Scott Edward Walker

JULY 20, 2011

Introduction I’ve been doing deals as a corporate lawyer for 17+ years, and there are certain fundamental mistakes that I’ve seen entrepreneurs make over and over again. It is critical that entrepreneurs understand this dynamic. Accordingly, I thought it would be helpful to share three basic tips in connection with doing deals.

Private Equity 78

Private Equity Liquidation Preference Option Pool Entrepreneur 78

Both Sides of the Table

SEPTEMBER 18, 2014

At an accelerator … Me: Raising convertible notes as a seed round is one of the biggest disservices our industry has done to entrepreneurs since 2001-2003 when there were “full ratchets” and “multiple liquidation preferences” – the most hostile terms anybody found in term sheets 10 years ago.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Up and Running

AUGUST 17, 2015

As I read stories of college dropouts who had successfully sold tech companies, or entrepreneurs with innovative ideas who made it big on Shark Tank, it became clear that there was no set path to startup success. C Corp versus LLC, non-competes, liquidation preferences, preferred versus common stock, and so on).

Entrepreneur 60

Entrepreneur Cofounder Angel Investor eCommerce 60

Feld Thoughts

JUNE 10, 2022

So, as an entrepreneur, I encourage you to deal with reality. Rather, when you have a choice between a financing at a lower valuation and a financing with all kinds of crazy structure to try to maintain a previous valuation, negotiate the best price you can but do a clean financing with no structure. and a bunch of other things.

Down Round 162

Down Round Ratchet Liquidation Preference Participating Preferred 162

Steve Blank

MARCH 16, 2016

As part of the deal you signed with your investors was a term specifying the Liquidation Preference. The liquidation preference determines how the pie is split between you and your investors when there is a liquidity event. Your investors funded you for a liquidity event. Great entrepreneurs shoot for 20X.

Liquidity Event 120

Liquidity Event Founder Liquidation Preference Venture Capital 120

Both Sides of the Table

SEPTEMBER 16, 2010

This is the fourth article in a series on what it takes to be a great angel investor (and why this should matter to entrepreneurs). more senior to you) might be piling up liquidation preferences and tilting returns in their favor. Part 1 – Access to Great Deal Flow – is here. So know that going in.

Cap Table 283

Cap Table Angel Investor Liquidation Preference Deal Flow 283

Both Sides of the Table

FEBRUARY 23, 2015

For some aspiring to be tech entrepreneurs, I often suggest a two-step process, as I argued in this post that “ The First Startup Founder You Need to Invest in Is You.” Of course I’m not suggesting people shouldn’t start a company. If you can and if you want to – you should.

Technical Review 150

Technical Review Liquidation Preference Silicon Valley IP 150

Both Sides of the Table

SEPTEMBER 5, 2012

My initial reaction to Adeo when we spoke was that while it may have solved some issues (debt versus equity) it didn’t solve the ones that I’ve been warning entrepreneurs about most loudly. A standard entrepreneur retort I heard back then (2008-09) was “I don’t know what my company is worth now.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Both Sides of the Table

APRIL 14, 2010

It’s meant to be a bit provocative but the reality is that I give this advice to entrepreneurs all the the time and I usually leave the “e&# off of the end. I normally offer this advice in the capacity of really wanting to help entrepreneurs so please bear with me. Let’s say the company had raised $15 million.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

Both Sides of the Table

MAY 13, 2013

And a few teams of super talented, educated and bright entrepreneurs make a few mill. If the money comes from professional investors it usually has a “liquidation preference” meaning that their money comes out before the founders or common stock. (If in their 20′s. What could be more capitalist than that?

Liquidation Preference 357

Liquidation Preference Early Stage Retention Lock-up Period 357

ReadWriteStart

SEPTEMBER 2, 2011

Therefore, going down the fundraising path is something many technology entrepreneurs will need to do and a critical step in the development of their business. Including things like liquidation preferences impact both future rounds and ultimate liquidity to why VCs ask to expand an option pool before investing as part of their term sheet.

Cap Table 125

Cap Table Term Sheet Liquidation Preference Technical Review 125

Both Sides of the Table

FEBRUARY 15, 2016

This has led VC & entrepreneur bloggers alike to similar conclusions: start raising capital early and be careful about having too high of a burn rate because that lessens the amount of runway you have until you need more cash. I’m surprised how few entrepreneurs have this open conversation with their investors.

Burn Rate 150

Burn Rate Cap Table Valuation Software Review 150

Both Sides of the Table

JANUARY 21, 2010

I recently read a post over on VentureHacks titled, “ Top Ten Reasons Entrepreneurs Hate Lawyers &# written by Scott Walker (who blogs on legal issues for entrepreneurs ). Because many great entrepreneurs work with lawyers in registering their companies they have their ear to the pavement on the earliest of company formations.

Southern California 318

Southern California Silicon Valley IP Stock Options 318

Gust

SEPTEMBER 17, 2014

Me: Raising convertible notes as a seed round is one of the biggest disservices our industry has done to entrepreneurs since 2001-2003 when there were “full ratchets” and “multiple liquidation preferences” – the most hostile terms anybody found in term sheets 10 years ago. I see that all the time. And so forth. Truthfully.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Feld Thoughts

FEBRUARY 9, 2016

And, rather than rational and helpful thoughts for entrepreneurs, it often brings out the schadenfreude in even the most talented people. We entrepreneurs have been spinning that line for decades in every boom cycle. Then use the down round to clean up your preference overhang. It’s simply not true.

Cap Table 70

Cap Table Down Round Liquidation Preference Founder 70

The Equity Kicker

JUNE 28, 2013

Otherwise the investors won’t make the multiple on their investment that they want and after liquidation preferences are paid the amount left for the entrepreneur may well also be disappointing. back making 8.3x (£2m off the top and then 33% of the remaining £19m) and the entrepreneur makes £12.7m. Nobody is happy.

Liquidation Preference 116

Liquidation Preference Valuation Portfolio Operations 116

Startup Professionals Musings

FEBRUARY 3, 2018

As an angel investor to startups, I’m still surprised to find entrepreneurs who expect investors to give them money, and assume no strings attached. If the entrepreneur wants total control of their own venture, with no one looking over their shoulder, they should work within the limits of their own resources, a process called bootstrapping.

Term Sheet 140

Term Sheet Advisory Board Liquidation Preference Portfolio 140

Altgate

DECEMBER 15, 2010

@altgate Startups, Venture Capital & Everything In Between Skip to content Home Furqan Nazeeri (fn@altgate.com) ← No one wants to tell you your baby is ugly More on Liquidation Preferences → Pre-Money Valuation vs Number of Founders Posted on December 15, 2010 by admin Here’s a chart of the day worth sharing.

Pre-Money Valuation 66

Pre-Money Valuation Valuation Cofounder Founder 66

The Equity Kicker

JANUARY 18, 2013

If you’ve been paying attention you will know that Nicholas Lovell and I are writing a book for entrepreneurs who want to raise venture capital. We are now preparing to shoot a promotional video which opens with five frustrations that entrepreneurs frequently encounter when they embark on the fundraising process, expressed as questions.

Liquidation Preference 159

Liquidation Preference Venture Capital Dilution Video 159

Startup Professionals Musings

JULY 3, 2014

As an Angel investor to startups, I’m still surprised to find entrepreneurs who expect investors to give them money, and then disappear into the sunset. Finally, entrepreneurs should never forget that investors really believe that they are there to help (not like “I''m from the IRS and I''m here to help”). Marty Zwilling.

Term Sheet 237

Term Sheet Advisory Board Liquidation Preference Startup 237

Gust

APRIL 16, 2014

Invested Interests business entrepreneur investor contract startup' But something like that would be way, way outside the norm. original post can be found on Quora @ [link] *.

Liquidation Preference 152

Liquidation Preference Revenue Entrepreneur Startup 152

A Smart Bear: Startups and Marketing for Geeks

SEPTEMBER 8, 2010

6 Simple Selling Tips For Software Entrepreneurs [link] (from OnStartups). 6 Simple Selling Tips For Software Entrepreneurs. US Economic Risks (Sept 2010): Impact on Investors & Entrepreneurs [link]. US Economic Risks (Sept 2010): Impact on Investors & Entrepreneurs | Both Sides of the Table.

Liquidation Preference 216

Liquidation Preference Silicon Valley Startup Software 216

Tim Keane

JANUARY 12, 2010

Please see later version of this post on May 16, 2010 Entrepreneurs are often not experts in the area of term-sheet negotiations and all of the surrounding issues.   Investors sometimes “present” the terms they’d like and expect the entrepreneurs to react. Term-sheets and Valuations: Thinking about Negotiations.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Feld Thoughts

MAY 7, 2012

Down: Liquidation preference. Entrepreneurs – don’t get confused by the endless mumbo-jumbo. And even though a term sheet might be four to eight pages long and the definitive documents might be 100 pages or more, other than economics, there are really only three things a VC needs in a deal. Up: Pro-rata rights.

Liquidation Preference 143

Liquidation Preference Term Sheet Search Entrepreneur 143

Startup Professionals Musings

JANUARY 27, 2012

Entrepreneurs sometimes assume an initial agreement with an Angel is a commitment, so they start spending before any money is received. It’s true that Angel investors typically do not present entrepreneurs with overly complicated deal structures, especially when compared to venture capitalists. Liquidation preference.

Term Sheet 223

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 223

Growthink Blog

JANUARY 24, 2011

I get the same question a lot from entrepreneurs raising equity capital (venture capital or angel funding). The question is whether they need to issue common or preferred stock. The answer depends on how and what rights are defined in the preferred stock. If, then the company were to be sold for $5,000,000 (i.e. read more.

Preferred Stock 93

Preferred Stock Stock Common Stock Liquidation Preference 93

Feld Thoughts

JUNE 2, 2015

The other day, Mark Suster wrote a critically important post titled One Simple Paragraph Every Entrepreneur Should Add to Their Convertible Notes. As an angel investor, I have never asked for a liquidation preference on conversion that is greater than the dollars I’ve invested. Go read it – I’ll wait.

Liquidation Preference 70

Liquidation Preference Cap Table Angel Investor Post-Money Valuation 70

Startup Company Lawyer

MARCH 14, 2010

Founders Institute Plain Preferred Term Sheet (by WSGR – disclaimer, I represent the Founders Institute and was involved in drafting this document). My general opinion is that anything that makes the financing process faster and easier or otherwise educates entrepreneurs is a good thing. (A Dividend preference.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Startup Professionals Musings

SEPTEMBER 14, 2010

Entrepreneurs sometimes assume an initial agreement with an angel is a commitment, so they start spending before any money is received. It’s true that angel investors typically do not present entrepreneurs with overly complicated deal structures, especially when compared to venture capitalists. Liquidation preference.

Term Sheet 227

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 227

The Next Web

FEBRUARY 15, 2015

Let’s dig into the remaining set of terms entrepreneurs can typically find in an equity-round term sheet, which the first post didn’t cover. The terms Liquidation preference: a very important clause… This story continues at The Next Web. Entrepreneur Analysis and Opinion'

Term Sheet 60

Term Sheet Equity Liquidation Preference Valuation 60

Startup Professionals Musings

SEPTEMBER 26, 2015

Most entrepreneurs looking for an investor can tell you how much money they need, but few have given much thought to what they are willing to give up for it. Preferred shares are not possible with a limited liability corporation (LLC), so expect to convert to a C-corp to get an equity investment. Board of directors participation.

Term Sheet 120

Term Sheet Demand Preferred Stock Liquidation Preference 120

Startup Professionals Musings

AUGUST 16, 2015

As an angel investor to startups, I’m still surprised to find entrepreneurs who expect investors to give them money, and assume no strings attached. If the entrepreneur wants total control of their own venture, with no one looking over their shoulder, they should work within the limits of their own resources, a process called bootstrapping.

Term Sheet 120

Term Sheet Advisory Board Liquidation Preference Angel Investor 120

www.readwriteweb.com

DECEMBER 29, 2011

Therefore, going down the fundraising path is something many technology entrepreneurs will need to do and is a critical step in the development of their business. Too many entrepreneurs focus exclusive on the valuation number and this book can really help you understand all the implications around the term sheet you receive.

Cap Table 47

Cap Table Term Sheet Liquidation Preference Technical Review 47

ithacaVC

JUNE 3, 2015

The punishment comes in the form of “unjust” liquidation preference that the note holders end up with when they convert at a valuation cap that is way lower than the valuation of the actual round. Each share of Series A will have a liquidation preference of $1.00 (assuming 1X preference, which is normal).

Liquidation Preference 40

Liquidation Preference Pre-Money Valuation Dilution Valuation 40

Scott Edward Walker

DECEMBER 29, 2011

House Passes Crowdfunding Bill: FAQ’s For Entrepreneurs 3. What Is A Liquidation Preference? What Makes A Great Entrepreneur? What’s It Like Working At A Major New York City Law Firm? How To Hire A Superstar Engineer For Your Startup 5. How To Launch A Startup And Avoid Ending-Up In Jail 6.

Antidilution 66

Antidilution Liquidation Preference Term Sheet New York City 66

Gust

OCTOBER 17, 2011

Entrepreneurs sometimes assume an initial agreement with an angel is a commitment, so they start spending before any money is received. It’s true that angel investors typically do not present entrepreneurs with overly complicated deal structures, especially when compared to venture capitalists. Liquidation preference.

Term Sheet 158

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 158

Altgate

OCTOBER 8, 2009

Raising Capital: 5 Reasons Convertible Debt Sucks HOT The Collapse of the VC Ecosystem & What It Will Look Like Post Recovery 10 Tips On Negotiating With VCs Dating…er…Fundraising Etiquette The Science & Art of Term Sheet Negotiation HOT How Liquidation Preferences Work HOT How Much Money Should I Raise?

Term Sheet 39

Term Sheet Technical Review Michigan Liquidation Preference 39