Mathematical vs. Economic Dilution of Startup Equity: Thinner Slices of an Extra-Large Pizza

Gust

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. Back from a hiatus, it’s time to venture forward once more.

The Right Way to Grant Equity to Your Employees

Redeye VC

is the virtually universal practice among tech companies of distributing meaningful equity (usually in the form of stock options) to ordinary employees. Before companies like Fairchild and Hewlett-Packard began the practice fifty years ago, distributing stock options to anyone other than top management was virtually unheard of. Andy Rachleff is President and CEO of Wealthfront, a software-based financial advisor.

Trending Sources

How to Divide Equity to Startup Founders, Advisors, and Employees

thinkspace.com

How to Divide Equity to Startup Founders, Advisors, and Employees. The part that I’d like to zero in on is when you’ve got a high growth company what are some of the best practices out there to distribute equity to the founders, advisors, and employees?

Probability Distributions and the Brute Force Approach

Rob Go

I’ve been thinking a lot about the outcome distributions in different circumstances. I find that most people are not tuned to this sort of outcome distribution. I notice a lot of people are tuned to this kind of outcome distribution, and that colors the way that they go about solving problems. Given that kind of distribution, a different approach and strategy can work that involves a lot of smart, coordinated iteration.

Powerball: The Difference Between Gambling and Investing

Non-Linear Growth

I encouraged them to not only think about the NPV of the investment but also to look at the distribution of returns. Distribution of Returns Matters Forget about whether or not the NPV is positive. With the return distribution so skewed -producing a staggering return for the winner and a loss for everyone else – Powerball may be a fun bet but it is a really, really bad investment. The distribution of returns is worth considering independent of the NPV of an investment.

NPV 22

How much stake (equity) is an idea worth?

Gust

Invested Interests entrepreneur equity equity distribution idea startupIt depends on the quality of the idea. I’m a firm believer in Derek Sivers ‘ calculus, which goes like this: AWFUL IDEA = -$1. WEAK IDEA = $1. SO-SO IDEA = $5. GOOD IDEA = $10. GREAT IDEA = $15. BRILLIANT IDEA = $20. The real value, of course (as other answers here have noted), comes from executing on the idea.

Angel Investors Skip Startups With No Profit Motive

Startup Professionals Musings

Angel investors and venture capitalists don’t make equity investments in non-profits. A non-profit organization is generally defined as an organization that does not distribute its surplus funds to owners or shareholders, but instead uses them to help pursue its goals.

Dancing the Political Brand Equity Tango on Social Media

crowdSPRING Blog

Last week, the Trump campaign found itself in hot water over a graphic it distributed on social media comparing the security threat of an increased refugee population on American soil to a bowl of Skittles with three poisoned candies in the mix.

How much equity do I give an advisor? What do they give me?

The Startup Toolkit

Those numbers get completely thrown out when the advisor is your distribution channel. Going back to the more normal 0.5-2%, you treat advisor equity just like founder or employee equity: vested over 4 years. 1] Advisors get paid on an exit just like investors, so the investability & valuation of a company is a good heuristic for the value of the advisor’s equity. [2]

6 Funding Sources For Good Causes, Without Angels

Startup Professionals Musings

Angel investors and venture capitalists don’t make equity investments in nonprofit good causes. A nonprofit organization is generally defined as an organization that does not distribute its surplus funds to owners or shareholders, but instead uses them to help pursue its goals.

Private Equity Investing: Secrets of Doing it Right (Part I)

Growthink Blog

Well, in most forms of angel and early-stage private equity investing, these breakdowns flow from a misunderstanding of the power and nature of outliers. The concept of outliers and how they apply to early stage private equity investment was best described by the Lebanese thinker and writer Nicolas Taleb, in his best-selling books "Fooled by Randomness" and "The Black Swan." So does this mean that early stage private equity investing is for the birds?

Why Private Equity Firms Should Exit Their Positions in B2B Distributors

Inc Startups

With Amazon entering B2B distribution, private equity firms should look to exit their positions now. Distributor valuations are headed in one direction: down. Technology

Debt Or Equity To Fund Your Start-up: Which Is Better?

YoungUpstarts

Loan financing and equity investment are two common methods of funding a new business start-up, assuming you do not have the capital on your own. However, if you would rather share the risk, mitigate debt obligations and bring in top-level experts, invite equity investors. By Jenny Q.

Entrepreneur Startup Share Depends on Contribution

Startup Professionals Musings

One of the first tough decisions that startup founders have to make is how to allocate or split the equity among co-founders. Another common “failure to start” situation I see is one where the “idea person” insists that the idea is 90% of the value (and 90% of the equity).

Private Equity Bankrupted My Company

Inc Startups

Now, a decade after Oreck, then an 80-year-old entrepreneur, and his family sold the business to a private equity company, Oreck the company has filed for Chapter 11 bankruptcy. "We Keep Control of Distribution One problem was an over-reliance on third-party retailers. "If

[Asia] Online Equity Crowdfunding Platform For Startups SeedAsia Sprouts In Shanghai

YoungUpstarts

Shanghai, China-based SeedAsia was officially launched in mid May as Asia’s first online equity funding platform for Asia-based technology startups.

Should We Celebrate Equity Crowdfunding At The First Investment Or First Exit?

ArcticStartup

act is going to change crowdfunding in the United States, but I think it's worth pointing out we actually have a head start on equity crowdfunding in Northern Europe. A few companies actually have their own equity success case. Right now we're reading about how the J.O.B.S.

How To Break Up A Business Partnership

Mike Michalowicz

” That equity split of 50/50 made total sense back then. In the woulda-coulda column, I advise that if you consider a partner in the future that you distribute equity based on performance. So the time to break ways with your business partner has finally come, huh?

Invesdor Launches Equity-Crowdfunding Platform That Skips The Paperwork

ArcticStartup

An ambitious new equity-crowdfunding player for Finland and Sweden-based startups has opened up publicly today. By doing so, they're not not playing by the standard rules or raising equity, which has both its benefits and consequences.

What is Growth Equity, Anyway? And When Do You Need It?

Inc Startups

Now you have to develop worldwide sales and distribution, hire hundreds of employees, and most painfully, upgrade your team. A relatively new category of asset class, called growth-stage venture or growth private equity, has expanded rapidly in just the past five years.

IPO 8

How Indie.vc Cash Distributions Work

Bryce Dot VC

terms is the option for founders to make cash distributions to investors from profits as a return on their investment instead of selling out or taking their company public to create a liquidity event. model, founders who choose not to sell out or raise money from traditional VCs have the option to make cash distributions to investors. Once 2x is hit, that math flips to 80% of cash distribution going to founders and 20% to Indie.vc. equity amount.

Considering ILPA Private Equity Principles

Recent Buzzes - VC Experts, Inc.

Last year the Institutional Limited Partners Association (ILPA), a voluntary organization dedicated to the interests of institutional limited partners in private equity funds, released its Private Equity Principles. Since then, the Principles have received the endorsement of more than 100 of the largest and most influential institutional private equity investors. Some of the more significant "Best Practices" offered by the ILPA include: Distributions.

What Are App Coins?

A VC : Venture Capital and Technology

Now, however, the developers of a cloud storage service can incorporate a scarce access-token, an appcoin, into the design, distribute that token to users, retain some amount of the token for themselves, and if the platform proves popular, the token (alongside the holdings of the developers) will grow in value and remunerate the developers for providing a public good. Last week Coin Center published a primer on app coins. It is very good.

Splitting Equity

Force of Good: a blog by Lance Weatherby

The subject of startup equity distribution is one that seems to generate a lot of interest. How much equity should you give a partner? Not a bad starting point for a more serious discussion about equity split. Mine was piqued again by James Altucher''s brilliant article on The Ultimate Cheat Sheet for Starting and Running a Business. I wish I had have written this one line, " The rules are: I''m going to give no explanations. Just listen to me." It''s a masterpiece.

Do It Right The First Time, Part II: Visit the Doctor or House Call?

Gust

Readers can anticipate my next point in continuing the analogy: It makes no more sense for a non-lawyer to prepare fundamental legal, governance, equity and intellectual property documents than it would for a patient to self-diagnose and begin taking prescription-strength antibiotics or other medications. Stepping off the soapbox, let’s examine the highest level “To Do” list for a new startup: Formation, Governance and Equity. Strategic partnership or distribution agreements.

Experiment and Scandal

A VC : Venture Capital and Technology

I am thinking of the launch of equity crowdfunding for everyone in the US last week. Rinse, repeat, rinse, repeat and you get unicorns and distributed autonomous funding mechanisms entrusted with hundreds of millions before anything has even been funded. I am all for distributed autonomous organizations and the innovation behind them and in front of them. We are living in a time of great experiments. They are not happening in the lab. They are happening in the real world.

How to Negotiate a Partner Role at a Venture Capital or Private Equity Firm

David Teten

It’s hard enough to get a job at a venture capital or private equity firm; it’s even more complex to join as a Partner. Also see Preqin’s Key Due Diligence Considerations for Private Equity Investors. . VC and private equity are very illiquid on both the investing and the personnel side. Summarizing the study, Private Equity International notes that when compensation “bias” is tilted towards founders, staff turnover rises significantly. – Tax distributions.

Dancing the Political Brand Equity Tango on Social Media

crowdSPRING Blog

Last week, the Trump campaign found itself in hot water over a graphic it distributed on social media comparing the security threat of an increased refugee population on American soil to a bowl of Skittles with three poisoned candies in the mix.

Dancing the Political Brand Equity Tango on Social Media

crowdSPRING Blog

Last week, the Trump campaign found itself in hot water over a graphic it distributed on social media comparing the security threat of an increased refugee population on American soil to a bowl of Skittles with three poisoned candies in the mix.

How Amazon Partners With Brands

YoungUpstarts

When I speak with brand executives, I encourage them to evaluate the range of distribution options available for brands to capitalize on the Amazon marketplace channel, while controlling key issues like pricing, distribution, brand equity content, catalog selection and inventory levels.

Fund Level Vs Deal By Deal Carry

A VC : Venture Capital and Technology

It is more common in private equity where the distribution of outcomes looks very differently. In a venture fund, the general partners will make something like twenty or twenty five investments. There are outliers for sure. A few venture funds will make less investments than that. And there are seed funds that will make significantly more investments than that. But that’s not the point of this post.

Crowd-Funding Success Usually Brings New Challenges

Gust

Professionals maintain that there is plenty of money and equity for qualified startups, and funding marginal startups via any source will only make more people unhappy. But safely seeking equity investments from the crowd via the Jobs Act of 2012 is problematic and has still not been defined.

Should You Share Equity with Consultants?

www.inc.com

Should You Share Equity with Consultants? To grow his cash-strapped start-up, Parker ended up sharing equity -- not only with employees, but also with consultants and vendors. Parker found that equity as compensation helped build loyalty to his company -- even among consultants. Nevertheless, he finds that equity is generally "a great tool to use before you can line up enough cash to pay people.". But sharing equity can have pitfalls, too. ); Login or signup.

Splitting Startup Equity for Your Piece of the Pie

Startup Professionals Musings

One of the first tough decisions that startup founders have to make is how to allocate or split the equity among co-founders. Another common “failure to start” situation I see is one where the “idea person” insists that the idea is 90% of the value (and 90% of the equity).

Free Startup CTO Consulting Sessions

SoCal CTO

Send your overview to me (Tony Karrer): akarrer@techempower.com Based on the type of business, we will distribute it to someone who is most appropriate. I'm looking for free (equity only) development, should I contact you? We can likely provide technical strategy help at little to no cost, but hard core development generally requires that you have found someone to do it for you for equity or that you have some capital available (think $50K+).

CTO 121

How Smart Startups Survive Investor Due Diligence

Startup Professionals Musings

That might start with the CEO giving the investor pitch to the whole organization, and distributing the current business plan document to everyone. Startup equity investments imply a long-term business relationship, lasting an average of five years.

2 Disjointed Thoughts: Product Distribution Fit and Founder Heuristics

Rob Go

Product / Distribution Fit. My friend Brian Balfour wrote a blog post yesterday about emerging distribution channels and how they impact innovation. One point he makes is that in even established vertical, new companies tend to rise on the back of new distribution channels. We talked about this in the context of founders risk, equity splits, and opportunity cost. I have 15 minutes free and have been thinking about 2 topics that I can’t get out of my head.

Changing Equity Structures for Early Startup Employees

www.instigatorblog.com

Changing Equity Structures for Early Startup Employees Tweet Recently someone asked me for advice on how much equity they should give to their early employees. I recognize that it’s challenging to give much more than the accepted guidelines on equity to early startup employees.

Top Startup Mistake 8: Misunderstanding Equity

Up and Running

Unlike stock that is acquired as the business grows, founder stock is primarily granted for sweat equity–so it’s difficult to distribute fairly if there are multiple founders with different roles and levels of commitment. Make your equity count.

Crowd-Funding Success Usually Brings New Challenges

Startup Professionals Musings

Professionals maintain that there is plenty of money and equity for qualified startups, and funding marginal startups via any source will only make more people unhappy. But safely seeking equity investments from the crowd via the Jobs Act of 2012 is problematic and has still not been defined.