Both Sides of the Table

SEPTEMBER 28, 2013

So as a startup CEO you constantly have to suspend disbelief. ” A startup CEO’s job is to absorb stress so the team doesn’t have to. Startups have to be optimists because no rational person would actually believe you could build Uber into the amazing company that it is today. We just need your $500,000!!”

Startup 417

Startup Dilution San Diego Stock Options 417

Both Sides of the Table

MAY 13, 2013

For the past 5 years or so Google, Facebook and a handful of tech industry giants have been quietly buying scores of early-stage startups for their talent. I’m supposed to believe that my best innovation can only come from scores of startup founders who just made millions and have now become CVOs at my company? Go do a startup.

Liquidation Preference 357

Liquidation Preference Early Stage Retention Lock-up Period 357

abovethecrowd.com

APRIL 20, 2016

In February of last year, Fortune magazine writers Erin Griffith and Dan Primack declared 2015 “ The Age of the Unicorns ” noting — “Fortune counts more than 80 startups that have been valued at $1 billion or more by venture capitalists.” Next came Rolfe Winkler’s deep dive “ Highly Valued Startup Zenefits Runs Into Turbulence. ”

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.” In 2015 in the US there were $77 billion written into startup tech companies.

Valuation 150

Valuation Down Round Startup Later Stage 150

The Equity Kicker

DECEMBER 30, 2013

The corollary of this is that when valuations get too high, or the amount of cash raised gets too high then the asymmetry between the upside and the downside disappears. In this case the investment is largely in the form of time committed to the startup, and hence the downside is the time lost to other opportunities.

Finance 129

Finance Liquidation Preference Valuation Harvest 129

Both Sides of the Table

SEPTEMBER 6, 2010

We set our sites on our IPO price and then worked back to our current valuation and showed potential employees what we thought they could earn (with all legal caveats) if the company was successful. Options are obviously a very important economic motivator for your first 3-5 employees and your most senior management team.

Stock Options 294

Stock Options Stock Valuation Liquidation Preference 294

Austin Startup

APRIL 1, 2017

They’ll focus on high-level issues like valuation, liquidation preference, and board composition (# of seats), and then prematurely check out once a term sheet is signed. The wrong way to define “independent” is simply as “not an investor or employee.” And, broadly speaking, that is correct.

Term Sheet 48

Term Sheet Institutional Investors Technical Review Lead Investor 48

Altgate

DECEMBER 18, 2008

@altgate Startups, Venture Capital & Everything In Between Skip to content Home Furqan Nazeeri (fn@altgate.com) ← Holiday Cards Year End Management Changes → The 3X Liquidation Preference Is Back! Let’s recap how expensive a 3x liquidation preference really is. What’s the alternative?

Liquidation Preference 31

Liquidation Preference Venture Capital Post-Money Valuation Participating Preferred 31

Austin Startup

AUGUST 1, 2017

This is most clearly highlighted in the “unicorn” boom we all saw over the past few years, where founders raised very large rounds, with terms very onerous to the underlying common stock, hoping they could eventually justify billion dollar valuations to skeptical acquirers or public market investors. Angels/Seed Funds v.

Liquidation Preference 48

Liquidation Preference Common Stock Valuation Silicon Valley 48

Feld Thoughts

SEPTEMBER 9, 2015

Some will demonstrate strategically justifiable metrics and have fantastic ‘up round’ exits; others may see liquidation preferences kick in which will negatively impact founders and employees; others may fulfill the adage “IPO is the new down round” , which has been the case for more than half of the public companies on our list. “We

Liquidation Preference 70

Liquidation Preference Burn Rate Balance Sheet .Net 70

www.mattbartus.com

DECEMBER 9, 2012

Perspectives on issues affecting founders, startups and investors from a veteran startup lawyer in Silicon Valley. How to pump up your VC valuation. Let’s say you receive a term sheet for a $1 million investment at a $3 million fully diluted pre-money valuation, and you’re kind of disappointed. 10,000,000.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

Both Sides of the Table

NOVEMBER 4, 2009

This is part of my Startup Advice series. at a startup that has already raised $5 million the chances of you making your retirement money on that company is EXTREMELY small. BTW, this ignores liquidation preferences which actually mean you’ll earn less. He’d be employee number 3. Let’s face it.

Stock Options 418

Stock Options Stock Liquidation Preference Option Pool 418

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. In the early days, tracking the percentage of ownership in a startup is easy. Things can escalate quickly, however, when a startup decides to seek investors.

Cap Table 40

Cap Table Liquidation Preference Dilution Liquidity Event 40

ithacaVC

SEPTEMBER 20, 2011

In “VC world” Rule 409A is best known for providing a safe harbor for private company valuations, and in particular the setting of strike prices for employee stock options. A whole cottage industry popped up, and the cost of a valuation is typically $4-8K. Here is one reason why 409A valuations drive people nuts.

Liquidation Preference 49

Liquidation Preference Common Stock Stock Options Valuation 49

genylabs.typepad.com

SEPTEMBER 24, 2011

Planning, Startups, Stories. I wont bother going into details on start-up financing terms ( see this post for an overview of typical VC terms) except to say if you dont know and understand: the firms cap table and valuation. where your stock sits in the liquidity preference stack. Small Business Blogs. OReilly Radar.

Equity 40

Equity Technical Review San Jose Stock 40

Startup Company Lawyer

FEBRUARY 21, 2010

Due to aggregate liquidation preferences that may exceed the acquisition price in an M&A deal, common stock may be rendered worthless. If you can’t figure this out yourself, you should probably build a liquidation preference spreadsheet to model how liquidation preferences work depending on M&A transaction value.

Retention 31

Retention Liquidation Preference Employee Common Stock 31

Up and Running

MARCH 29, 2017

million for the SaaS startup I founded because sometimes we see success coming out of the blue, when really that person benefited from a broad network of support. If you want to run a startup, go with what you know. I mention that before I explain how I’ve been able to raise $2.3

Term Sheet 60

Term Sheet Venture Capital Liquidation Preference Valuation 60

K9 Ventures

NOVEMBER 21, 2011

Let’s say you’re the founder (I use a solo-founder in my example to keep things simple, but this could just as well apply to a founding team) of a startup called Blood, Sweat and Tears, Inc. You raised a Series A round, a Series B round, and this year are just about to raise a big Series C round at a great valuation.

Founder 87

Founder Common Stock Preferred Stock Stock 87

dondodge.typepad.com

JANUARY 15, 2011

Community is more powerful than money or technology » August 11, 2007 How much equity for investors and employees? How much equity should I grant to early employees? The entrepreneur expects the company to be worth many times this valuation and so does the investor. Should I take Angel or VC money?

Equity 40

Equity Employee Dilution Valuation 40

K9 Ventures

NOVEMBER 21, 2011

Let’s say you’re the founder (I use a solo-founder in my example to keep things simple, but this could just as well apply to a founding team) of a startup called Blood, Sweat and Tears, Inc. You raised a Series A round, a Series B round, and this year are just about to raise a big Series C round at a great valuation.

Founder 84

Founder Common Stock Preferred Stock Stock 84

ithacaVC

NOVEMBER 1, 2011

Normally employee options vest over 4 years, with 25% vesting after year 1 and then the balance pro rata (monthly or quarterly) over the remaining 3 years. This allows the acquiror to NOT be burdened with employee options of the selling company. I am probably not in the majority of VCs on this topic. Quick background: 1.

Vesting 60

Vesting Pre-Money Valuation Liquidation Preference Stock Options 60

www.paulgraham.com

APRIL 28, 2010

When we sold our startup in 1998 I thought one day Id do some angelinvesting. You give a startup money and they give you stock. When youhear people talking about a successful angel investor, theyre notsaying "He got a 4x liquidation preference." Thats how you win: by investing in the right startups.

Angel Investor 63

Angel Investor Syndicate Syndication Dilution 63

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. Startup outcomes tend to be very binary. They did get the partners on board on the condition that the term sheet is renegotiated at a lower valuation.

Term Sheet 46

Term Sheet Silicon Valley Syndicate Syndication 46