014

5) Senior Preferred Stock and warrants. 7) Junior Preferred Stock and warrants. 9) Common Stock (including any Preferred that converted to Common, any exercised options, and all Founders stock) and Common stock warrants. 2) Secured creditors. 3) Un-secured trade creditors.

Warrant 157

Warrant Preferred Stock Early Stage Common Stock 157

Berkonomics

JANUARY 6, 2022

Most sophisticated investors will take either a promissory note or preferred stock, both of which come before founder or management stock in a sale or liquidation. Promissory notes come before any equity, and most late equity investments come before early equity investments, even of the same class of security.

Dividend 62

Dividend IRR Preferred Stock Participating Preferred 62

Startup Professionals Musings

JANUARY 29, 2018

I’ll never forget that great sense of excitement I felt when I incorporated my first business, and realized that I was now the proud owner of 10 million shares of common stock. Even though initial stock has no market value today, it is extremely valuable in dividing equity ownership between co-founders, investors, and early partners.

Stock 129

Stock Vesting Preferred Stock Cofounder 129

keen.io

FEBRUARY 5, 2013

For example: Don’t accept equity compensation (stock shares) without knowing the percentage of the company you’ll own. From there, I began googling things like “first employee startup equity” and “startup offer negotiation.” These were the best resources I found: Equity for Early Employees in Early Stage Startups.

Salary 50

Salary Equity Startup San Francisco 50

ReadWriteStart

JANUARY 28, 2022

With the rise of startups and growing businesses , it has become more critical for investors to have a thorough understanding of equity to be aware of all of the advantages they are receiving from the companies they have invested in. What is Company Equity? Types of equity. Common stock. Preferred shares. .

Valuation 108

Valuation Equity Warrant Common Stock 108

Startup Professionals Musings

SEPTEMBER 26, 2015

Investors, on the other hand, look at the money figure, and even the equity, as the easy part. This is a loan with an option to convert to equity at a later date. For later investments, the price is equity, with a percentage of the owner stock to be assigned to the investor. Type of stock assigned to the investor.

Term Sheet 120

Term Sheet Demand Preferred Stock Liquidation Preference 120

Startup Professionals Musings

MAY 18, 2015

When an entrepreneur first incorporates his or her business, he or she may find him or herself the proud owner of 10 million shares of common stock, commonly called founder’s shares. This is called stock dilution control. Minimize your own loss of ownership as major investors contribute.

Stock 120

Stock Vesting Common Stock Founder Vesting 120

Startup Company Lawyer

MARCH 14, 2010

After the recent announcement of the Series Seed Financing documents by Marc Andreesen, Brad Feld points out that there are now four sets of “open source&# equity seed financing documents: TechStars Model Seed Funding Documents (by Cooley). Y Combinator Series AA Equity Financing Documents (by WSGR). under $500K).

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Austin Startup

JULY 22, 2021

Access to the Capital Factory Mentor network as long as we are shareholders Up to $250,000 in potential total hosting credits from AWS, Google Cloud, Microsoft Azure and other major hosting providers (each individual offer is different and subject to change) A free Capital Factory coworking membership for you and your team for six months Capital Factory (..)

San Antonio 107

San Antonio Dallas Houston Founder 107

Haystack

JULY 8, 2018

For employees at early-stage companies… the equity you’ve been granted is likely common stock, just like the founders. You can read more about the types of stock granted in startups here. Knowing where you sit on this preference stack is a good thing to know, so you should ask.

Early Stage 95

Early Stage Dilution Private Equity Common Stock 95

Both Sides of the Table

APRIL 14, 2010

Liquidation preference is the amount of money that an investor gets paid before the common stock (e.g. It also gets the new investor concerned that management (common stock holders) will not be incentivized because they realize that the investors will take most of the money unless there is a big upside scenario.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

Scott Edward Walker

JUNE 9, 2019

For example, if an investor owns 20% of the equity of a startup on a fully-diluted basis following the closing of a Series A round, it will have the right to purchase 20% of the shares of the preferred stock issued in the subsequent Series B round. This is a huge red flag and founders should push back very hard.

Preferred Stock 56

Preferred Stock Term Sheet Dilution Stock 56

Startup Professionals Musings

JANUARY 27, 2012

Define equity type. The first capital a young company receives usually takes the form of common stock, the same class of shares the founders hold. This does not mean that if you have eight Angels in your company, you will have to seat all eight of them on your board. But the lead Angel would certainly ask to be given a seat.

Term Sheet 223

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 223

Gust

MAY 24, 2012

As a quick review, most startups begin life as corporations with a single class of equity securities, referred to as Common Stock , issued to founders, employees, and outside service providers. Options and warrants, when issued, are also typically exercisable for shares of Common Stock.

IPO 159

IPO Equity Common Stock Stock 159