Feld Thoughts

SEPTEMBER 2, 2011

As Finance Fridays continues, we are introducing the concept of the Cap Table. As first time entrepreneurs they did not create an employee options pool; we’ll fix that in a little while. They come up with two options: Hire Praveena as an employee and offer her stock options.

Cap Table 133

Cap Table CTO Hire Technical Cofounder Cofounder 133

www.avc.com

SEPTEMBER 22, 2011

Employee Equity: How Much? The most common comment in this long and complicated MBA Mondays series on Employee Equity is the question of how much equity should you grant when you make a hire. Once you have assembled a core team that is operating the business, you need to move from art to science in terms of granting employee equity.

Equity 64

Equity Employee CTO Hire Fractional CTO 64

Up and Running

JULY 2, 2014

of our company in exchange for the $300K, and my business partner and I each diluted from 50% ownership down to 33.3% ownership and never dilute. When fundraising for a startup, all investors dilute as additional investors join in on the deal. We were targeting to raise around $3 million in investment capital.

Technical Review 118

Technical Review Angel Investor Due Diligence Dilution 118

Feld Thoughts

FEBRUARY 28, 2023

Corporate law: In Germany, most companies in general and most VC-financed companies are structured in the legal form of a “Gesellschaft mit beschränkter Haftung” (GmbH). Often, this integration results in VC-financed GmbH companies having little to do with the GmbH as envisaged by the law. regarding employee issues.

Germany 165

Germany Liquidation Preference Option Pool Advisory Board 165

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

Up and Running

SEPTEMBER 20, 2021

And as the company grows, it brings on new people and may decide to issue stock options to attract new staff and funding from investors. Furthermore, there are various forms of equity, such as preferred stock, common stock, and convertible notes, which influence the present and potential future investors. Common shares.

Cap Table 112

Cap Table Pre-Money Valuation Stock Options Option Pool 112

Both Sides of the Table

SEPTEMBER 18, 2014

It’s like we need a finance 101 course for entrepreneurs. In finance they call it “terminal value” but the truth is the price is as arbitrary at your A round as it is at your seed round. Less than you’ll probably grant your most junior employees in stock options? Me: More dilution?

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

www.inc.com

SEPTEMBER 24, 2011

Finance | Tuesdays. Financing a Small Business. Financing A Small Business. Personal Finance. Employee Benefits. Back in 1997, Randy Parker was staring at a blank whiteboard, wondering where hed find the money to hire the employees and consultants he needed to build his new product. "We Start-up | Mondays.

Fractional CTO 40

Fractional CTO Equity Iowa Technical Cofounder 40

www.instigatorblog.com

OCTOBER 23, 2010

Changing Equity Structures for Early Startup Employees Tweet Recently someone asked me for advice on how much equity they should give to their early employees. His company had just closed an early round of funding and he wanted to cement the employee relationships. Those first employees will take 0.5-1%

Equity 41

Equity Employee Startup Vesting 41

Haystack

JULY 8, 2018

So, that’s why I’m writing this short post specifically for 1) employees of early-stage startups and 2) the earliest investors in these startups, who are often themselves new to the entire sector. For employees at early-stage companies… the equity you’ve been granted is likely common stock, just like the founders.

Early Stage 95

Early Stage Dilution Private Equity Common Stock 95

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. From there, I began googling things like “first employee startup equity” and “startup offer negotiation.” Me: “Cool.

Salary 50

Salary Equity Startup San Francisco 50

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 answer. Please specify the necessary improvements.

Equity 40

Equity Employee Founder Cofounder 40

Tim Keane

JANUARY 12, 2010

For angel groups, the distinction between groups and VCs on this issue is dwindling, especially as angel groups do bigger rounds of financing.   Note that this applies only to earl stage Series A-type equity financings and assumes no cash dividends are paid to investors.   First , dividends.   Why is this fair?

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

abovethecrowd.com

APRIL 20, 2016

Why the Unicorn Financing Market Just Became Dangerous…For All Involved. All Unicorn participants — founders, company employees, venture investors and their limited partners (LPs) — are seeing their fortunes put at risk from the very nature of the Unicorn phenomenon itself. The same thing happened to many Internet stocks.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

www.mattbartus.com

SEPTEMBER 24, 2011

We will grant him/her X% fully diluted shares up front, and every time he/she makes an introduction, he/she will vest in 100 shares.” People tend to underestimate how much record keeping is involved with managing employees and consultants, and this just adds an unacceptable extra burden. link] mattbartus. link] Casey Allen.

Equity 40

Equity Vesting Silicon Valley Intellectual Property 40

Gust

SEPTEMBER 17, 2014

It’s like we need a finance 101 course for entrepreneurs. In finance they call it “terminal value” but the truth is the price is as arbitrary at your A round as it is at your seed round. Less than you’ll probably grant your most junior employees in stock options? Me: More dilution? There were no metrics.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

www.payne.org

SEPTEMBER 22, 2011

Startup Equity For Employees. 2 Stock Classes: Common and Preferred. 3 Dilution. 5 Stock vs Options. 6 Founders / Restricted Stock. Important disclaimer: Ive got experience negotiating stock compensation packages from both sides of the table. Stock Classes: Common and Preferred. From Payne.org Wiki.

Equity 56

Equity Employee Vesting Preferred Stock 56

ithacaVC

DECEMBER 13, 2013

They are typically pretty simple: (i) shares owned by founders and (ii) shares authorized for issuance in a stock option pool, some of which may be issued to employees already and some of which will be available for future issuance. S0, being able to clearly state how many options you want to grant at the time of the financing is KEY.

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

dondodge.typepad.com

JANUARY 15, 2011

Community is more powerful than money or technology » August 11, 2007 How much equity for investors and employees? How much equity should I grant to early employees? It isnt always possible to have a competitive bidding situation at each financing round so here are some guidelines for funding sources and percentages.

Equity 40

Equity Employee Dilution Valuation 40

Startup Lessons Learned

JUNE 19, 2019

Previously, on the venture side you wanted to invest as early as possible, because the first round of financing got you to a product, and then you'd get beta-type customers, and then you'd raise a second round at a much higher price, and the business could immediately take off from there. Employees are not entrepreneurs. Most hedge.

Silicon Valley 159

Silicon Valley Lean Venture Capital Pre-Money Valuation 159

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.&#

Option Pool 68

Option Pool Pre-Money Valuation Dilution Warrant 68

Startup Company Lawyer

MAY 4, 2009

If a founder’s company raises more than $50,000 in debt or equity financing, excluding funds from the founder, within 18 months of formation, then the founder must pay a tuition fee of $4,500, which is used to cover the Institute’s expenses in providing the program. Incorporation. August 11th, 2009: Incorporate the business.

Founder 28

Founder Warrant San Francisco Intellectual Property 28

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. Or they bring you a handful of great employees.

Advisory Board 44

Advisory Board Cap Table Vesting Equity 44

Ben's Blog

JULY 16, 2013

First, if you did not understand how radically the fundraising environment might change, then there is no chance that your employees would have understood it. In fact, if you are like most companies, your managers probably implied to your employees that your stock price would only rise as long as you were private. Silly them.

Down Round 78

Down Round Marketing Preferred Stock Post-Money Valuation 78

ithacaVC

MAY 1, 2013

It must be paid out before the common shares, which are typically held by the founders and other employees.” The article also states that “But venture capital investments are structured to ensure that the venture capitalists are paid before founders and employees.” The dividend goes unpaid until the company is sold.

Dividend 45

Dividend Liquidation Preference Common Stock Venture Capital 45

Altgate

MAY 24, 2012

As a whole, Zuckerberg, his co-founders, and his former and present employees, own about 55% of Facebook. On the other hand, they are also understandably greedy about maintaining a high equity stake, by minimizing their dilution. In every round of financing, Zuckerberg and his Facebook team have impressively minimized their dilution.

Pre-Money Valuation 43

Pre-Money Valuation Cofounder Dilution Valuation 43

Up and Running

JANUARY 17, 2011

You’ve seen ups and downs in major stocks and house prices, and in those markets it’s obvious. This chart shows how founders’ ownership gets diluted as a successful startup collects investment through various rounds. Another 30 percent is set aside for other employees. Will Facebook’s value increase?

Securities and Exchange Commission 74

Securities and Exchange Commission Dilution SEC Stock 74

K9 Ventures

NOVEMBER 21, 2011

If there is one piece of advice I would give to the founders of BST, it is to consider selling a part of their personal stock in the company at that stage. 2) Fairness to other early employees in the company : This is a very critical and important point, that is often overlooked by founders.

Founder 87

Founder Common Stock Preferred Stock Stock 87

K9 Ventures

NOVEMBER 21, 2011

If there is one piece of advice I would give to the founders of BST, it is to consider selling a part of their personal stock in the company at that stage. 2) Fairness to other early employees in the company : This is a very critical and important point, that is often overlooked by founders.

Founder 84

Founder Common Stock Preferred Stock Stock 84

Austin Startup

AUGUST 1, 2017

TL;DR: In a market that has historically idolized huge, splashy financings and exits, an increasing number of entrepreneurs are realizing that everyone else’s definition of success — particularly among certain large VCs — isn’t necessarily aligned with their own. And large checks require very large exits to achieve good returns.

Liquidation Preference 48

Liquidation Preference Common Stock Valuation Silicon Valley 48

ithacaVC

FEBRUARY 23, 2011

The MCOP can serve a critical role as founders and other management team members are diluted down by rounds of financing or if their equity is not in the money. The ALP is the total amount of $ that preferred stock holders are owed on a sale of the company under their liquidation preferences.

Liquidation Preference 55

Liquidation Preference Management Preferred Stock Dividend 55

Ben's Blog

JULY 16, 2013

First, if you did not understand how radically the fundraising environment might change, then there is no chance that your employees would have understood it. In fact, if you are like most companies, your managers probably implied to your employees that your stock price would only rise as long as you were private. Silly them.

Marketing 46

Marketing Preferred Stock Post-Money Valuation Down Round 46

Venture Chronicles

AUGUST 23, 2013

Managing for growth vs. managing for margin enters the discussion because investors want to manage cash efficiently while also proving the growth capability of the company in order to get to the next stage of financing. I also want to talk about shareholder interests and the Board members positions are, typically, preferred shareholders.

Management 66

Management Startup Liquidation Preference Dilution 66

Both Sides of the Table

FEBRUARY 14, 2016

Social networking finally came of age connected the planet and leading to enormous wealth creation for Facebook employees and investors. Smart phones finally took off leading to enormous wealth creation for Apple employees and investors but also helped propel Google, Facebook, Twitter, Instagram, Snapchat, WhatsApp and others.

Valuation 150

Valuation Down Round Startup Later Stage 150

epaley.com

MAY 6, 2013

Once financed, everyone at the startup should have a reasonable salary, but the real compensation for achieving the improbable is the equity that is typically shared between all employees proportional to the expected contribution of each person. Did that make the employees happy? The logic is compelling, but faulty. Not really.

Salary 41

Salary Startup Equity Forecast 41

www.mattbartus.com

DECEMBER 9, 2012

If you are a company that is fundraising, keep in mind that there are a few different levers you can pull to change the amount of dilution that the founders will experience. Let’s say you receive a term sheet for a $1 million investment at a $3 million fully diluted pre-money valuation, and you’re kind of disappointed.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

Professor VC

JANUARY 17, 2008

One of the panelists mentioned that they have gotten very valuation sensitive (nothing wrong with that) and like to purchase preferred stock rather than invest in convertible notes. He then went on to say that this type of financing was good for the entrepreneur (vs taking VC money) because they got to keep more of the company.

Pre-Money Valuation 28

Pre-Money Valuation Angel Investor Angel Groups Valuation 28