Berkonomics

JANUARY 7, 2021

How many of them, particularly in technology, were able to start a company, supply all the funding, and share no management tasks or equity with others, and still grow the company to any significant size, worthy of a multi-million-dollar opportunity to cash out at exit? Dividing equity among those that fill the management gap.

Liquidity Event 96

Liquidity Event Pre-Money Valuation Cofounder Initial Public Offering 96

Gust

DECEMBER 1, 2011

Notice what is missing from this list of priorities: The company itself – that is, a business entity, most often a corporation , that will own the entire business (however defined), issue equity to founders, take investment capital , enter into contracts, make sales, pay employees and contractors, and so forth.

IP 114

IP Intellectual Property Equity Liquidity Event 114

Startup Professionals Musings

AUGUST 10, 2019

You have very little money, and you don’t want to give away your equity. Giving equity is realistic, but base it on contribution and role, with vesting after time and milestones. If you take investor money, expect a push for hockey-stick growth and a liquidity event, like going public (IPO) or sale (M&A), to get the payback.

Hockey Stick 243

Hockey Stick Cofounder Liquidity Event Startup 243

VC Adventure

JULY 15, 2021

One thing I’m particularly proud of in my career is founding Pledge 1% , an organization that encourages companies to give back to their communities by donating a portion of equity, profit, time, or product to nonprofits in its community. You can read the full announcement on Business Wire here.

Liquidity Event 108

Liquidity Event Equity Portfolio Community 108

Berkonomics

AUGUST 3, 2023

Some businesses require very little capital and the founder can self-finance the enterprise and retain 100% of its ownership and control from ignition through liquidity event (startup through sale). Venture, private equity and more: Here we lump a large number of investor classes into one.

Private Equity 118

Private Equity Valuation Cap Table Accredited Investor 118

Berkonomics

DECEMBER 17, 2020

Let’s take a few minutes to examine the kind of equity financing available to small or early stage businesses. In most cases, these applicants for equity funding must be rooted in technology to apply to this limited discussion. For early stage investors, the usual expectation is seven years from investment to expected liquidity.

Equity 62

Equity Finance Liquidity Event Angel Groups 62

Berkonomics

AUGUST 6, 2020

Some of us build our businesses to be lifestyle creations, destined to provide for our families but not necessarily as creators of great equity upon an eventual sale. But most of us dream of selling the business someday for lots of money and building our wealth upon that event. Envision your end game when you start.

Liquidity Event 62

Liquidity Event Intellectual Property IPO Equity 62

Startup Professionals Musings

AUGUST 17, 2014

Here are some basic “rules of thumb” that every Angel or venture capital equity investor uses, to help you anticipate their reactions. According to a recent Dow Jones VentureSource report, the average time to liquidity of an equity investment in a startup is now about five years. Build a path to 10x return.

Liquidity Event 249

Liquidity Event Equity Venture Capital Merger 249

Berkonomics

FEBRUARY 3, 2022

First, the implied promise: Taking money from professional investors such as angels or VCs usually requires that you agree to seek an exit for those investors in your plan, often targeting five to seven years as the ideal period for growth before a liquidity event. For some, that comfort is worth forgoing building high equity value.

Liquidity Event 62

Liquidity Event Preferred Stock Dividend Equity 62

Startup Professionals Musings

JULY 27, 2018

Specific investment size request, and equity offered. Every investor pitch must include the size of the desired investment, followed by the percentage of equity offered, thus supporting a realistic valuation today. Discussion of likely liquidity events and exit strategy.

Product 145

Product Intellectual Property Liquidity Event Exit Strategy 145

Startup Professionals Musings

DECEMBER 14, 2014

You have very little money, and you don’t want to give away your equity. Giving equity is realistic, but base it on contribution and role, with vesting after time and milestones. If you take investor money, expect a push for hockey-stick growth and a liquidity event, like going public (IPO) or sale (M&A), to get the payback.

Hockey Stick 268

Hockey Stick Cofounder Entrepreneur Liquidity Event 268

Startup Professionals Musings

MAY 28, 2013

Here are some basic “rules of thumb” that every Angel or venture capital equity investor uses, to help you anticipate their reactions. According to a recent Dow Jones VentureSource report, the average time to liquidity of an equity investment in a startup is now about five years. Build a path to 10x return.

Liquidity Event 243

Liquidity Event Startup Equity Venture Capital 243

Berkonomics

MARCH 21, 2019

To grow your business to a size that will be attractive to a VC or angel making an investment now, you’ve got to show that the business will be large enough at the time of the investor’s liquidity event (cashing out) to make the investment attractive at all. The more you ask for – the more equity you give up.

Hockey Stick 63

Hockey Stick Liquidity Event Valuation Balance Sheet 63

Startup Professionals Musings

AUGUST 19, 2017

You have very little money, and you don’t want to give away your equity. Giving equity is realistic, but base it on contribution and role, with vesting after time and milestones. If you take investor money, expect a push for hockey-stick growth and a liquidity event, like going public (IPO) or sale (M&A), to get the payback.

Hockey Stick 144

Hockey Stick Cofounder Entrepreneur Liquidity Event 144

Startup Professionals Musings

JULY 19, 2013

You have very little money, and you don’t want to give away your equity. Giving equity is realistic, but base it on contribution and role, with vesting after time and milestones. If you take investor money, expect a push for hockey-stick growth and a liquidity event, like going public (IPO) or sale (M&A), to get the payback.

Founder 245

Founder Hockey Stick Cofounder Liquidity Event 245

Berkonomics

JUNE 12, 2014

It is rare when one person starts a company, supplies all the funding, and shares no management tasks or equity with others, and still grows the company to any significant size, worthy of a multi-million dollar opportunity to cash out at exit. So co-management is the second group to share in the bounty upon a liquidity event.

Liquidity Event 85

Liquidity Event Pre-Money Valuation Cofounder Initial Public Offering 85

Gust

AUGUST 10, 2014

Here are some basic rules of thumb that every Angel or venture capital equity investor uses, to help you anticipate their reactions. According to a recent Dow Jones VentureSource report, the average time to liquidity of an equity investment in a startup is now about five years. Build a path to 10x return.

Liquidity Event 176

Liquidity Event Equity Venture Capital Merger 176

Berkonomics

SEPTEMBER 12, 2013

Some of us build our businesses to be lifestyle creations, destined to provide for our families but not necessarily as creators of great equity upon an eventual sale. But most of us dream of selling the business someday for lots of money and building our wealth upon that event. The liquidity event and beyond'

Liquidity Event 76

Liquidity Event Intellectual Property IPO Equity 76

Gust

JUNE 7, 2014

The technical term for this is the “liquidation waterfall”, because on a liquidation event (whether good, as in a large buyout, or bad, as in a distress sale, investors (and others) get paid out in a specified order.

Warrant 157

Warrant Preferred Stock Early Stage Common Stock 157

Startup Professionals Musings

SEPTEMBER 7, 2015

Think about the valuation implications and equity you are willing to give up for each investment amount. Show a liquidity event and investor return at the end of the period. This means an acquisition or initial public offering that will generate at least five times your fifth-year revenues, at a commensurate equity ownership.

Liquidity Event 120

Liquidity Event Startup Initial Public Offering Equity 120

Startup Professionals Musings

FEBRUARY 13, 2016

How big is the funding request, and how much equity will you give? Quantify founder investments, both cash and sweat-equity. If you don’t plan a liquidity event, you won’t find many investors interested. Justify funding requirements, use of funds and specify a current valuation estimate.

Sweat Equity 120

Sweat Equity Advisory Board Liquidity Event Startup 120

View from Seed

MAY 19, 2015

Jet-set lifestyles are perhaps appropriate after the liquidity event, but founders and executives must avoid them at all costs before that, as employees treat resources with the same respect (or lack thereof) as their leadership. A flourishing startup requires investing equity in others to generate substantial return.

Seed Stage 120

Seed Stage Liquidity Event Cofounder Startup 120

Board Effect

MAY 13, 2019

What we’re really looking for is the baseline of management startups should afford their cap tables as they grow—in both size and the complexity of their equity structures. Investors are likely searching for an estimate of what they stand to gain; either at the time of their anticipated exit or in a variety of hypothetical liquidity events.

Cap Table 40

Cap Table Management Liquidity Event Dilution 40

Steve Blank

JULY 19, 2010

I’ll offer that both entrepreneurs and VC’s have the wrong model for founding CEO equity compensation. Where’s My Liquidity Event. As a board member I negotiated with founding CEO’s over vesting when I thought it was their time to go. At best this is an argument where no one wins, at worst it’s like a nasty divorce.

Vesting 251

Vesting Liquidity Event Venture Capital Founder Vesting 251

Startup Professionals Musings

MAY 18, 2015

Startup owners need to assume a three to five year wait for a liquidity event, such as acquisition or going public, before they can cash out. While new equity owners always have to get it from someone, actual re-allocation of existing shares should be based on a formula to maximize the value of your remaining founder shares.

Stock 120

Stock Vesting Common Stock Founder Vesting 120

Startup Professionals Musings

AUGUST 7, 2015

No investor pitch should end without asking for a specific amount of money, providing some details on how that money will be used and what equity in the company you are offering in return. Investors are also interested in future investment requirements, time frames and long-term strategy.

Product 120

Product Intellectual Property Liquidity Event Burn Rate 120

Pascal's View

AUGUST 28, 2010

Private-equity and venture capital firms have been hard hit too. capital markets for listed equities have been in systemic decline since 1997, while every other major international equity market has been growing. The biggest industry waiting is computers and electronics with 23 deals seeking to raise as much as $4.8

Venture Capital 56

Venture Capital America Initial Public Offering IPO 56

Pascal's View

MARCH 12, 2010

In addition there is a major tension and conflict between the management team and the VC directors—the management wants more share ownership, and the common equity is at the bottom of the seniority stack behind the various series of preferred equity rounds.

Government 28

Government Portfolio Technical Review Due Diligence 28

Berkonomics

AUGUST 20, 2015

The inciting incident in a movie is the event at the beginning of the story that causes the hero’s life to be completely transformed and irrevocably changed, and makes the whole story unfold. I thought of this in a recent liquidity event in one of my portfolio companies.

Liquidity Event 48

Liquidity Event Private Equity Valuation Equity 48

Gust

OCTOBER 21, 2011

This week we move on to something near and dear to the hearts of entrepreneurs and investors alike: The exit, more formally known as a “ liquidity event.” a mix of cash and stock) received by other equity holders in the transaction. Most would agree this is not a fair outcome.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Startup Professionals Musings

AUGUST 13, 2012

Quantify existing skin-in-the-game, by insiders and outsiders, including sweat equity and capital. These investors want to know that you are thinking about a liquidity event – when and how they will get their money out, with ROI. Explain how you calculated the funding requirements, and show details on planned use of funds.

Business Plan 283

Business Plan Sweat Equity Exit Strategy Intellectual Property 283

Gust

SEPTEMBER 5, 2012

Convertible equity? The new form of convertible security or “convertible equity” is essentially a convertible note containing most of the usual terms — except it’s been stripped of the features that would make it a loan. How to finance a new seed-stage startup? Convertible debt?

Finance 134

Finance Convertible Security Equity Seed Stage 134

Berkonomics

JUNE 2, 2010

That form of open book management surprises many, but if the employees are stakeholders with a taste of equity, why not underscore the value of that equity by treating them as cohorts? Tags: Depending upon others Surrounding yourself with talent The liquidity event and beyond. Yes, sometimes the news is not good.

Liquidity Event 86

Liquidity Event Stock Options IPO Stock 86

David Teten

AUGUST 21, 2019

Most founders who are raising capital look first to traditional equity VCs. Revenue-Based Investing (“RBI”) is a new form of VC financing, distinct from the preferred equity structure most VCs use. Should you raise venture capital from a traditional equity VC or a Revenue-Based Investing VC? But should they? Optionality.

Revenue 60

Revenue Liquidation Preference Equity Cofounder 60

The Next Web

MARCH 2, 2014

Should we finance with debt or equity? For us, because we chose to finance with debt, we gave up almost no equity in the company, and therefore almost no dilution of stock options. This will have a significant impact on the amount business owners could realize on the sale or other liquidity event for the company.

Liquidity Event 139

Liquidity Event Equity Finance Stock Options 139

Berkonomics

OCTOBER 29, 2015

Taking money from professional investors such as angels or VCs usually requires that you agree to seek an exit for those investors in your plan, often targeting five to seven years as the ideal period for growth before a liquidity event. For some, that comfort is worth forgoing building high equity value.

Liquidity Event 48

Liquidity Event Equity Venture Capital Stock 48

Berkonomics

JUNE 8, 2017

Some businesses require very little capital and the founder can self-finance the enterprise and retain 100% of its ownership and control from ignition through liquidity event (startup through sale). Venture, private equity and more: Here we lump a large number investor classes into one.

Private Equity 106

Private Equity Valuation Cap Table Accredited Investor 106