Startup Professionals Musings

MAY 8, 2022

The downside is loss of control and financial dilution. Offer low cash early, with bonuses or stock options for milestones, to people in your personal network. If you take investor money, expect a push for hockey-stick growth and a liquidity event, like going public (IPO) or sale (M&A), to get the payback.

Founder 325

Founder Hockey Stick Cofounder Liquidity Event 325

Startup Professionals Musings

JULY 3, 2015

In reality, this option is a nightmare that can bump you out of the driver seat, dilute your equity and create a business entity you can’t control. For financial reasons alone, an IPO is a statistically rare phenomenon, happening just 275 times in 2014 , out of almost 500,000 startups.

IPO 120

IPO Initial Public Offering Entrepreneur Private Equity 120

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. It will be in millions and you will have to dilute your shares even further if you are aiming for another funding round. There is a complete process to go for an IPO.

Startup 113

Startup Technical Cofounder Merger Early Stage 113

David Teten

JANUARY 19, 2021

The value ascribed by subsequent investors (in a secondary); buyers (acquisition); or the public markets (IPO). Eligible for favorable treatment under Qualified Small Business Stock exemption, if structured as equity. This applies if the investment converts into common stock; details are beyond this essay’s scope. Governance.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

Both Sides of the Table

OCTOBER 12, 2014

And because they are so much larger by the time they go public (think: Facebook $104 billion, Twitter $18 billion, Alibaba > $200 billion) the private value of the most successful companies pre-IPO is more more valuable than it ever was. Why prorata rights are now sought out by LPs. As I like to point out, the truth is often more nuanced.

Technical Review 336

Technical Review Later Stage Early Stage LP 336

ReadWriteStart

JULY 18, 2011

Kedrosky: "In the 90's I was an analyst through all this [tech investment and IPO] madness. These people are like shopkeepers trying to stock their shelves with goods they can sell to other people. They want to stock their shelves and they have nothing. You want to build your own IPO and exit.

Investment Bankers 153

Investment Bankers Technical Review Cofounder Due Diligence 153

Startup Professionals Musings

AUGUST 10, 2019

The downside is loss of control and financial dilution. Offer low cash early, with bonuses or stock options for milestones, to people in your personal network. If you take investor money, expect a push for hockey-stick growth and a liquidity event, like going public (IPO) or sale (M&A), to get the payback.

Hockey Stick 243

Hockey Stick Cofounder Liquidity Event Startup 243

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. That management team might have decided that they wanted to maintain more control of their company, didn’t want new board members and didn’t want to take dilution.

Stock Options 227

Stock Options Startup Dilution Venture Capital 227

Both Sides of the Table

SEPTEMBER 18, 2014

If you’re wildly successful early on or if they help you achieve a great valuation they actually pay a significant price for their eventual stock even though they took much more risk than a future investor and backed you early. 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

Both Sides of the Table

SEPTEMBER 10, 2021

In 2001 companies IPO’d very quickly if they were working, by 2011 IPOs had slowed down to the point that in 2013 Aileen Lee of Cowboy Ventures astutely called billion-dollar outcomes “unicorns.” How little we all knew how ironic that term would become but has nonetheless endured. So in a way it’s self selecting.

Pre-Money Valuation 471

Pre-Money Valuation Valuation Venture Capital Early Stage 471

Startup Professionals Musings

JULY 5, 2011

They don’t realize that this option would likely be their worst nightmare, since it costs millions for the road show, usually dilutes your equity to a tiny fraction, and takes away all your entrepreneurial control. companies made the IPO transition in 2009, out of thousands of startups. Only about a dozen U.S.

Exit Strategy 235

Exit Strategy IPO Investment Bankers Entrepreneur 235

Both Sides of the Table

SEPTEMBER 28, 2013

A cautious person wouldn’t try to pry people out of Twitter right before their IPO to” join my cause!!” So the tech team departed en masse to find the next great stock option scheme to make their big bucks. Dilution / valuation. I wasn’t expecting this much dilution this quickly.”

Startup 417

Startup Dilution San Diego Stock Options 417

Both Sides of the Table

SEPTEMBER 29, 2009

Three reasons: There is a relative valuation between the price a VC pays and their expectations of what it will exit for in an IPO or trade sale. The professor plotted data and showed us statistically that most people buy stocks when they are booming (e.g. Short answer – yes. The best MBA class I took was an investment strategy class.

Burn Rate 263

Burn Rate Valuation Pre-Money Valuation Private Equity 263

Startup Professionals Musings

DECEMBER 14, 2014

The downside is loss of control and financial dilution. Offer low cash early, with bonuses or stock options for milestones, to people in your personal network. If you take investor money, expect a push for hockey-stick growth and a liquidity event, like going public (IPO) or sale (M&A), to get the payback.

Hockey Stick 268

Hockey Stick Cofounder Entrepreneur Liquidity Event 268

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. valuation, that’s sort of like a new IPO, but without the lockup period.

Early Stage 95

Early Stage Dilution Private Equity Common Stock 95

Tim Keane

JANUARY 12, 2010

Next, they carefully consider the range of multiples being used today to value companies being acquired or doing IPOs in the market that the business is in. Term-sheets for preferred stock offerings are designed to protect the investor in case things don’t go as well as planned. times the investment.). here of 7.65 [2].

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Startup Professionals Musings

AUGUST 19, 2017

The downside is loss of control and financial dilution. Offer low cash early, with bonuses or stock options for milestones, to people in your personal network. If you take investor money, expect a push for hockey-stick growth and a liquidity event, like going public (IPO) or sale (M&A), to get the payback.

Hockey Stick 144

Hockey Stick Cofounder Entrepreneur Liquidity Event 144

Startup Professionals Musings

JULY 19, 2013

The downside is loss of control and financial dilution. Offer low cash early, with bonuses or stock options for milestones, to people in your personal network. If you take investor money, expect a push for hockey-stick growth and a liquidity event, like going public (IPO) or sale (M&A), to get the payback.

Founder 245

Founder Hockey Stick Cofounder Liquidity Event 245

ithacaVC

FEBRUARY 1, 2018

If FFAs only invest at the beginning and do not make any follow on investments as the company raises more $$ then the only real way FFAs make money when the company is ultimately sold is if the company keeps raising future rounds at higher and higher valuations (and IPO exit may provide upside if the stock price increases over time after the IPO).

Preemptive Right 45

Preemptive Right Cap Table Valuation Dilution 45

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

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

Gust

MAY 24, 2012

Dual-class voting structures are receiving a lot of attention these days along with intense publicity related to the Facebook IPO , following in the wake of other recent tech IPOs with a similar structure such as Zynga and LinkedIn. Options and warrants, when issued, are also typically exercisable for shares of Common Stock.

IPO 159

IPO Equity Common Stock Stock 159

Hunter Walker

DECEMBER 18, 2015

Bloomberg’s article about lower-than-expected financial gains from startup IPOs for midlevel employees stuck in craw this week because there’s a handful of complex issues at play here. You join at an executive level pre-IPO for a company that already has huge potential. Post IPO, You Have Choices: Hold or Sell.

Equity 48

Equity Employee IPO Vesting 48

Gust

SEPTEMBER 17, 2014

If you’re wildly successful early on or if they help you achieve a great valuation they actually pay a significant price for their eventual stock even though they took much more risk than a future investor and backed you early. Less than you’ll probably grant your most junior employees in stock options? Me: More dilution?

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

The Next Web

JANUARY 24, 2014

So let’s take stock: What do we offer? The company has a checkered past, but it was the first corporation in history to issue stock in exchange for capital. This legal-financial ingenuity lead to the creation of the world’s first stock exchange in 1602: the Amsterdam Stock Exchange. Not in my view. How to fix this?

Netherlands 143

Netherlands Technical Review Stock Silicon Valley 143

Austin Startup

NOVEMBER 25, 2018

My first day at Bazaarvoice was just a few weeks later, on May 2, 2005, and we built a company from inception to IPO on around $12m of capital use (out of the $24m we raised) in 7 years, creating over a thousand jobs and impacting clients all over the world?—?starting Below is a post I wrote on their Yahoo! Groups list on March 15, 2005.

Bootstrapping 48

Bootstrapping Austin Equity Cofounder 48

The Equity Kicker

APRIL 13, 2012

Throughout our evolution, from privately held start-up to large, publicly listed company, we have managed Google for the long term — enjoying tremendous success as a result, especially since our IPO in 2004. Effectively a Stock Split: And a New Class of Stock.

Dilution 87

Dilution Stock Government SEC 87

The Next Web

OCTOBER 7, 2013

Every time a startup raises capital, all common shareholders are diluted. All of the estimates displayed above are figures prior to any dilution. As stated earlier, investors will dilute ownership upon nearly every round of financing. So, if o = initial ownership and y = total dilution, x = o * (1 – y). N: exit size.

Engineer 129

Engineer Dilution Option Pool Vesting 129

Startup Company Lawyer

JANUARY 31, 2011

Optional maturity conversion : into Series AA Preferred Stock based on a $5M valuation. Optional change of control/IPO conversion : into common stock at the lesser of (A) fair market value (based on change of control or IPO), or (B) $5M valuation. (Once again, I don’t know how to get a better deal than this.).

Preferred Stock 60

Preferred Stock Liquidation Preference IPO Common Stock 60

www.payne.org

SEPTEMBER 22, 2011

2 Stock Classes: Common and Preferred. 3 Dilution. 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. From Payne.org Wiki.

Equity 56

Equity Employee Vesting Preferred Stock 56

Feld Thoughts

FEBRUARY 28, 2023

However, the lack of a conversion right also has implications for anti-dilution protection: in the U.S., In Germany, anti-dilution protection is achieved by issuing additional preferred shares. IPO issues: Possibly the biggest problem for German venture-backed companies is the very low number of IPOs in Germany.

Germany 165

Germany Liquidation Preference Option Pool Advisory Board 165

Scott Edward Walker

JULY 7, 2011

A redemption right is another feature of preferred stock and permits the investors to require the company to repurchase their shares after a specified period of time; it is, in effect, a “put” right – that is, the investors may elect to put their shares back to the company. Redemption Rights What Are Redemption Rights?

Term Sheet 49

Term Sheet Redemption Venture Capital Preferred Stock 49

www.paulgraham.com

APRIL 28, 2010

In an IPO, it might not merely addexpense, but change the outcome. 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. They just want to invest in this startup.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

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

abovethecrowd.com

APRIL 20, 2016

The pressures of lofty paper valuations, massive burn rates (and the subsequent need for more cash), and unprecedented low levels of IPOs and M&A, have created a complex and unique circumstance which many Unicorn CEOs and investors are ill-prepared to navigate. The same thing happened to many Internet stocks.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

www.paulgraham.com

OCTOBER 23, 2010

The way to getrich from a startup is to maximize the companys chances of succeeding,not to maximize the amount of stock you retain. The problem is, for the company to exist, you have todecide who the founders are, and how much stock they each have. They get the same kind of stock and get diluted the same amount in futurerounds.

Startup 105

Startup Cofounder Software Stock 105

discuss.joelonsoftware.com

NOVEMBER 1, 2010

I dont control the companys valuation: if for example the company is privately-held, then the value of equity might be complicated and outside my control (you can dilute equity, reinvest any revenue instead of paying it in dividends, etc., Unethical IMO but some people make money that way. An employee is normally paid a salary or wages.

Sweat Equity 40

Sweat Equity Equity Angel Investor Affiliate 40