ReadWriteStart

JUNE 1, 2020

To secure your funding, you must establish the feasibility of your idea through proper planning and implementation. The shares given out can either be common stocks or preferred stocks. ? Debt investment. Raising higher capital at an early stage means more equity to be diluted to the investors. Capital is expensive.

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

Ben's Blog

MAY 24, 2021

For public investors in Facebook to achieve returns comparable to those of Microsoft shareholders, Facebook would need to reach a market cap of $500 trillion, a number that well exceeds the total global market cap of all listed stocks.

SEC 36

SEC Accredited Investor IPO Technical Review 36

www.inc.com

SEPTEMBER 24, 2011

Computer Security. 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. Besides the future potential earnings youre forgoing, youre also diluting your own ownership in the company. Employee Benefits. SALES & MARKETING.

Fractional CTO 40

Fractional CTO Equity Iowa Technical Cofounder 40

Startup Company Lawyer

MARCH 14, 2010

To differentiate it from typical “Series A&# preferred stock, which comes with certain expectations with regard to rights. There is no real rule to what a particular series of preferred stock is called. Anti-dilution protection. Deleting anti-dilution rights saves several pages of text in the Certificate of Incorporation.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Board Effect

MAY 10, 2019

Such metrics can include an investor’s liquidation preference, option exercise windows and expiry dates, and shareholders’ fully diluted ownership percentages. There’s the owner—maybe a partner or two—but unless employees are offered equity from the get-go, there’s typically not a whole lot of dilution.

Cap Table 40

Cap Table Liquidation Preference Dilution Liquidity Event 40

Scott Edward Walker

JUNE 9, 2019

For example, if an investor owns 20% of the equity of a startup on a fully-diluted basis following the closing of a Series A round, it will have the right to purchase 20% of the shares of the preferred stock issued in the subsequent Series B round.

Preferred Stock 56

Preferred Stock Term Sheet Dilution Stock 56

Berkonomics

SEPTEMBER 28, 2017

And then there are options: [Email readers, continue here…] Stock options or phantom stock are the tools of early stage businesses used to attract great talent when there is not enough cash to pay market rates. An option plan should carve out an addition of about 15% of the “fully diluted” shares.

Early Stage 102

Early Stage Equity Stock Options Vesting 102

Both Sides of the Table

SEPTEMBER 28, 2013

I think it’s kind of like a terrorism and security analyst. 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.” We probably don’t want to know everything they actually know.

Startup 417

Startup Dilution San Diego Stock Options 417

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? Startups valuations aresupposed to rise over time.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

Both Sides of the Table

APRIL 14, 2012

Did raising money at a $500 million valuation help secure the $1 billion deal? You are either bought for stock or for equity. And most likely your potential buyer is some other company with a much lower valuation, much less secure position in the future and probably less cash on hand. Was this a good thing? Think about it.

Valuation 316

Valuation Balance Sheet Dilution Term Sheet 316

Board Effect

MAY 13, 2019

It quantifies capital investments, lays out the allocation of shares and ownership percentages, and accounts for multiple types of security. Let’s assume your startup enters into negotiations at this stage with a neatly-formatted cap table, outfitted with equations for pre- and post-money valuation as well as equity dilution.

Cap Table 40

Cap Table Management Liquidity Event Dilution 40

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

The Next Web

MARCH 2, 2014

For many business owners and management teams, “now” can easily seem like the right time to secure funding, and why not? Instead, honestly analyze the company’s business plan and finances to determine whether the business needs to secure outside funding in order to achieve its objectives, and if so, how much. Take your time.

Liquidity Event 139

Liquidity Event Equity Finance Stock Options 139

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. A lot of founders end up with single digit percent ownership, after all the investment dilution.

Securities and Exchange Commission 74

Securities and Exchange Commission Dilution SEC Stock 74

Scott Edward Walker

APRIL 9, 2012

ii) why are convertible notes issued instead of shares of common or preferred stock? and (iii) what securities laws do founders need to worry about in connection with the issuance of convertible notes? Why Can’t a Startup Issue Shares of Common Stock to Investors? Friends and family are also often issued shares of common stock.

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

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

MAY 12, 2010

The real insight here is that stock options or phantom stock are the tools of early stage businesses used to attract great talent when there is not enough cash to pay market rates. First you must create a stock option plan using your attorney, which must be registered in many states as a security offering.

Early Stage 85

Early Stage Equity Stock Options Vesting 85

Scott Edward Walker

SEPTEMBER 21, 2011

I’ve been helping entrepreneurs raise capital as a securities lawyer for 17+ years, and there are certain fundamental mistakes that I’ve seen entrepreneurs repeatedly make. Tip #1: Only Sell Securities to “Friends & Family” as a Last Resort. What about issuing shares of common stock? the pricing) until the Series A round.

Preferred Stock 45

Preferred Stock Angel Investor Entrepreneur Common Stock 45

Berkonomics

AUGUST 27, 2015

He has served as advisor to and member of numerous financial exchanges, and was the founder and CEO of Arthur Lipper Corporation and co-founder and Chairman of New York & Foreign Securities Corporation. The Flipper’s executives usually have significant equity holdings, either actually owned or reflected in stock options.

Intellectual Property 48

Intellectual Property Balance Sheet Stock Options Valuation 48

ReadWriteStart

FEBRUARY 8, 2013

Many startups struggle to get the proper valuation with the right amount share dilution with their initial rounds of funding. Don’t sacrifice more equity just to feel secure – there are always future rounds to find the cash you may need. Hold out for the right valuation, regular stock dilution and appropriate investors.

Valuation 60

Valuation Dilution Equity Stock 60

Professor VC

DECEMBER 8, 2015

Not surprisingly, the merger was highly dilutive, particularly to Confinity/PayPal shareholders. Luckily, Google was one of the 150 and did ultimately return the fund assuming the LP was smart enough to hold the stock after distribution. Both companies offered home security and automation services through partners.

Merger 28

Merger LP IPO Redemption 28

ConversionXL

APRIL 14, 2016

Additional elements like that dilute the central CTA. Instead of getting bogged down in dense compatibility issues, security features, or IT nonsense, it appeals directly to its intended audience — current personal Dropbox users — while at the same time allowing “IT admins” to drill down where needed. How to Terrify.

Conversion 48

Conversion Technical Review Audience PPC 48

Reid Hoffman

JUNE 8, 2021

We took nearly 2% of the company’s stock, and we put it aside and we created, it was actually 9.2 That probably saved a huge amount of dilution, rather than doing a down round at between $15 billion to $18 billion. I think there’s a one-for-one-for-one. And that’s kind of the way we thought. And you think there’s very minimal downside.

Silicon Valley 69

Silicon Valley Hosting Rhode Island Design 69

maplebutter.com

JANUARY 8, 2013

2) Co-Founders are the largest form of dilution (if you’re raising) 3) Everything around LeanStartup / Customer Development 4) Understand the micro economics of your business early. Co-founders are the highest form of dilution to a business. the overseas business is a $billion security market. Just one piece of advice?

Technical Review 44

Technical Review Startup Cofounder Software Review 44

Reid Hoffman

JUNE 8, 2021

We took nearly 2% of the company’s stock, and we put it aside and we created, it was actually 9.2 That probably saved a huge amount of dilution, rather than doing a down round at between $15 billion to $18 billion. I think there’s a one-for-one-for-one. And that’s kind of the way we thought. And you think there’s very minimal downside.

Silicon Valley 36

Silicon Valley Hosting Rhode Island Design 36