YoungUpstarts

AUGUST 25, 2015

One of the first actions you will take with your startup is to organize your company a separate legal entity to protect yourself from personal liability for the company’s debts. In the tech startup context, you’ll typically choose between a Corporation and a Limited Liability Company (“LLC”).

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LLC Technical Review Software Review Limited Liability Company 100

Gust

NOVEMBER 28, 2023

The principal roles of the lead investor was to negotiate the terms of an investment with the founder of the startup. When a corporation is established, its ownership is divided into pieces called shares of common stock. That’s what you as a founder will have, which is why it’s also known as founders’ stock.

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Due Diligence Term Sheet Common Stock Preferred Stock 91

Startup Professionals Musings

DECEMBER 11, 2022

Experienced entrepreneurs understand investor expectations of Board representation, preferred stock, and payments based on interim milestones. Founder insistence on non-dilute clauses, arms-length relationships, and quick closure without due diligence will short-circuit active interest. Ask only for the money you can justify.

Due Diligence 271

Due Diligence Intellectual Property Entrepreneur Preferred Stock 271

View from Seed

DECEMBER 4, 2014

Editor’s note: Understanding how to divide founder equity at a startup can be tricky, even to the point of reaching emotional riffs between founders. I like to say that “there are only co-founders” — it’s extraordinarily rare for a successful business to have just a sole founder.

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Equity Founder Sweat Equity Cofounder 315

Startup Professionals Musings

NOVEMBER 30, 2015

A popular approach these days seems to be for founders to regale investors early with a pitch touting the newest “million-dollar idea.” A C-corporation is more complex and expensive, and is recommended only if you expect to pitch to professional investors who demand preferred stock, or to more than 100 potential shareholders.

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Intellectual Property Entrepreneur Preferred Stock Stealth 120

Agile VC

DECEMBER 4, 2014

I like to say that “there are only co-founders” — it’s extraordinarily rare for a successful business to have just a sole founder. But not all co-founders are equal in terms of title, ownership, responsibilities, and so forth. Sometimes co-founders put off the equity split question for some time.

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Cofounder Equity Founder Sweat Equity 255

Early Growth Financial Services

FEBRUARY 3, 2015

This post by Ian Engstrand first appeared on Founders Workbench. From time to time on Founders Workbench we give a brief primer on common terms and issues in venture financings. management). management). Participating versus non-participating: what’s the difference?

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Preferred Stock Stock Finance Participating Preferred 28

YoungUpstarts

JUNE 26, 2020

by Rizwan Virk, author of “ Startup Myths and Models: What You Won’t Learn in Business School “. If you are building a startup, you’ll find no shortage of people who are willing to give you advice, particularly when it comes to raising financing. I used to think a valuation was kind of like a stock price of a public company.

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Finance Silicon Valley Valuation Startup 205

Steve Blank

OCTOBER 24, 2017

Why do these founders get to stay around? Because the balance of power has dramatically shifted from investors to founders. — Unremarked and unheralded, the balance of power between startup CEOs and their investors has radically changed: IPOs/M&A without a profit (or at times revenue) have become the norm. .

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Founder Technical Review CTO Hire IPO 245

Agile VC

DECEMBER 4, 2014

I like to say that “there are only co-founders” — it’s extraordinarily rare for a successful business to have just a sole founder. But not all co-founders are equal in terms of title, ownership, responsibilities, and so forth. Sometimes co-founders put off the equity split question for some time.

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Cofounder Equity Founder Sweat Equity 173

Startup Company Lawyer

AUGUST 31, 2012

Over the past few years, convertible debt has emerged as a quick and inexpensive method for startup companies to raise money from angel investors and early stage venture funds. ” As a result, Ted introduced the Series Seed preferred stock documents as an alternative to convertible debt for early stage investments.

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Convertible Security Equity Security Preferred Stock 73

David Teten

MARCH 14, 2018

Managers of VC funds typically want to grow their business aggressively, just like the founders we back. Among the sites we have found most helpful with practical guides for founders: Biztree , First Search , Foundersuite , Goodwin Founders Workbench , Guides.co , Inc.com , and StartupRocket. .

Private Equity 60

Private Equity Venture Capital Equity Cofounder 60

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.

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Term Sheet Demand Preferred Stock Liquidation Preference 120

Startup Professionals Musings

JANUARY 29, 2018

Of course, initially these founder’s shares were worth essentially nothing, but it doesn’t take much of an imagination to grasp the possibilities. Now is the time to talk to a qualified attorney, and get some discipline in place for the following strategies: Manage founder’s shares like gold with partners.

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Stock Vesting Preferred Stock Cofounder 129

Startup Professionals Musings

MAY 18, 2015

Every entrepreneur needs to understand the following basics, to be addressed at company formation, as they engage a qualified attorney to draw up the paperwork: Allocate founder’s stock commensurate with commitment. Key founder vesting should have no cliff. Retain the right to reclaim stock from anyone leaving the startup.

Stock 120

Stock Vesting Common Stock Founder Vesting 120

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.

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Founder Common Stock Preferred Stock Stock 87

Austin Startup

OCTOBER 27, 2017

TL;DR : “Founder friendliness” should mean not being hostile, but also not being submissive, to founders. Out of State VCs When you’re not CEO Material Preferred Stock v. The truth is, I’ve put my fair share of founders in their place, when appropriate. Good entrepreneurs and advisors know that.

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Founder Cap Table Preferred Stock Common Stock 48

Startup Professionals Musings

FEBRUARY 8, 2019

File founder stock election so no taxes are due until exit. File an 83(b) election with the IRS within 30 days of founding the company, while the market value of your startup is essentially zero. Additionally, I recommend that you review and update co-founder ownership agreements annually.

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LLC Limited Liability Company Cofounder Preferred Stock 210

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

Steve Blank

APRIL 10, 2019

VC’s have just changed the ~50-year old social contract with startup employees. In doing so they may have removed one of the key incentives that made startups different from working in a large company. For most startup employee’s startup stock options are now a bad deal. Why Startups Offer Stock Options.

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Stock Options Stock Vesting Common Stock 333

Both Sides of the Table

JULY 29, 2010

Mike Stern (wasn’t sure which one so leave a comment if it’s you): Q: “is it possible to sell your startup without venture investment if the company has big traction and a large user base?&# I talked also about 409a valuations and why common stock purchases cost less than preferred stock purchases.

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Venture Capital Term Sheet Valuation Stock Options 282

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. Series A Preferred. Series A-1 Preferred.

Pre-Money Valuation 113

Pre-Money Valuation Liquidation Preference Dividend Common Stock 113

Scott Edward Walker

MAY 15, 2012

Part 2, entitled “ Convertible Note Seed Financings: Econ 101 for Founders ,” addressed the economics. What Happens If a Startup is Acquired Prior to the Note’s Conversion to Shares of Preferred Stock? There are generally three different approaches: 1) Money Back, Plus Interest (Founder-Friendly).

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Finance Founder Accredited Investor Preferred Stock 64

Scott Edward Walker

APRIL 22, 2012

ii) why are convertible notes issued instead of shares of common or preferred stock? 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? and (iii) what are the advantages of issuing convertible notes? What Is a Conversion Discount?

Pre-Money Valuation 72

Pre-Money Valuation Finance Liquidation Preference Founder 72

Gust

JUNE 7, 2014

5) Senior Preferred Stock and warrants. 6) Any preference multiple on (5). 7) Junior Preferred Stock and warrants. 8) Any preference multiple on (7). 9) Common Stock (including any Preferred that converted to Common, any exercised options, and all Founders stock) and Common stock warrants.

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Warrant Preferred Stock Early Stage Common Stock 157

Scott Edward Walker

JUNE 9, 2019

Accordingly, I thought it would be helpful for founders to discuss these rights and to point out the problems they create for startups. This is a huge red flag and founders should push back very hard. In short, super pro rata rights are another example of investors trying to take advantage of inexperienced founders.

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Preferred Stock Term Sheet Dilution Stock 56

Lightspeed Venture Partners

OCTOBER 7, 2012

Week three’s breakdown covered topics like how hard momentum is to turn around, and how participating preferred stock works. The founders were very sympathetic; a man, laid off from his job, and his very pregnant wife, who sold their house and investing $150k into the business and are working hard to make a go of it.

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Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

ithacaVC

DECEMBER 22, 2012

I recently engaged in a conversation (over a few days) about the need for a seed stage company to have a board member other than the founder. For clarity, a company with one founder can have a one member board (assuming a corporation). Dave McClure (500 Startups) and David Lee (SV Angels) are 2 examples, but there are many many others.

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Seed Stage Preferred Stock Founder Angel Investor 82

Scott Edward Walker

APRIL 9, 2012

Venture capital funds, seed funds, super angels, angel groups, incubators, and “friends and family” are all playing the seed financing game and investing early in startups in an attempt to land the next Facebook. ii) why are convertible notes issued instead of shares of common or preferred stock?

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Scott Edward Walker

MAY 30, 2013

Many founders do not realize that officers of a corporation have the same fiduciary obligations as directors. It means every founder must be very careful whom he or she chooses as a co-founder or an investor. The more stockholders a startup has and the less sophisticated they are (e.g., Introduction.

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Delaware Founder Cofounder Due Diligence 68

View from Seed

OCTOBER 15, 2014

Over the summer, based on feedback from our portfolio and the broader startup community, NextView created pre-formatted board deck templates for seed-stage startups — part of our Growth Guides series. A seed-stage mobile startup’s housekeeping section might look something like this: Section 3: Core Metrics.

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Seed Stage Cap Table Metrics Burn Rate 331

www.quora.com

JANUARY 16, 2011

Find Questions, Topics and People Add Question Add Question Venture Capital Venture Capital Term Sheets Startups Term Sheets What are examples of good startup term sheets? Ryan Spoon , Founder, Former CEO of beRecruited.co. continue) What are good examples of successful "invite only" startups? PDF in email?

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Term Sheet Startup Angel Investor Wiki 41

Gust

SEPTEMBER 29, 2011

The most successful serial entrepreneurs in the world may found three or four, perhaps even eight or ten venture-backed startups over the course of their careers. It should therefore come as no surprise that an asymmetry of information exists, mostly gleaned from experience, between founders and investors in a venture financing deal.

Finance 178

Finance Term Sheet Preferred Stock Bridge Financing 178

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. I never did.

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Liquidation Preference Term Sheet Cap Table Participating Preferred 304

Business Plan Blog

NOVEMBER 13, 2013

Most startup founders do not have enough capital to launch their companies and need to raise money at some point. Individual investors who provide financial funding to startups are called ‘Angel Investors.’ Among the most common methods of funding used by startups when raising seed capital is “Convertible Debt Financing.”

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Finance Accredited Investor Angel Investor Seed Capital 93

Startup Professionals Musings

AUGUST 1, 2016

Experienced entrepreneurs understand investor expectations of Board representation, preferred stock, and payments based on interim milestones. Founder insistence on non-dilute clauses, arms-length relationships, and quick closure without due diligence will short-circuit active interest. Ask only for the money you can justify.

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Due Diligence Intellectual Property Preferred Stock Seed Stage 120

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. It’s called restricted stock because it often comes with restrictions, such as vesting. See Also: 10 Tips for Dealing With Startup Stock Options.

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Equity Employee Stock Options Vesting 60