Both Sides of the Table

AUGUST 14, 2017

Executives run the day-to-day so often the board is more involved as a sparring partner at key intervals. That’s true. 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

David Teten

JANUARY 19, 2021

(co-written with Jamie Finney, Founding Partner at Greater Colorado Venture Fund. Similar to the explosion of seed funds in the past decade, we (and some limited partners too ) believe these Flexible VCs are on the forefront of what will become a major segment of the venture ecosystem. Yes, via conversion rights at a valuation cap.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

Startup Professionals Musings

OCTOBER 7, 2022

The average valuation for angel investments is $2 million, which will get you $500,000 for 20 percent of your startup. Most professional investors will expect preferred stock, a board seat, rights to later rounds and perhaps anti-dilution protection. Are you flexible on the terms of the investment?

Preferred Stock 304

Preferred Stock Exit Strategy Equity Angel Investor 304

Berkonomics

AUGUST 10, 2023

From the moment such an investor looks seriously at your company, the investor or VC partner is thinking of the end game, the ultimate sale of the company or even of an eventual initial public offering. There is no middle ground. Resetting your priorities Taking money from these sources involves resetting priorities over time.

Liquidity Event 116

Liquidity Event Initial Public Offering Dividend Valuation 116

Both Sides of the Table

SEPTEMBER 10, 2021

I’m over-paying for every check I write into the VC ecosystem and valuations are being pushed up to absurd levels and many of these valuations and companies won’t hold in the long term. On the one hand, you’re over paying for every investment and valuations aren’t rational. each with partners as the lead.

Pre-Money Valuation 471

Pre-Money Valuation Valuation Venture Capital Early Stage 471

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

JANUARY 4, 2020

The average valuation for angel investments is $2 million, which will get you $500,000 for 20 percent of your startup. Most professional investors will expect preferred stock, a board seat, rights to later rounds and perhaps anti-dilution protection. Are you flexible on the terms of the investment?

Startup 337

Startup Preferred Stock Exit Strategy Equity 337

Both Sides of the Table

SEPTEMBER 29, 2009

They should heed the age old advice that raising slightly more money while you can is always better than trying to optimize future valuations. Should VC’s really be impacted by public market valuations when the money that they’re investing today should be for returns in 7-10 years? Short answer – yes.

Burn Rate 263

Burn Rate Valuation Pre-Money Valuation Private Equity 263

Both Sides of the Table

OCTOBER 12, 2014

” If you invested at $8m pre-money and put $2m in (thus you own 20% of a company at a $10m post-money valuation) and if you put another $2m into a round at a $40m valuation raising $10m ($50m post) you end up with half your money at $8m pre and half at $40m pre thus your average price goes up dramatically. That seems fair.

Technical Review 336

Technical Review Later Stage Early Stage LP 336

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

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

Startup Company Lawyer

MARCH 14, 2010

I was actually somewhat surprised that the following investors have agreed to use the Series Seed documents in certain of the their deals: Baseline, Charles River Ventures, SV Angel (Ron Conway), First Round Capital, Harrison Metal Capital, Mike Maples, Polaris Venture Partners, SoftTech VC and True Ventures. under $500K). “ .

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

The Equity Kicker

NOVEMBER 9, 2016

Additionally, they introduce a small amount of complexity and an element of misalignment between the investor and the common stock holder (usually the founder). For these reasons our investments at Forward Partners are always in ordinary shares. Furthermore, provided the instrument is kept simple (i.e.

Liquidation Preference 122

Liquidation Preference Silicon Valley Participating Preferred Common Stock 122

www.inc.com

SEPTEMBER 24, 2011

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. I advise my clients that you offer stock only after youve searched your heart and soul and cant come up with a way to pay with anything else," says Thomas H.

Fractional CTO 40

Fractional CTO Equity Iowa Technical Cofounder 40

Berkonomics

JUNE 15, 2017

From the moment such an investor looks seriously at your company, the investor or VC partner is thinking of the end game, the ultimate sale of the company or even of an eventual initial public offering. Taking in angel or venture money requires a setting of an entrepreneur’s expectations that may come as a shock at least at first.

Liquidity Event 97

Liquidity Event Initial Public Offering Dividend Valuation 97

Early Growth Financial Services

JUNE 26, 2014

Baze, Partner at Partech Ventures, Carlos Diaz, CEO at Kwarter, and EGFS’ Chief Strategy Officer Glenn McCrae covered raising funds, how-to pitch VCs, and potential sticking points around valuation. Pre-money valuation — The value of the company prior to investment, calculated on a fully-diluted basis.

Pre-Money Valuation 51

Pre-Money Valuation Option Pool Dilution Common Stock 51

www.mattbartus.com

DECEMBER 9, 2012

How to pump up your VC valuation. 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. One possibility is to negotiate a higher valuation and offer warrants (i.e., Matt Bartus — February 9, 2010.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

Startup Professionals Musings

MARCH 7, 2015

The average valuation for angel investments is $2 million, which will get you $500,000 for 20 percent of your startup. Most professional investors will expect preferred stock, a board seat, rights to later rounds and perhaps anti-dilution protection. Are you flexible on the terms of the investment?

Preferred Stock 120

Preferred Stock Exit Strategy Equity Angel Investor 120

Both Sides of the Table

APRIL 14, 2010

Liquidation preference is the amount of money that an investor gets paid before the common stock (e.g. It also gets the new investor concerned that management (common stock holders) will not be incentivized because they realize that the investors will take most of the money unless there is a big upside scenario. But pass they will.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Pre-Money Valuation 289

The Next Web

MARCH 2, 2014

For us, because we chose to finance with debt, we gave up almost no equity in the company, and therefore almost no dilution of stock options. If you choose to issue stock, valuation and the amount you’re raising determines how much equity the investors will receive, and you will give up, for their investment.

Liquidity Event 139

Liquidity Event Equity Finance Stock Options 139

The Next Web

OCTOBER 7, 2013

Every time a startup raises capital, all common shareholders are diluted. In a CTO Salary and Equity trends report by Safire Partners, it finds non-founder equity compensation to settle out below 2 percent. All of the estimates displayed above are figures prior to any dilution. percent to 3 percent range for engineer #1s.

Engineer 129

Engineer Dilution Option Pool Vesting 129

Berkonomics

JANUARY 27, 2010

From the moment such an investor looks seriously at your company, the investor or VC partner is thinking of the end game, the ultimate sale of the company or even of an eventual initial public offering. Taking in angel or venture money requires a setting of an entrepreneur’s expectations that may come as a shock at least at first.

Liquidity Event 67

Liquidity Event Initial Public Offering Dividend Valuation 67

VC Cafe

SEPTEMBER 6, 2011

But here it’s not enough to relay on secondary research – get out there and speak to potential customers, partners and even competitors – gather evidence and interest. Evidence the plan will work – for example, there’s a similar startup in another country that’s working well.

Startup 133

Startup Cofounder Warrant Stock Options 133

Scott Edward Walker

SEPTEMBER 21, 2011

David Hornik , a partner at August Capital and a very smart investor, confirms this approach in his interview on Sprouter : So if you are new to the area or to entrepreneurship, how do you get the right. This approach will keep the financing relatively simple and inexpensive and will defer the company’s valuation (i.e.,

Preferred Stock 45

Preferred Stock Angel Investor Entrepreneur Common Stock 45

Scott Edward Walker

AUGUST 31, 2011

How should the founders divide the initial stock ownership? At what valuation and on what terms? He will also help diligence the investors to make sure you choose the right partner for your startup. They are often dealing with people with very limited or no business experience. Who should be on their board of directors?

Silicon Valley 45

Silicon Valley Term Sheet Liquidation Preference Redemption 45

Professor VC

JANUARY 17, 2008

A partner from the law firm (sponsor, covers the drinks and food) tosses out some softball questions to the panelists, the audience chimes in with Q&A and finally, culminates with the meet and greet where the panelists are flooded with business cards and pitches on the next great thing, which is often very similar to the last great thing.

Pre-Money Valuation 28

Pre-Money Valuation Angel Investor Angel Groups Valuation 28

VC Adventure

AUGUST 30, 2010

Preferred equity is stock which carries with it certain rights (preferences) in terms of how and when it gets paid back and a handful of other items that relate to the control of the underlying business. Historically convertible debt has been easier (and therefore cheaper) to put in place.

Angel Investor 103

Angel Investor Early Stage Equity Valuation 103

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. Another concept we need to introduce now is valuation. Startups valuations aresupposed to rise over time.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

venturehacks.com

SEPTEMBER 22, 2011

Paul says, “Whenever you’re trading stock in your company for anything, whether it’s money or an employee or a deal with another company, the test for whether to do it is the same. Offers from top-tier firms increase your valuation. Offers from top-tier firms increase your valuation. If no, she is a no hire.

Equity 40

Equity Cap Table Valuation RSS 40

Both Sides of the Table

APRIL 3, 2010

First, if the VC does 15-20 of these under one partner then it is certain he can’t spend any time with these investments. Third, he notes that even if they do invest they’re likely to do so at a lower price because you can’t truly get an independent valuation. And then there is GRP Partners.

Venture Capital 265

Venture Capital Term Sheet Early Stage Silicon Valley 265

Both Sides of the Table

FEBRUARY 25, 2010

We were trying to optimize around a few criteria: price, size of round, number of syndicate partners and, of course, terms. million at a $15 million pre-money valuation. But we weren’t optimizing for dilution – we were building a $1 billion+ company and we wanted the runway to succeed. We ended up agreeing a term sheet for $16.5

Technical Review 301

Technical Review Term Sheet Due Diligence Venture Capital 301

thinkspace.com

SEPTEMBER 7, 2012

Should founders have anti-dilution rights? That’s where a good partner agreement comes into play. Not only do you want to allocate ownership, but you want to re-allocate ownership if either partner fails to deliver. How do you determine what the third partner’s equity share should be? . Five years?

Equity 62

Equity Employee Founder CTO Hire 62

Professor VC

JULY 25, 2013

In investment parlance, it strictly means that new classes of stock have equal rights with prior classes in terms of liquidation preference, voting rights, etc. Well, those 3 weeks came and went, and they decided they weren''t sure about the market and needed to get other partners in the firm on board.

Term Sheet 46

Term Sheet Silicon Valley Syndicate Syndication 46

thestartuplawyer.com

FEBRUARY 24, 2010

Your Business Partner Closer,&# was a reformatted version of a blog post titled “Keep Your Startup Co-Founder Closer&# which appeared in Ryan Roberts PC’s blog for startups and entrepreneurs, The Startup [.] He obviously never launched a startup and got shafted by a co-founder. Leave a Reply Click here to cancel reply.

Cofounder 40

Cofounder Founder Preferred Stock Startup 40

abovethecrowd.com

APRIL 20, 2016

One key to this population growth has been the remarkable ease of the Unicorn fundraising process: Pick a new valuation well above your last one, put together a presentation deck, solicit offers, and watch the hundreds of million of dollars flow into your bank account. The same thing happened to many Internet stocks.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Both Sides of the Table

FEBRUARY 14, 2016

I have been talking about my concerns about valuations for the past couple of years because, well, they’ve been rising very rapidly the past two years! ” “Mark has a vested interest in talking down valuations of startups.” Do Investors WANT Valuations to Drop? The Motive for Speaking Up. Mostly, no.

Valuation 150

Valuation Down Round Startup Later Stage 150

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: The option pool lowers your effective valuation.

Option Pool 68

Option Pool Pre-Money Valuation Dilution Warrant 68