Both Sides of the Table

JULY 22, 2010

Things like “ participating preferred stock &# in legalese unsurprisingly never actually call out, “hey, this is the participating preferred language.&# We got a3x participating liquidation preference with interest (not participating with a 3x cap, but 3x participating. The VC assumes you’ll have an option pool.

Valuation 405

Valuation Liquidation Preference Pre-Money Valuation Term Sheet 405

The Next Web

JUNE 15, 2012

And perhaps most importantly, equity is a business’ most precious resource, and the amount you give a contractor in stock can end up being worth many, many times more in a few years. Not to mention the fact that every time you compensate with equity, you dilute your own ownership of the business. Plan upfront. Put it in writing.

Equity 116

Equity Stock Options Vesting Stock 116

Both Sides of the Table

JUNE 5, 2011

On a public stock market that is the value that investors place on future free cash flows of the business discounted to today’s date to account for the time value of money. The price of public stocks change instantly in reaction to news that is perceived to affect the future value of that company. Here’s what I mean.

Pre-Money Valuation 336

Pre-Money Valuation Valuation Silicon Valley Stock 336

Up and Running

JULY 2, 2014

We had personally invested $70,000 of our own money at this point, and we were hoping to raise at least another $250,000 to help us hire a team, launch our company, and begin to build our product. of our company in exchange for the $300K, and my business partner and I each diluted from 50% ownership down to 33.3%

Technical Review 118

Technical Review Angel Investor Due Diligence Dilution 118

VC Adventure

AUGUST 16, 2020

Yet others try to use cash to minimize dilution for early employees and try to rapidly reduce their reliance on options. But it will also change the nature of your workforce if you only hire employees that can work for well below market cash comp. It’s also important not to go crazy with the trade-off.

Programming 149

Programming Vesting Equity Software Review 149

thinkspace.com

SEPTEMBER 7, 2012

Should founders have anti-dilution rights? I was originally hired as a contractor, developing a SaaS app from scratch, including DB design and coding. Along the way, I was hired full time (I believe about 8 months after I started), a coder from India was hired and another contractor was added to the team. Five years?

Equity 62

Equity Employee Founder CTO Hire 62

The Next Web

OCTOBER 10, 2013

Hire everyone you need as an employee. Too dilutive.”. Dilution – bringing on a co-founder likely means you’re splitting your share in half. We split our stock one-fifth each. The required number of cofounders for success is: “Zero” – You don’t need a cofounder. You are the founder, the visionary, the uber-entrepreneur.

Cofounder 143

Cofounder Technical Cofounder Kenya Dilution 143

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

YoungUpstarts

MAY 6, 2019

If you are getting funded for the first time, which means that you have not diluted the shares of your company, you will be receiving Series A funding. Hiring more resources. When you are done with making product improvements, start hiring more resources that can work to solidify your brand presence. Series A, B, C Funding.

Startup 113

Startup Technical Cofounder Merger Early Stage 113

Both Sides of the Table

JUNE 17, 2017

It was a stock option incentive related “expense” but I bet you didn’t know that because in an era where we only read the headlines — they must be a train wreck losing billions. If you don’t have a strong balance sheet and can’t hire more people that’s fine — but understand this may lead to slower growth. Two-f **g-billion!

Stock Options 227

Stock Options Startup Dilution Venture Capital 227

Both Sides of the Table

FEBRUARY 19, 2019

This is often true when the action of the board could dramatically affect shareholders such as raising new capital, acquiring new businesses (that drain existing cash or dilute shareholders), selling the company or raising a lot of debt. Equally it could vote to increase the stock option plan to 99% of the company.

Startup 204

Startup Dilution Government Stock Options 204

Austin Startup

MAY 8, 2018

Background reading: Founder Compensation: Cash, Equity, Liquidity Fatal Errors in Early Startup Hiring Early Hires: Options or Stock Given how deeply involved we are with early-stage startups hiring their first key employees, I figured it would be helpful to outline a few key principles to help entrepreneurs navigate the topic.

Employee 48

Employee Seed Stage Startup Equity 48

This is going to be BIG.

FEBRUARY 27, 2011

Despite advances in cloud infrastructure, many businesses still have fleshy parts—soft underbellies where a human hand is required to keep quality control, stuff something into a box, order inventory, hire enough engineers to keep the site going or manage cash. Scale brings complexity. If you’re lucky, you realize it in time.

Dilution 104

Dilution Equity Hiring Partner 104

www.avc.com

SEPTEMBER 22, 2011

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. For your first key hires, three, five, maybe as much as ten, you will probably not be able to use any kind of formula. First, a caveat. Let's say the number is $25mm.

Equity 64

Equity Employee CTO Hire Fractional CTO 64

www.inc.com

SEPTEMBER 24, 2011

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 Before Roving Software could receive its first round of financing from professional investors, in early 1999, he had to put all the stock arrangements in writing.

Fractional CTO 40

Fractional CTO Equity Iowa Technical Cofounder 40

Both Sides of the Table

SEPTEMBER 10, 2021

A-Rounds used to be $3–7 million with the best companies able to skip this smaller amount and raise $10 million on a $40 million pre-money valuation (20% dilution). In fact, we just announced that we hired a new head of our Growth Platform, (follow him on Twitter here ? So in a way it’s self selecting. Seksom Suriyapa ?—?he

Pre-Money Valuation 471

Pre-Money Valuation Valuation Venture Capital Early Stage 471

www.paulgraham.com

APRIL 28, 2010

A lawyer I asked about it said: When the company goes public, the SEC will carefully study all prior issuances of stock by the company and demand that it take immediate action to cure any past violations of securities laws. Whatkind of anti-dilution protection do they want? Those remedial actions can delay, stall or even kill the IPO.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

Both Sides of the Table

SEPTEMBER 28, 2013

So the tech team departed en masse to find the next great stock option scheme to make their big bucks. Dilution / valuation. I hate when companies publish too much information about the total stock option allocations, the company valuations, the dilution faced in every round, etc. But we departed on good terms.

Startup 417

Startup Dilution San Diego Stock Options 417

David Teten

OCTOBER 1, 2015

At the same time, a direct equity investment (one where the dev shop acquires a share in the company immediately) puts the founders in a potentially uneasy position of having to dilute their company before a product is built. Because of that, the tendency is for them to begin playing the equity game with potential interesting entrepreneurs.

Software Developers 60

Software Developers Software Development Software Review Technical Cofounder 60

Andrew Payne

SEPTEMBER 9, 2017

If an early very experienced developer has 1%, and a less senior dev has 0.5%, those become two reference points for the next dev hire. Five percent might feel fair in a particular situation for a near-founder post-funding, but how much is that pre-funding, with unknown dilution? 6 / 16 = 37.5%. 5 / 15 = 31.25%. 3 / 16 = 18.75%.

Equity 71

Equity Founder Vesting Dilution 71

keen.io

FEBRUARY 5, 2013

For example: Don’t accept equity compensation (stock shares) without knowing the percentage of the company you’ll own. And they gave me a choice whether I’d want more stock or a higher salary.” On the other hand, this was new territory for the founders as well; they had zero experience making offers to new startup hires.

Salary 50

Salary Equity Startup San Francisco 50

Austin Startup

MARCH 26, 2019

Discounts too early can also have the adverse effect of diluting a brand when targeting a more affluent customer segment. Many DTC brands eventually hire someone to specifically focus on reducing the impact of credit card errors. Are you prepared for continued investment in customer service?

Technical Review 49

Technical Review Software Review China Acquisition 49

99u.com

DECEMBER 22, 2012

Every business needs a dream team, but you cant hire for every expertise youll need. Sure, you may need developers and designers, but how about experts on your industry or people with relationships with certain prospects that you cant afford to hire? Why You Should Treat Your Freelance Portfolio Like a Stock Portfolio.

Turkey 40

Turkey Dilution Portfolio Exit Strategy 40

Berkonomics

DECEMBER 20, 2018

Would I hire a broker? If you and your shareholders (the royalty issuer) really believe in the business and its intellectual property, then you should welcome financing arrangements such as shared royalties, which are non-equity dilutive and avoid reducing their percentage of ownership in your business. Investment banker? Do it myself?

IP 54

IP Intellectual Property Investment Bankers Product 54

Both Sides of the Table

SEPTEMBER 5, 2012

Can you imagine investing in the stock market where your price was determined at a future date and the better that company performed the HIGHER the price you paid for that investment. In a standard VC term sheet there is a standard term called an “anti dilution provision” and they are in nearly 100% of deals.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Berkonomics

MAY 27, 2021

They protect the company by overseeing the expenditure of company money for expansion, acquisitions, purchases of large assets, hiring of senior management and more. Approving the budget and watching over it during the year and approving any actions that would dilute ownership including stock option grants, are two examples.

Stock Options 62

Stock Options Dilution Acquisition Stock 62

Berkonomics

DECEMBER 20, 2018

Would I hire a broker? If you and your shareholders (the royalty issuer) really believe in the business and its intellectual property, then you should welcome financing arrangements such as shared royalties, which are non-equity dilutive and avoid reducing their percentage of ownership in your business. Investment banker? Do it myself?

IP 48

IP Intellectual Property Investment Bankers Product 48

Rob Go

JUNE 10, 2013

Write code, talk to users, and build the company (hire the best people you can find, get the culture right, fundraise, close sales, etc.) Hire slow; fire fast. Hiring is the most important thing you do; spend at least a third of your time on it. Hire smart and effective people that are committed to what you’re doing.

Startup 49

Startup Technical Cofounder Hiring Cofounder 49

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.” The most you lose is 1 or 2 months of vesting on the stock. 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

www.paulgraham.com

OCTOBER 23, 2010

One of the best tricks I learned during our startup was a rule for deciding who to hire. And when businesspeople try to hire hackers, they cant tell which ones are good.Even other hackers have a hard time doing that. The problem is, for the company to exist, you have todecide who the founders are, and how much stock they each have.

Startup 105

Startup Cofounder Software Stock 105

Early Growth Financial Services

JUNE 26, 2014

Valuation — Know what these terms mean: Fully-diluted — This includes all issued stock and anything that could be converted into common stock (typically after an acquisition or IPO), such as your stock option pool.

Pre-Money Valuation 51

Pre-Money Valuation Option Pool Dilution Common Stock 51

www.instigatorblog.com

OCTOBER 23, 2010

I gave him similar numbers to what I had been given when I was hiring the first few employees for Standout Jobs. This is especially true when you think of a tech startup, where the first few hires are typically engineers/programmers. 1% is even less after you factor in dilution. 1% is even less after you factor in dilution.

Equity 41

Equity Employee Startup Vesting 41

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. Again, that number is typically around 10%, as in 10% available on a fully diluted basis post-money.

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

venturehacks.com

OCTOBER 21, 2010

Use a hiring plan to justify a small option pool, increase your share price, and increase your effective valuation. You explain that the company currently has 6M shares outstanding so the investors must be valuing the company’s stock at $1.33/share: First, the option pool only dilutes the common stockholders.

Option Pool 68

Option Pool Pre-Money Valuation Dilution Warrant 68

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

Berkonomics

APRIL 4, 2024

Compensation’s charter is to approve stock option grants for any employee, no matter how small the grant, and all salary and benefits for at least the CEO if not the next level down, to avoid conflict of interest with the CEO. Yet another personal story… Let me tell you the story of a company on whose board I sat for several years.

Covenant 48

Covenant Software Review Stock Options Vesting 48

discuss.joelonsoftware.com

NOVEMBER 1, 2010

Mark Walsen Mark Walsen Thursday, October 09, 2008 Deleting … Approving … I think you would be better off hiring people, rather than trying to convince them to work for free in exchange for equity. In a large company, stock incentives tend to work more like bonuses than as motivators for the greater cause of the business.

Sweat Equity 40

Sweat Equity Equity Angel Investor Affiliate 40