Startup Professionals Musings

JANUARY 15, 2021

When an entrepreneur first incorporates a business, they may find themselves 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. This is called stock dilution control.

Vesting 298

Vesting Dilution Stock Founder Vesting 298

SoCal CTO

SEPTEMBER 27, 2011

Paul Graham provides what is roughly the core formula for equity at any point in The Equity Equation : You can use the same formula when giving stock to employees, but it works in the other direction. Stock vests for 4 years. Is it Time for You to Earn or to Learn? You get 1%, you sell for $150 million and it’s in 3 years (e.g.

Early Stage 391

Early Stage Equity CTO Hire Sweat Equity 391

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

Startup Professionals Musings

JULY 1, 2022

Many employees forget that there isn’t even a market for startup stock, until after the company has gone public, which hasn’t happened positively to many companies in the last few years. It never hurts to ask in a job interview what stock options are available, and don’t fall for the offer which promises to “work out the equity terms later.”

Stock Options 343

Stock Options Advisory Board Stock Startup 343

Startup Professionals Musings

MARCH 23, 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 256

Stock Vesting Common Stock Founder Vesting 256

The Startup Magazine

MARCH 14, 2022

The equity dilution at this nascent stage is on desirable terms; such investing can lead to profitable returns. Once the company has established itself and created brand recognition, then the company’s promoters look to list the shares of the company on the stock exchanges. 2) Seed funding. The transforming startup ecosystem.

Technical Review 144

Technical Review Due Diligence India Startup 144

Gust

APRIL 9, 2014

Equity dilution works when the same pie is divided among more people. Over time, other people receive pieces of equity in exchange for work (employee stock options), money (seed, angel and venture investors), services (attorneys, directors, etc.). Uncategorized company equity dilution founder investors startup'

Dilution 150

Dilution Equity Vesting Stock Options 150

Startup Professionals Musings

OCTOBER 17, 2013

Many employees forget that there isn’t even a market for stock, until after the company has gone public, which hasn’t happened positively to many companies in the last few years. Thus, stock doesn’t “pay the mortgage” today, so to speak. Your compensation is the total package of stock plus salary plus benefits. Marty Zwilling.

Stock Options 224

Stock Options Stock Advisory Board Startup 224

Startup Professionals Musings

OCTOBER 21, 2017

Many employees forget that there isn’t even a market for startup stock, until after the company has gone public, which hasn’t happened positively to many companies in the last few years. It never hurts to ask in a job interview what stock options are available, and don’t fall for the offer which promises to “work out the equity terms later.”

Stock 140

Stock Stock Options Advisory Board Startup 140

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

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

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. My version is, “you have a company with private stock. Somebody else is trying to convince you to sell to them in exchange for all stock. Don’t trade your company (cat) for their stock (dog).&#.

Merger 276

Merger Technical Review Early Stage Dilution 276

Startup Professionals Musings

SEPTEMBER 22, 2012

Many employees forget that there isn’t even a market for stock, until after the company has gone public, which hasn’t happened positively to many companies in the last few years. 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

Startup Professionals Musings

AUGUST 24, 2016

Even with an agreed initial equity split, it’s smart to have Founder’s stock actually issue or vest over a period of at least two years, on a month-by-month basis. Of course, all co-founders need to remember that allocated percentages will be diluted as Angel and VC investors are brought in. But don’t get greedy.

Equity 120

Equity Cofounder Technical Cofounder Intellectual Property 120

Gust

APRIL 11, 2014

Let’s get right down to business: Dilution of founders’ and other early shareholders’ equity in startups is frequently a subject of intense interest and debate. That’s the concept of what some call mathematical dilution. That is not economic dilution, but rather its opposite ( accretion ).

Dilution 162

Dilution Equity Pre-Money Valuation Prospectus 162

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

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. 4 * $4 million) and not $4 million.

Valuation 405

Valuation Liquidation Preference Pre-Money Valuation Term Sheet 405

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

ithacaVC

OCTOBER 10, 2017

Here is the big problem with investors – they dilute the founders’ ownership in the company. Let’s cover some basics: It is impossible to issue stock to investors without existing shareholders (founders, employees and prior investors) being diluted. Is this actually a big problem?

Dilution 53

Dilution Stock Options Stock Valuation 53

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. 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

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

Startup Professionals Musings

MARCH 29, 2015

Many employees forget that there isn’t even a market for startup stock, until after the company has gone public, which hasn’t happened positively to many companies in the last few years. It never hurts to ask in a job interview what stock options are available, and don’t fall for the offer which promises to “work out the equity terms later.”

Stock Options 120

Stock Options Stock Advisory Board Startup 120

Feld Thoughts

SEPTEMBER 2, 2011

They come up with two options: Hire Praveena as an employee and offer her stock options. Bring Praveena in as a founder and offer 10-20% of the company as stock. If the full pool were to be given out, the dilution is fairly significant to the founders.

Cap Table 133

Cap Table CTO Hire Technical Cofounder Cofounder 133

Both Sides of the Table

OCTOBER 1, 2009

Unemployment coupled with a stock market drop will stop this spending cold IMHO. If these factors impact earnings the stock market may be headed South – If unemployment rises housing prices won’t. This will likely cause the stock market to contract. If the stock market holds then the pace of VC may hold steady.

Technical Review 269

Technical Review Stock Hawaii Early Stage 269

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

The Startup Magazine

AUGUST 9, 2022

Being faced with the same issues as Zumba a couple of years earlier, either you spend tons of money for major artists or you’re left with commonplace stock tracks, we realized a middle ground was needed. One of the most underrated jobs of a leader in a scaling organization is making sure the culture doesn’t get diluted.

Cofounder 147

Cofounder Founder Miami Marketing 147

Startup Professionals Musings

SEPTEMBER 25, 2019

Many employees forget that there isn’t even a market for startup stock, until after the company has gone public, which hasn’t happened positively to many companies in the last few years. It never hurts to ask in a job interview what stock options are available, and don’t fall for the offer which promises to “work out the equity terms later.”

Equity 237

Equity Stock Options Advisory Board Stock 237

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. Alternatively, some companies pay an advisor a fee of $1,000 to $2500 per “on premises” meeting day and optionally much smaller stock grants, if any.

Advisory Board 62

Advisory Board Dilution Stock Vesting 62

Startup Professionals Musings

OCTOBER 7, 2022

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

Preferred Stock 304

Preferred Stock Exit Strategy Equity Angel Investor 304

Berkonomics

FEBRUARY 8, 2024

A seat on your board? Email readers, continue here…] Almost always, professional investors, including angel groups and venture capitalists, also require at least one seat on the corporate board.

Cost 62

Cost Covenant Angel Groups Angel Investor 62

The Startup Lawyer

MARCH 1, 2011

I hate non-dilution rights and if you are an entrepreneur you should, too. I’m not talking about price-based anti-dilution protection that is typical in an angel or VC round. But the fact that the startup’s founders are being diluted by such an issuance should provide enough protection.

Dilution 89

Dilution Equity Stock Startup 89

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

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

ithacaVC

SEPTEMBER 10, 2012

But here is one that I want to focus on in this post: “Can I ask for undiluted stock (non dilution clause)?” I am not even sure what “undiluted stock” is, but safe to say the person (I will call him Exec X) meant stock that his equity would not be dilutable in terms of ownership.

Dilution 53

Dilution Employee Cap Table Stock 53

thinkspace.com

SEPTEMBER 7, 2012

Should founders have anti-dilution rights? Consider the stock exchange, knowing something that will effect the price of a stock before it is well known allows you to make the right move with the stock. You’d have to look at your stock options contract. Dilution should occur across the board.

Equity 62

Equity Employee Founder CTO Hire 62

Berkonomics

AUGUST 10, 2023

To protect against such an event, almost every professional investor includes a clause in the investment documents which allow the investor to “put” the stock back to the company after five years, requiring the company to pay back the investment plus dividends accrued during the term of the investment.

Liquidity Event 116

Liquidity Event Initial Public Offering Dividend Valuation 116

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. Should you start a company solo or find co-founders to help you? In my view, two heads are always better than one. The co-founder relationship dilemma.

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Founder Hockey Stick Cofounder Liquidity Event 325