Both Sides of the Table

AUGUST 3, 2010

How much dilution should I take for it?&# My friend’s company was pre-revenue. Me: “Zero dilution. It meant that the management teams hadn’t figured out a product / market fit for their own businesses. My version is, “you have a company with private stock. BUT … it’s your company.

Merger 276

Merger Technical Review Early Stage Dilution 276

Startup Professionals Musings

OCTOBER 21, 2017

Plus you have to remember that these 200,000 shares could still be worth nothing in four years, depending on the “strike price” today, compared to the market price four years from now. CEO brought in to replace the founder, 5 - 10% CTO, CFO, VP of Marketing or Sales, 1.5 - 3% Chief Engineer or Architect, 1 - 1.5%

Stock 140

Stock Stock Options Advisory Board Startup 140

Startup Professionals Musings

OCTOBER 17, 2013

Plus you have to remember that these 200,000 shares could still be worth nothing in four years, depending on the “strike price” today, compared to the market price four years from now. Thus, stock doesn’t “pay the mortgage” today, so to speak. Your compensation is the total package of stock plus salary plus benefits.

Stock Options 224

Stock Options Stock Advisory Board Startup 224

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

Startup Professionals Musings

SEPTEMBER 22, 2012

Plus you have to remember that these 200,000 shares could still be worth nothing in four years, depending on the “strike price” today, compared to the market price four years from now. Thus, stock doesn’t “pay the mortgage” today, so to speak. Your compensation is the total package of stock plus salary plus benefits.

Stock Options 230

Stock Options Stock Advisory Board Startup 230

Both Sides of the Table

AUGUST 14, 2017

This is similar to the role that public markets play in helping shape publicly traded companies. The administrative work we actually do at board meetings? Boards are not appointed to be founder-friendly lapdogs for the 1–3 founders who start companies and usually own the largest equity positions in the company.

Cofounder 217

Cofounder Stock Options Equity Technical Review 217

Both Sides of the Table

JULY 22, 2010

Due to competitive markets we ended up with a pretty good term sheet until we needed to raise money in April 2001 and then we got completely screwed. The more senior members you have (say you already have a CEO, CTO, VP marketing, VP Biz Dev, VP Products) then the less options you’ll need and vice versa.

Valuation 405

Valuation Liquidation Preference Pre-Money Valuation Term Sheet 405

The Startup Magazine

JULY 25, 2021

Virgin Galactic shares are worth over $43, giving the spaceflight firm a market value of $11 billion. But existing shareholders are not happy with the company’s proposed plan to issue $500 million in new shares as it would only dilute its current float. Understand market share . Maintain relevance through innovation.

Valuation 161

Valuation Artificial Inteligence Dilution Marketing 161

Both Sides of the Table

OCTOBER 1, 2009

In the first post in this three part series I described why I believe the VC market froze between September 2008 – April 2009. When the market run started in March people were relieved that “the world wasn’t ending” so they started spending again. Unemployment coupled with a stock market drop will stop this spending cold IMHO.

Technical Review 269

Technical Review Stock Hawaii Early Stage 269

Steve Blank

APRIL 10, 2019

For most startup employee’s startup stock options are now a bad deal. Why Startups Offer Stock Options. In tech startups stock options were here almost from the beginning, first offered to the founders in 1957 at Fairchild Semiconductor , the first chip startup in Silicon Valley. Not everyone got the same amount of stock.

Stock Options 333

Stock Options Stock Vesting Common Stock 333

Gust

MARCH 16, 2014

In reality, so-called “Founder’s” shares are simply common stock, issued at the time of startup incorporation, for a very low price, and normally allocated to the multiple initial players commensurate with their investment or role. Here are some typical special terms and considerations for Founder’s stock: Negligible real value.

Stock 175

Stock Vesting Common Stock Founder Vesting 175

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. Make sure the government waits for a stock sale to collect taxes. Spread stock issuance over an earning period. In the U.S.,

Stock 120

Stock Vesting Common Stock Founder Vesting 120

Both Sides of the Table

JUNE 5, 2011

2 preamble issues having read the comments on TC today: 1: I know that the prices of startup companies is much great in Silicon Valley than in smaller towns / less tech focused areas in the US and the US prices higher than many foreign markets. I can’t control the market. Private markets for stocks are the opposite.

Pre-Money Valuation 336

Pre-Money Valuation Valuation Silicon Valley Stock 336

Startup Professionals Musings

MARCH 29, 2015

Plus you have to remember that these 200,000 shares could still be worth nothing in four years, depending on the “strike price” today, compared to the market price four years from now. CEO brought in to replace the founder, 5 - 10% CTO, CFO, VP of Marketing or Sales, 1.5 - 3% Chief Engineer or Architect, 1 - 1.5%

Stock Options 120

Stock Options Stock Advisory Board Startup 120

Startup Professionals Musings

SEPTEMBER 25, 2019

Plus you have to remember that these 200,000 shares could still be worth nothing in four years, depending on the “strike price” today, compared to the market price four years from now. CEO brought in to replace the founder, 5 - 10% CTO, CFO, VP of Marketing or Sales, 1.5 - 3% Chief Engineer or Architect, 1 - 1.5%

Equity 237

Equity Stock Options Advisory Board Stock 237

Startup Professionals Musings

DECEMBER 11, 2022

Experienced entrepreneurs understand investor expectations of Board representation, preferred stock, and payments based on interim milestones. Founder insistence on non-dilute clauses, arms-length relationships, and quick closure without due diligence will short-circuit active interest. Naïve expectations on funding terms and process.

Due Diligence 271

Due Diligence Intellectual Property Entrepreneur Preferred Stock 271

Berkonomics

FEBRUARY 1, 2024

There is no limit to the number of individuals for such a board, but there is a practical limit to the amount of cash and / or stock to be allocated to these outside advisors. How about using the names for marketing, fundraising? How about the size of the group? What if an advisor acts as a consultant with more time?

Advisory Board 62

Advisory Board Dilution Stock Vesting 62

Startup Professionals Musings

OCTOBER 7, 2010

In reality, so-called “founder’s” shares are simply common stock, issued at the time of startup incorporation, for a very low price, and normally allocated to the multiple initial players commensurate with their investment or role. Here are some typical special terms for founder’s stock: Negligible par value. Stock survives investment.

Stock 214

Stock Vesting Common Stock Founder Vesting 214

ReadWriteStart

JUNE 1, 2020

The next reason is to establish a competitive advantage over your competition and quickly acquire a substantial market share. Let’s take an example – In the case of an internet or app business, the user traction and market penetration is a must. The shares given out can either be common stocks or preferred stocks. ? Debt investment.

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

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.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

Startup Professionals Musings

MAY 8, 2022

The right time to jump is a function of favorable career, personal, and market circumstances. 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. The right time to start dilemma. The co-founder relationship dilemma.

Founder 325

Founder Hockey Stick Cofounder Liquidity Event 325

Both Sides of the Table

OCTOBER 12, 2014

Prorata rights are one of the most important rights of a private market technology investors and yet are seldom fully understood. Because companies are raising way more capital in private markets than they ever did in the past. So the answer is: sometimes they take it, sometimes they don’t. Times won’t always be good.

Technical Review 336

Technical Review Later Stage Early Stage LP 336

Up and Running

JULY 2, 2014

You can’t underestimate the importance of selecting an attorney who “gets” your business model, your market opportunity, and most importantly, your fundraising and exit strategy. 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.

Technical Review 118

Technical Review Angel Investor Due Diligence Dilution 118

Austin Startup

JULY 6, 2018

Re: cash, the more “unbundled” types of accelerators (less formalized, less equity) tend to not provide any cash upfront, but also typically “cost” less in equity, often just 1–2% of your fully diluted capitalization. Anti-Dilution. See: Startup Accelerator Anti-Dilution Provisions; The Fine Print. Market Focus.

Dilution 48

Dilution Startup Technical Review Equity 48

Startup Professionals Musings

MARCH 14, 2020

Experienced entrepreneurs understand investor expectations of Board representation, preferred stock, and payments based on interim milestones. Founder insistence on non-dilute clauses, arms-length relationships, and quick closure without due diligence will short-circuit active interest. Naïve expectations on funding terms and process.

Due Diligence 308

Due Diligence Intellectual Property Preferred Stock Seed Stage 308

YoungUpstarts

MAY 6, 2019

Market Research. In this stage, you will also search the market to check if your idea is viable. If there is a gap in the market, there will be demand. Now the question is: How to find gaps in the market? MVP is the product that you can bring to the market. Next is marketing. There is a simple rule of thumb.

Startup 113

Startup Technical Cofounder Merger Early Stage 113

Startup Professionals Musings

JUNE 20, 2010

Plus you have to remember that these 200,000 shares could still be worth nothing in four years, depending on the “strike price” today, compared to the market price four years from now. Thus, stock doesn’t “pay the mortgage” today, so to speak. Your compensation is the total package, stock plus salary. 7% Product Manager,2 -.3%

Stock 144

Stock Stock Options Advisory Board Startup 144

Both Sides of the Table

FEBRUARY 20, 2019

If angel investors are pressuring you to set up a board and if you don’t have the leverage to push back a little then I might suggest a 3-person board in which all 3 seats are appointed by the common stock and you agree to appoint one of these seats to the angel investor but perhaps make it either time based or event based.

Venture Capital 236

Venture Capital Startup Angel Investor Silicon Valley 236

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. All good, but different philosophies (and different markets and market conditions) can lead to different initial option programs. And it would be the more fair thing to do, but I digress).

Programming 149

Programming Vesting Equity Software Review 149

Startup Professionals Musings

JANUARY 22, 2013

In reality, so-called “founder’s” shares are simply common stock, issued at the time of startup incorporation, for a very low price, and normally allocated to the multiple initial players commensurate with their investment or role. Here are some typical special terms and considerations for founder’s stock: Negligible real value.

Vesting 245

Vesting Common Stock Stock Founder Vesting 245

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. They hired a marketing team to promote their products more broadly. I don’t want to pretend that stock-option grants have zero impact on you as a shareholder.

Stock Options 227

Stock Options Startup Dilution Venture Capital 227

View from Seed

SEPTEMBER 14, 2021

Will Quist did a great job of explaining this market rhetoric in this thread. The three-question framework goes as such: Q: How much tech-related market cap will be created in the next 10-20 years? So, on one hand, the market see ms like a total frenzy these days. US VC versus stocks. Source: WaitButWhy. during this time.

Valuation 319

Valuation Pre-Money Valuation Distribution Early Stage 319

Both Sides of the Table

SEPTEMBER 10, 2021

With the enormous changes to our economies and financial markets?—?how how on Earth could the venture capital market stand still? One of the most common questions I’m asked by people intrigued by but also scared by venture capital and technology markets is some variant of, “Aren’t technology markets way overvalued?

Pre-Money Valuation 471

Pre-Money Valuation Valuation Venture Capital Early Stage 471

View from Seed

SEPTEMBER 14, 2021

Will Quist did a great job of explaining this market rhetoric in this thread. The three-question framework goes as such: Q: How much tech-related market cap will be created in the next 10-20 years? So, on one hand, the market see ms like a total frenzy these days. US VC versus stocks. Source: WaitButWhy. during this time.

Valuation 295

Valuation Pre-Money Valuation Distribution Early Stage 295

Both Sides of the Table

SEPTEMBER 25, 2010

Markets always evolve toward higher resolution. The key is making sure the second close isn’t too high (I think 50% of X sounds about right) because you’ll be adding on that dilution to yourself & “X&# investors will own less of the company. You may not need to use convertible notes to do it.

Finance 286

Finance Term Sheet Technical Review Warrant 286

Both Sides of the Table

SEPTEMBER 18, 2014

It’s simply what a market is willing to pay based on a future belief that your company will grow and non-linear rates and be worth much more in the future. Less than you’ll probably grant your most junior employees in stock options? Me: More dilution? Stock Option plans. Cashflow projections? Him: Not so good.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Agile VC

OCTOBER 23, 2012

For example, if there were no S&P 500 ETFs or index mutual funds an investor could easily buy a “synthetic” equivalent by buying shares of all the S&P 500 stocks in proportion to each company’s weighting in the index. But the median investment is almost certainly a middling return if not a modest loss.

LP 176

LP Accredited Investor Carried Interest Portfolio 176