Startup Professionals Musings

JANUARY 15, 2021

This is called stock dilution control. While new equity owners always have to get it from someone, actual re-allocation of existing shares should be based on a formula to maximize the value of your remaining founder shares. Minimize your own loss of ownership as major investors contribute.

Vesting 298

Vesting Dilution Stock Founder Vesting 298

David Teten

JANUARY 19, 2021

From RBI, Flexible VCs borrow the ability to reap meaningful returns without demanding founders build for an exit. From traditional equity VC, Flexible VC borrows the option to pursue and reap the rewards of an outsized exit. Flexible VC 101: Equity Meets Revenue Share. Equity Ownership. Yes, typically preferred equity.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

This is going to be BIG.

MAY 17, 2012

2) Supply and demand of capital willing to invest in your company. Getting less dilution than standard means that you have to have made fantastic progress, have a world class team, etc. The other way to move that number is much more simple-- generate more demand for the round than there is supply of allocation.

Venture Capital 116

Venture Capital Framework Dilution Equity 116

Startup Professionals Musings

MAY 8, 2022

Don’t wait for the harsh reality of the demanding business world to start thinking about these tradeoffs. The downside is loss of control and financial dilution. You have very little money, and you don’t want to give away your equity. That’s not an attractive statistic if you crave control and power.

Founder 325

Founder Hockey Stick Cofounder Liquidity Event 325

Startup Professionals Musings

NOVEMBER 6, 2020

It seems that most of you entrepreneurs I meet in my role as business advisor are convinced that starting a new business requires equity investors, exponential growth, and a plan to go public via IPO. Personal income is related to operations versus equity. With major investors, your equity and return is diluted and delayed.

Small Business 311

Small Business Small Business Administration SBA Equity 311

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. Terms to prevent equity dilution relative to others.

Term Sheet 120

Term Sheet Demand Preferred Stock Liquidation Preference 120

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? Anti-Dilution. See: Startup Accelerator Anti-Dilution Provisions; The Fine Print.

Dilution 48

Dilution Startup Technical Review Equity 48

Both Sides of the Table

OCTOBER 1, 2009

It is also a result of pent-up demand. We spent our future since the equity was artificial. My advice : if you’re raising a $750,000 round and you have demand for $1.2 .&# This is a direct result of innovation around the iPhone / mobile computing, Facebook / Social Networks and Twitter (as distinct from Social Networks).

Technical Review 269

Technical Review Stock Hawaii Early Stage 269

Hunter Walker

AUGUST 7, 2017

Employee options pools, typically created at the point of financings, shouldn’t be treated as haggling over dilution, but rather a strategic resource that will help founders build the best team and, by extension, a more valuable company.

Equity 94

Equity Pre-Money Valuation Option Pool Founder 94

Startup Professionals Musings

AUGUST 10, 2019

Don’t wait for the harsh reality of the demanding business world to start thinking about these tradeoffs. The downside is loss of control and financial dilution. You have very little money, and you don’t want to give away your equity. That’s not an attractive statistic if you crave control and power.

Hockey Stick 243

Hockey Stick Cofounder Liquidity Event Startup 243

www.quora.com

SEPTEMBER 22, 2011

Type to Add and Search Questions; Search Topics and People Startups Startup Compensation Entrepreneurship Compensation Stock Options Major Internet Companies Silicon Valley Why is there such a large founder to early employee equity drop-off? This ties into this Paul Graham article: [link] /equity. I'm always su. This answer.

Equity 40

Equity Employee Founder Cofounder 40

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

Version One Ventures

FEBRUARY 6, 2019

This aggressive ownership target is one reason more and more founders are looking for capital from IT/tech VCs who don’t demand as much equity. And when making big investments, these investors have higher ownership targets (40-50%) compared to IT/tech VCs (20-25%).

Dilution 132

Dilution Artificial Inteligence IPO Valuation 132

Startup Professionals Musings

DECEMBER 14, 2014

Don’t wait for the harsh reality of the demanding business world to start thinking about these tradeoffs. The downside is loss of control and financial dilution. You have very little money, and you don’t want to give away your equity. That’s not an attractive statistic if you crave control and power.

Hockey Stick 268

Hockey Stick Cofounder Entrepreneur Liquidity Event 268

David Teten

SEPTEMBER 2, 2017

It’s hard enough to get a job at a venture capital or private equity firm; it’s even more complex to join as a Partner. Also see Preqin’s Key Due Diligence Considerations for Private Equity Investors. . VC and private equity are very illiquid on both the investing and the personnel side. So assessing fit is critical.

Private Equity 60

Private Equity Venture Capital Equity Partner 60

Startup Professionals Musings

JANUARY 29, 2018

Even though initial stock has no market value today, it is extremely valuable in dividing equity ownership between co-founders, investors, and early partners. Manage dilution with proper use of new investment terms. Make sure you make allocations commensurate with commitments and contributions.

Stock 129

Stock Vesting Preferred Stock Cofounder 129

Startup Professionals Musings

AUGUST 19, 2017

Don’t wait for the harsh reality of the demanding business world to start thinking about these tradeoffs. The downside is loss of control and financial dilution. You have very little money, and you don’t want to give away your equity. That’s not an attractive statistic if you crave control and power.

Hockey Stick 144

Hockey Stick Cofounder Entrepreneur Liquidity Event 144

Startup Professionals Musings

SEPTEMBER 5, 2016

Many aspiring entrepreneurs jump ship from corporate environments, complaining that they want to be their own boss, only to find that investors are more demanding bosses than the ones they left. You don’t have to fight for your equity, and no one can slow you down in decision making. Spread your equity internally to build the team.

Bootstrapping 120

Bootstrapping Entrepreneur Startup Exit Strategy 120

Startup Professionals Musings

JULY 19, 2013

Don’t wait for the harsh reality of the demanding business world to start thinking about these tradeoffs. The downside is loss of control and financial dilution. You have very little money, and you don’t want to give away your equity. That’s not an attractive statistic if you crave control and power.

Founder 245

Founder Hockey Stick Cofounder Liquidity Event 245

Startup Professionals Musings

MAY 18, 2015

This is called stock dilution control. While new equity owners always have to get it from someone, actual re-allocation of existing shares should be based on a formula to maximize the value of your remaining founder shares. Minimize your own loss of ownership as major investors contribute.

Stock 120

Stock Vesting Common Stock Founder Vesting 120

K9 Ventures

JUNE 12, 2012

You get a situation whether investors are incentivized to put in more money into a company, not only to buy more equity, but also to fund the quick growth. Founders typically get their equity in a company once — at the time of founding and then get diluted with each subsequent round of financing.

Venture Capital 117

Venture Capital Silicon Valley Founder Seed Stage 117

The Next Web

OCTOBER 3, 2012

Note: I’m not talking about equity. So, growing more not only has the effect of adding more weight to the company, but also of diluting each employee’s decision-making stake (feeling of overall responsibility) in the company. And consider this: when your company is three people (e.g.

Cofounder 155

Cofounder Technical Cofounder Technical Review Software Review 155

Up and Running

MAY 27, 2014

Is the investor asking for a non-dilution clause (a stipulation that their equity shares never dilute) in your operating agreement? (No No savvy investor will ever ask for this, nor will a savvy investor want to invest in your business if you have any investors who demand this clause.

Angel Investor 119

Angel Investor Dilution Accredited Investor Due Diligence 119

Berkonomics

FEBRUARY 21, 2019

Second, almost no professional investor will consider putting that much into a startup until there is proof of market demand, product viability or some other mitigation of failure. Third (if you’re keeping score), it is not wise to dilute the founder’s ownership greatly in the first round of financing.

Dilution 48

Dilution Retention Valuation Startup 48

K9 Ventures

JUNE 12, 2012

You get a situation whether investors are incentivized to put in more money into a company, not only to buy more equity, but also to fund the quick growth. Founders typically get their equity in a company once — at the time of founding and then get diluted with each subsequent round of financing.

Venture Capital 105

Venture Capital Silicon Valley Founder Seed Stage 105

The Next Web

FEBRUARY 27, 2014

Supply and demand. To start, let’s not forget about the obvious: the natural economic principles of supply and demand apply to valuing your business. your equity in a hot new patented technology business), the higher the demand (e.g., your equity in a hot new patented technology business), the higher the demand (e.g.,

Valuation 167

Valuation Forecast Seed Stage .Net 167

Ben's Blog

MAY 24, 2021

Second, by better matching supply and demand, direct listings have generally mitigated the magnitude of IPO Pops, thus engendering better overall price discovery. Among the findings are: SPAC dilution amounts to roughly 50% of the cash ultimately delivered to the companies brought public. Time Period IPO Pop* 1980-1989 6.1%

SEC 36

SEC Accredited Investor IPO Technical Review 36

Board Effect

MAY 13, 2019

The realistic demands of cap table management will increase as your business grows and matures—that much is a no-brainer. What we’re really looking for is the baseline of management startups should afford their cap tables as they grow—in both size and the complexity of their equity structures. Defining Cap Tables.

Cap Table 40

Cap Table Management Liquidity Event Dilution 40

Both Sides of the Table

SEPTEMBER 5, 2012

This time by the efforts of Adeo Ressi to introduce a new kind of structure called “ convertible equity.” My initial reaction to Adeo when we spoke was that while it may have solved some issues (debt versus equity) it didn’t solve the ones that I’ve been warning entrepreneurs about most loudly.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

99u.com

DECEMBER 22, 2012

It is best to have a contract that covers details regarding any form of equity grant or compensation as well as whether or not expenses are reimbursed. Assuming no dilution (which is not a good assumption), this means you need to sell for $200 million. How to Power Through Any Demanding Task. State expectations up front.

Turkey 40

Turkey Dilution Portfolio Exit Strategy 40

rapidrollout.wordpress.com

JANUARY 15, 2011

He or she might call himself a “consulting CTO,&# “freelance CTO,&# “on-demand CTO,&# “CTO on call,&# “CTO for hire,&# or just a “technology strategy advisor.&# And finally, you may be able to avoid diluting your equity. See my blog post, Startup Advice: When to Use a Consulting CTO.

Fractional CTO 40

Fractional CTO CTO CTO Hire Fractional VPE 40

Berkonomics

FEBRUARY 24, 2012

Second, almost no professional investor will consider putting that much into a startup until there is proof of market demand, product viability or some other mitigation of failure. Third (if you’re keeping score), it is not wise to dilute the founder’s ownership greatly in the first round of financing. Email readers, continue here.]

Dilution 72

Dilution Retention Valuation Equity 72

Tim Keane

JANUARY 12, 2010

The investors and the entrepreneurs are – or should be – aware that the price of the company’s equity is set by the market – in simplest terms, what an informed buyer is willing to pay.   Note that this applies only to earl stage Series A-type equity financings and assumes no cash dividends are paid to investors.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Gust

OCTOBER 21, 2011

For convertible notes, the only liquidity event we need be concerned with is an acquisition of the startup in the near future, before the maturity date; otherwise, the notes will convert to equity of one kind or another, and the eventual sale of that equity (in a public offering, acquisition, or private sale) is a different subject for another day.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Rob Go

AUGUST 29, 2016

If there is a fixed post money on say, a $5M series A round, if the founder decides that they want to take on a bit more new capital, the existing shareholders eat all of the additional dilution. In the old world, this additional dilution would end up being shared, since the pre-money was fixed.

Post-Money Valuation 52

Post-Money Valuation Valuation Cap Table Term Sheet 52

The Startup Lawyer

JUNE 9, 2010

The term sheet was pretty much a done deal, when the startup’s CEO demanded a salary of $25,000. The startup community focuses most of the term sheet discussion on liquidation preferences and anti-dilution , but startup CEO salary is nonetheless an important issue. It aligns his interest with the equity holders.

Salary 99

Salary Term Sheet Liquidation Preference Liquidity Event 99

Lightspeed Venture Partners

NOVEMBER 19, 2012

Barbara thought that the company should be further along for $240,000 already invested, and didn’t like that the founder only owned 43% and would be diluted by a further 10% in this round, so she passed. Daymond had invested in a competitive business previously, so he bowed out. Neither of these reasons make any sense to me.

Pre-Money Valuation 166

Pre-Money Valuation Alabama Valuation Churn Rate 166