Steve Blank

MARCH 16, 2016

There are many reasons to found a startup. There are many reasons to work at a startup. To most founders a startup is not a job, but a calling. But startups require money upfront for product development and later to scale. Traditional lenders (banks) think that startups are too risky for a traditional bank loan.

Liquidity Event 120

Liquidity Event Founder Liquidation Preference Venture Capital 120

Both Sides of the Table

SEPTEMBER 2, 2009

If a company has reached a level of success, has been around for a few years and you believe the company has potential to break out into a much bigger company then you should let the founders take money off of the table. The VCs basically have liquidity in management fees along the way, in the sense they get paid decently along the way.

Founder 329

Founder Liquidation Preference Term Sheet Participating Preferred 329

The Startup Lawyer

JANUARY 10, 2012

In most equity financing rounds, an investor will ask for (and get) a term called a liquidation preference. A liquidation preference is the amount that must be paid to a preferred stock holder before any sale proceeds may be paid to the holders of common stock (i.e., founders, option holders, etc.).

Liquidation Preference 73

Liquidation Preference Pre-Money Valuation Participating Preferred Preferred Stock 73

Agile VC

APRIL 17, 2011

AGILEVC My idle thoughts on tech startups. Kayak was started here in my backyard of Boston… co-founder & CTO Paul English and the product/engineering team is based here in Concord MA. Co-founder & CEO Steve Hafner and the business team are based in Norwalk, CT. liquidation preference, 6% accumulated dividend (1).

Pre-Money Valuation 113

Pre-Money Valuation Liquidation Preference Dividend Common Stock 113

Both Sides of the Table

FEBRUARY 23, 2015

But not everybody has the right skills to build a highly successful and valuable startup from scratch. 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.”

Technical Review 150

Technical Review Liquidation Preference Silicon Valley IP 150

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

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

Both Sides of the Table

FEBRUARY 15, 2016

There is much talk these days that startup valuations have decreased and may continue to do so and that the amount of time it takes to fund raise may take longer. And recaps hurt founders so often people just avoid doing them. If they’re only 1 of 5 they might rather just take the write off.

Burn Rate 150

Burn Rate Cap Table Valuation Software Review 150

Both Sides of the Table

JULY 25, 2011

When I first started as a startup CEO in 1999 there were no guides on raising venture capital. Founders don’t often think about “primary&# stock vs, “fully diluted&# stock in terms of voting rights. Or what “participating preferred&# stock is and how it can screw you. Drag along rights? I never did.

Liquidation Preference 304

Liquidation Preference Term Sheet Cap Table Participating Preferred 304

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?

Liquidation Preference 357

Liquidation Preference Early Stage Retention Lock-up Period 357

Feld Thoughts

FEBRUARY 9, 2016

Mark Suster wrote a great post yesterday titled The Resetting of the Startup Industry. I’ve seen every imaginable type of liquidation preference structure, pay-to-play dynamic, preferred return, ratchet, share/option bonus, option repricing, and carveout. Go read it now – I’ll wait.

Cap Table 70

Cap Table Down Round Liquidation Preference Founder 70

Both Sides of the Table

SEPTEMBER 28, 2013

For starters let me use “CEO” as a proxy to include her “inner circle” which might mean co-founders or might just mean senior execs of the business. The Mind of the Founder. So as a startup CEO you constantly have to suspend disbelief. The mind of a founder is wired differently than most people.

Startup 417

Startup Dilution San Diego Stock Options 417

The Equity Kicker

OCTOBER 22, 2012

That’s exciting and motivating for founders, and makes it easier to enlist support for your mission from investors, new employees and customers and will get you talked about on blogs and at cocktail parties. Focusing too much on the big vision and too little on the plan is an increasingly common mistake at startups. Powerful stuff.

Liquidation Preference 134

Liquidation Preference Distribution Web Conversion 134

A Smart Bear: Startups and Marketing for Geeks

SEPTEMBER 8, 2010

It's nice to highlight awesome articles about startup that I didn't write! Startup Business Checklist 2010 [link]. Startup Business Checklist 2010 : Steve Smith's Blog. Below is my current checklist for startup businesses in 2010. How To Land a Killer Job At a Tech Startup Out of College - [link]. interintelli.

Liquidation Preference 216

Liquidation Preference Silicon Valley Startup Software 216

Gust

MAY 24, 2012

Some commentators have suggested this is the wave of the future, signifying a shift in the balance of power from investors to founders of the relatively small, elite group of growth companies that make it to public markets. Options and warrants, when issued, are also typically exercisable for shares of Common Stock.

IPO 159

IPO Equity Common Stock Stock 159

Startup Professionals Musings

SEPTEMBER 26, 2015

Perhaps they're way off in their valuation (usually far too high), or paralyzed by fear at seeing the other terms, because they have no idea what's normal, and what's worth a fight to the death (their startup's). In very early startups, which have no valuation, the term sheet may specify a convertible note.

Term Sheet 120

Term Sheet Demand Preferred Stock Liquidation Preference 120

Tim Keane

JANUARY 12, 2010

Startups and angels: Along the way to success.   At the financial level , and assuming a harvest of the investment in the company without the need for further financing, two terms stand out as driving economics: the dividend and the liquidation preference. Second a liquidation preference and a participation.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Austin Startup

APRIL 1, 2017

out of state VCs Don’t rush a term sheet In assessing financing terms and interacting with their lead investors, most founders instinctively focus on two core things: economics and control. Does the candidate regularly invest in other startups alongside your investors, perhaps as part of a seed fund, accelerator network, or other group?

Term Sheet 48

Term Sheet Institutional Investors Technical Review Lead Investor 48

Scott Edward Walker

DECEMBER 13, 2018

The purpose of this post is briefly (i) to provide an overview of acquihires and (ii) to discuss the significant legal issues that founders must address. An acquihire is essentially the acquisition of a startup for its talent/team (rather than for its products or services). Will the Founders Receive any Purchase Price Proceeds?

Founder 45

Founder Merger IP Liquidation Preference 45

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

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. The objective is really to be able to get some risk off the table for the founders and not leave all their eggs in one basket.

Founder 87

Founder Common Stock Preferred Stock Stock 87

Both Sides of the Table

APRIL 14, 2010

That means that the likely have a minimum of $15 million in liquidation preferences. 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. Take liquidation preferences head on.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

abovethecrowd.com

FEBRUARY 24, 2015

Despite this, startups commonly highlight “gross revenue” even when 80+% goes out the door for every single transaction. Most private company financings involve the use of preferred stock with liquidation preferences. These liquidation preferences give the investor a debt-like downside protection.

IPO 40

IPO Liquidation Preference Valuation Technical Review 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. The objective is really to be able to get some risk off the table for the founders and not leave all their eggs in one basket.

Founder 84

Founder Common Stock Preferred Stock Stock 84

Scott Edward Walker

APRIL 22, 2012

Part 3 will cover certain special issues, such as (i) what happens if the startup is acquired prior to the note’s conversion to equity? Finally, founders should be aware that investors will sometimes push for the issuance of warrants in lieu of a discount. Specifically, a cap is a ceiling on the value of the startup (i.e.,

Pre-Money Valuation 72

Pre-Money Valuation Finance Liquidation Preference Founder 72

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

The Equity Kicker

DECEMBER 30, 2013

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. If after a $5m Series A a founder holds 30% of her company and then goes on to raise a $20m Series B at $60m pre-money her stake will drop to 22.5%

Finance 129

Finance Liquidation Preference Valuation Harvest 129

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). The primary rights in these documents, ranked in order of importance in my opinion are: Non-participating preferred liquidation preference. under $500K).

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

techcrunch.com

FEBRUARY 25, 2010

This is an anonymous guest post from a well known startup executive: When we split the atom, Einstein remarked that everything changed but our way of thinking. As Mark Suster recently noted , employees will never see a big payday at most startups unless the company shoots for the moon. The two founders own 33%, and split $12 million.

Liquidation Preference 63

Liquidation Preference Founder Option Pool Acquisition 63

Both Sides of the Table

MARCH 3, 2013

Let me start by saying that Clayton is one of the most influential people on my thoughts about markets that led to both the concept behind my first startup and my main theses in investing. Startup Grind was a truly awesome conference and Derek the consumate host. Watch the 30-minute interview to hear why but summary notes below.

Bankruptcy 403

Bankruptcy Offshore Liquidation Preference Balance Sheet 403

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. One Shot” incentives.

Liquidation Preference 48

Liquidation Preference Common Stock Valuation Silicon Valley 48

Feld Thoughts

SEPTEMBER 9, 2015

We basically doubled the number of unicorns in the past year and a half,” says Aileen Lee, the founder of Cowboy Ventures, who has herself become a mythic creature in the Valley after coining the term. Venture capitalist Marc Andreessen warned in a tweetstorm that startups with high burn rates would “vaporize.”

Liquidation Preference 70

Liquidation Preference Burn Rate Balance Sheet .Net 70

The Startup Lawyer

JUNE 9, 2010

A startup’s Series A financing shouldn’t be a large liquidity event or salary payday for the startup’s founders. While a startup typically receives millions of dollars in a Series A, if too much of that $$$ flows guaranteed to the founders, various incentives get out of whack. Case Study.

Salary 99

Salary Term Sheet Liquidation Preference Liquidity Event 99

K9 Ventures

JUNE 5, 2015

So while the infrastructure cost and startup costs may have declined, the operating costs have increased. So in this post, I present the epilogue to The New Venture Landscape that highlights my take on what I think the venture landscape looks like today and what the implications are for founders, for GPs and for LPs. The Epilogue.

Seed Stage 48

Seed Stage Venture Capital Early Stage Valuation 48

Startup Professionals Musings

SEPTEMBER 14, 2010

The first capital a young company receives usually takes the form of common stock, the same class of shares the founders hold. Venture capitalists and later round investors like the preferred convertible shares. These “IV drip” financings may reduce risk for investors, but put more pressure on founders. Liquidation preference.

Term Sheet 227

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

Startup Professionals Musings

JANUARY 27, 2012

The first capital a young company receives usually takes the form of common stock, the same class of shares the founders hold. Venture capitalists and later round investors like the preferred convertible shares. These “IV drip” financings may reduce risk for investors, but put more pressure on founders. Liquidation preference.

Term Sheet 223

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

ithacaVC

JUNE 29, 2018

Our portfolio companies routinely adopt carve out plans when the founders/employees equity values are not likely to provide enough incentive to get a company to an exit. This typically results when the company has raised a lot of money and the preferred stock liquidation preference would absorb an out sized portion of the exit proceeds.

Management 40

Management Liquidation Preference Preferred Stock Dilution 40