Hunter Walker

SEPTEMBER 29, 2022

Below I’ll share some of the principles we use at Homebrew , knowing that there’s not really a single ‘right’ answer for a fund manager. So for the most part a venture investor holds their equity until the company exits via an acquisition, IPO, or some sort of other liquidity event (management buyout, whatever).

Venture Capital 122

Venture Capital Cap Table LP Equity 122

Up and Running

SEPTEMBER 20, 2021

And as the company grows, it brings on new people and may decide to issue stock options to attract new staff and funding from investors. A cap table will help you in the strategic management of business decisions. Preference shares. A class of stock with special rights as described in your startup is called preference shares.

Cap Table 112

Cap Table Pre-Money Valuation Stock Options Option Pool 112

Startup Company Lawyer

JANUARY 9, 2011

Convertible debt with a price cap seems to be the preferred structure for early-stage financings. Over the last 12 months, I’ve noticed a trend where early-stage startup companies raise seed financings of between $250K and $1M using a convertible note with a price cap. Is a priced Series A financing a valid alternative?

Liquidation Preference 57

Liquidation Preference Finance Preferred Stock Common Stock 57

ithacaVC

APRIL 25, 2014

This cap table can be used by a pre-funded startup and then a financing can be layered in. The model includes a simple waterfall analysis using both participating and non-participating preferred (see line 44 and then columns M and O). Dealing with VCs Management Startup Life' Here are things to note: 1.

Cap Table 79

Cap Table Preferred Stock Pre-Money Valuation Liquidation Preference 79

Startup Company Lawyer

MARCH 12, 2009

Any company that raises venture financing will need to be a C corp in order to issue preferred stock. If founders want the benefit of flow through tax treatment with respect to losses prior to an outside financing, an S corp election may make sense as long as there are no entity or non-U.S. citizen/resident stockholders.

LLC 61

LLC Stock Options Preferred Stock Stock 61

ithacaVC

FEBRUARY 23, 2011

A management carve out plan (MCOP) is a written obligation of the company that, in simple terms, provides that certain management members get a predetermined slice of proceeds when a company is sold. As the investors’ aggregate liquidation preference (ALP) increases typically the need for a MCOP also increases.

Liquidation Preference 55

Liquidation Preference Management Preferred Stock Dividend 55

Up and Running

AUGUST 28, 2019

Because of its popularity, Delaware is also statistically a popular state for investors to finance businesses. Note that if you are working with a lawyer or online incorporation service, you might name an “incorporator,” who is responsible for managing the articles of incorporation. Name your registered agent.

Delaware 83

Delaware Stock Nevada Technical Review 83

The Startup Lawyer

MARCH 1, 2010

“The Series Seed Documents are a standardized set of documents that can be quickly and easily deployed for a seed investment: to help get a company financed properly, legally, quickly, and intelligently.&#. 2) Series Seed Stock Preferred Stock Purchase Agreement. 3) Investors’ Rights Agreement. 4) Term Sheet.

Preferred Stock 79

Preferred Stock Term Sheet Redemption Registration Rights 79

www.mattbartus.com

SEPTEMBER 24, 2011

People tend to underestimate how much record keeping is involved with managing employees and consultants, and this just adds an unacceptable extra burden. First, you’d probably want them to receive common stock, not preferred stock (which is the likely next round). Recent Posts.

Equity 40

Equity Vesting Silicon Valley Intellectual Property 40

www.vccafe.com

MARCH 11, 2013

Task Management. Project Management Tools. Subscription Payments / Management. Managing APIs. Customer Relationship Management. Contractor Management. Private beta invitations & management: Prefinery. Scanning / Document Management. Project Management tools. Part 4- Closing.

Software Review 53

Software Review Technical Review Startup 53

Startup Company Lawyer

APRIL 22, 2009

Always looking for ways to better serve the entrepreneurial community, Wilson Sonsini Goodrich & Rosati is pleased to announce the release of the WSGR Term Sheet Generator , a publicly available online tool that allows entrepreneurs and investors to generate an initial draft of a term sheet for a preferred stock financing.

Term Sheet 39

Term Sheet Finance Preferred Stock Kentucky 39

Gust

JULY 18, 2012

Yet I’ve rarely seen entrepreneurs more fired up than when recounting war stories of startups whose founders had control of the company wrested from them, were forced to take financing or compensation deals on outrageously onerous terms , or worst of all, fired from their own companies.

Stock Options 188

Stock Options SEC Stock Government 188

K9 Ventures

MAY 14, 2011

The institutional funds typically manage a relatively large pot of capital (~$300M or higher per fund, with multiple funds running). Common Stock. Convertible Note or Preferred Stock. Convertible Note or Preferred Stock. Preferred Stock. Preferred Stock. Corporate Money.

Preferred Stock 125

Preferred Stock Seed Stage Incubator Early Stage 125

Tim Keane

JANUARY 12, 2010

Good investors use the valuation discussions to gauge the business savvy of the management team and to understand their ability to appreciate and deal with economic market forces that set values.   For individual angels and others investing their own money, this may be more fluid than for someone with responsibility for a managed fund.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Up and Running

DECEMBER 1, 2015

Typically, employers that offer employees equity compensation will do so in the form of common stock, preferred stock, or stock options. And is willing to share company finances, future, etc.”. I’ll go into the difference between these in just a moment. Types of equity compensation.

Equity 60

Equity Employee Stock Options Vesting 60

Ben's Blog

JULY 16, 2013

In fact, if you are like most companies, your managers probably implied to your employees that your stock price would only rise as long as you were private. They might have said something ridiculous like: “Based on the current price of the preferred stock, your offer is already worth $5M.” Silly them.

Down Round 78

Down Round Marketing Preferred Stock Post-Money Valuation 78

The Next Web

JUNE 17, 2015

But, if you have no other alternatives from professional investors, service providers can be a perfectly acceptable financing resource for you, if that is all you need and it is structured fairly. Be sure to read my companion piece: How to Protect Your Equity and Control Post Financings. Are There Any Strings Attached?

Equity 60

Equity Valuation Preferred Stock Common Stock 60

Growthink Blog

MAY 10, 2012

Mezzanine Financing Most companies that raise equity capital and are eventually acquired or go public receive multiple rounds of financing first. No right or wrong answer here, but if this is your vision then it's important to consider when negotiating deal terms on earlier stage financing rounds. Seed Funding 3.

Equity 88

Equity Mezzanine Later Stage Venture Capital 88

The Startup Lawyer

MARCH 1, 2010

“The Series Seed Documents are a standardized set of documents that can be quickly and easily deployed for a seed investment: to help get a company financed properly, legally, quickly, and intelligently.&#. 2) Series Seed Stock Preferred Stock Purchase Agreement. 3) Investors’ Rights Agreement. 4) Term Sheet.

Preferred Stock 40

Preferred Stock Term Sheet Redemption Registration Rights 40

Both Sides of the Table

APRIL 14, 2010

It will usually be higher because the liquidation preference has a dividend so if the deal is long in the tooth assume that the liquidation preference might be $20-22 million. Liquidation preference is the amount of money that an investor gets paid before the common stock (e.g. Take liquidation preferences head on.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

ithacaVC

JANUARY 18, 2017

Is there a minimum amount needed to “close” the round of financing. Typically will either be convertible debt or preferred stock (Series Seed or Series A). But, here are some basic things that I would recommend to Friend B to start with: How much is Friend A looking to raise in total? This is a critical question.

Preferred Stock 40

Preferred Stock LLC Startup Security 40

Up and Running

MAY 23, 2016

I used a freelance web designer and I only created the core functions to create, send, and manage invoices. Delaware law gives preferred stock investors of a corporation certain voting rights and control over the corporation. Step 5: Get financed. Delaware permits a single-member board of directors.

Software Review 74

Software Review Software Delaware Forecast 74

The Startup Lawyer

MARCH 11, 2010

I welcome these and future standardized seed funding docs because they provide entrepreneurs with the chance to take a look at financing terms. No set of seed funding documents will replace counsel, either pre-financing or post-financing. Those that manage this feat will survive.

Delaware 49

Delaware Hockey Stick Preferred Stock Open Source 49

Ben's Blog

JULY 16, 2013

In fact, if you are like most companies, your managers probably implied to your employees that your stock price would only rise as long as you were private. They might have said something ridiculous like: “Based on the current price of the preferred stock, your offer is already worth $5M.” Silly them.

Marketing 46

Marketing Preferred Stock Post-Money Valuation Down Round 46

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

www.payne.org

SEPTEMBER 22, 2011

Your offer will almost surely be for common stock. Preferred stock classes typically go to investors, and in some cases founders (usually where the founders have already invested some of their own money to build the company). If the company is acquired or liquidated, the preferred stock holders will get paid first.

Equity 56

Equity Employee Vesting Preferred Stock 56

The Startup Lawyer

MARCH 11, 2010

I welcome these and future standardized seed funding docs because they provide entrepreneurs with the chance to take a look financing terms. No set of seed funding documents will replace counsel, either pre-financing or post-financing. Those that manage this feat will survive. Myth #3: Standardized Docs = Open Source Law.

Delaware 45

Delaware Hockey Stick Preferred Stock Open Source 45

abovethecrowd.com

MAY 20, 2013

There are common stock, common options, and as many as three to five different layers of preferred stock, each with a specific liquidation preference. The bottom line is that it is very hard to merge two management teams, especially when you consider the contracted time window typically associated with such a discussion.

Merger 53

Merger Institutional Investors Liquidation Preference Preferred Stock 53

ithacaVC

JUNE 20, 2011

4. You are raising money: raising funds requires documentation regardless of type of financing. If you are doing an equity round (assuming preferred stock), assume legal fees of between $10,000 to $25,000 again dependent on number of investors and negotations. This is just the tip of the iceberg.

Stock Options 58

Stock Options Vesting Subscription Agreement Founder Vesting 58

Professor VC

JANUARY 17, 2008

One of the panelists mentioned that they have gotten very valuation sensitive (nothing wrong with that) and like to purchase preferred stock rather than invest in convertible notes. He then went on to say that this type of financing was good for the entrepreneur (vs taking VC money) because they got to keep more of the company.

Pre-Money Valuation 28

Pre-Money Valuation Angel Investor Angel Groups Valuation 28

Tim Keane

APRIL 12, 2006

What’s your attitude about “next round” financing? We are open to them and prefer to begin to co-invest at. Underlying this question is really “How will you manage the risk in this opportunity?”. Common stock is a vehicle for sharing risk equally with insiders who have more knowledge and ability to affect business results.

Entrepreneur 60

Entrepreneur Valuation Sweat Equity Common Stock 60