Gust

MAY 24, 2012

As a quick review, most startups begin life as corporations with a single class of equity securities, referred to as Common Stock , issued to founders, employees, and outside service providers. Options and warrants, when issued, are also typically exercisable for shares of Common Stock.

IPO 159

IPO Equity Common Stock Stock 159

David Teten

MARCH 14, 2018

Managers of VC funds typically want to grow their business aggressively, just like the founders we back. This is a model used in at least one case by China’s third-largest private equity firm, China Science & Merchants Investment Management Group ($12 billion+ AUM), which funded in 2015 CSC Upshot, a $400m seed fund through AngelList.

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.

Term Sheet 120

Term Sheet Demand Preferred Stock Liquidation Preference 120

www.vccafe.com

MARCH 11, 2013

Startup Resources (Updated Mar 2013). Venture Capital Cafe > Startup Resources (Updated Mar 2013). VC & Startup Resources. Seed Startups. VC Cafe covers early stage Israeli and European tech & mobile startups. Hundreds of startups featured since 2005, will yours be next? About VC Cafe.

Software Review 53

Software Review Technical Review Startup 53

ithacaVC

JUNE 29, 2018

I have posted a few times on management carve out plans (back in February 2011 and November 2011 ; wow, time flies!!). 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

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?&# The downside is that people need to buy their stock. In fact, far better if you haven’t raised venture capital.

Venture Capital 282

Venture Capital Term Sheet Valuation Stock Options 282

Startup Professionals Musings

MAY 18, 2015

Even though initial stock has no value or market, it is extremely valuable in dividing entity ownership between multiple co-founders, commensurate with their investment, contribution and role. 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.

Stock 120

Stock Vesting Common Stock Founder Vesting 120

Startup Professionals Musings

JANUARY 29, 2018

Unfortunately, in my years since as a small business advisor, I have seen too many founders squander this asset through a lack of understanding of some basic legal and operational issues, or by handing out nominally “free” stock to the wrong people at the wrong time. Buying back stock on the open market may cost a huge premium.

Stock 129

Stock Vesting Preferred Stock Cofounder 129

Startup Professionals Musings

FEBRUARY 8, 2019

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. Failing to file or waiting to incorporate until a first investor arrives could lead to a nasty tax bill in the middle of startup rollout when you can least afford it.

LLC 210

LLC Limited Liability Company Cofounder Preferred Stock 210

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. The range of investments in a startup can vary from three to seven figures. Preference shares. Let’s dive in.

Cap Table 112

Cap Table Pre-Money Valuation Stock Options Option Pool 112

Gust

JUNE 7, 2014

Also, as Ben Black mentioned in his answer, in some cases the investors may choose to provide an incentive to the management team, in order to ensure that the sale goes through, and quickly. Management carve-out (if any). 5) Senior Preferred Stock and warrants. 6) Any preference multiple on (5).

Warrant 157

Warrant Preferred Stock Early Stage Common Stock 157

David Teten

AUGUST 19, 2019

However, many industry experts question the accuracy of early-stage market data, given many startups are no longer filing their Form Ds. John Borchers, Co-founder and Managing Partner of Decathlon Capital, claims to be the largest revenue-based financing investor in the US. Should Private Startups Be Issuing More Bonds?

Revenue 60

Revenue Term Sheet Founder Technical Review 60

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

www.paulgraham.com

APRIL 28, 2010

Want to start a startup? A typical startup goes throughseveral rounds of funding, and at each round you want to take justenough money to reach the speed where you can shift into the nextgear. Few startups get it quite right. 1 ] A startups life will be more complicated, legally, if any of theinvestors arent accredited.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

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

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. But know that every term in your term sheet is there as a result of some dispute of the past between shareholders or between shareholders & management. Or what “participating preferred&# stock is and how it can screw you.

Liquidation Preference 304

Liquidation Preference Term Sheet Cap Table Participating Preferred 304

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

Tim Keane

JANUARY 12, 2010

Startups and angels: Along the way to success. 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. By Tim Keane, Angel Investor, Golden Angels Investors, LLC.

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

Equity 60

Equity Employee Stock Options Vesting 60

ithacaVC

NOVEMBER 18, 2011

In my earlier post on management carve out plans (see it here ), I gave a detailed description of what these plans are and why boards of VC-backed companies often use them. get both the carve out amount and the equity value; I guess double dipping is only for VCs that have participating preferred stock ).

Management 49

Management Preferred Stock Participating Preferred Equity 49

Startup Company Lawyer

MARCH 12, 2009

Almost all technology startup companies that I work with are C corps. Any company that raises venture financing will need to be a C corp in order to issue preferred stock. Management is accountable to the board of directors and therefore has the ability to transact business without stockholder participation in each decision.

LLC 61

LLC Stock Options Preferred Stock Stock 61

ithacaVC

JANUARY 18, 2017

Once in a while I get the question “What do I need to know about investing in a startup?” ” The context is typically where Friend A has asked Friend B to invest in Friend A’s startup business. We all know that startup projections are essentially best guesses, but the model needs to tell a realistic narrative.

Preferred Stock 40

Preferred Stock LLC Startup Security 40

ithacaVC

DECEMBER 22, 2012

Dave McClure (500 Startups) and David Lee (SV Angels) are 2 examples, but there are many many others. It is reasonable to think that the limited partners would expect their money managers (i.e., For clarity, a company with one founder can have a one member board (assuming a corporation). Might be kind of lonely, but completely legal.

Seed Stage 82

Seed Stage Preferred Stock Founder Angel Investor 82

The Startup Lawyer

MARCH 1, 2010

The drafters are “open sourcing&# the documents so that they may be continually improved by the startup community. The board is set up to consist of 3 directors: 1 director elected by the common (founders); 1 directors elected by the preferred (investors); 1 “independent&# director (i.e., Check out the docs here.

Preferred Stock 79

Preferred Stock Term Sheet Redemption Registration Rights 79

K9 Ventures

MAY 14, 2011

The companies go through a 3-6 month long startup bootcamp and then typically try to raise angel/seed funding. Most angels invest for a couple of reasons – some do it because they genuinely love the startup space and this is their way of continuing to be involved in a startup, sometimes vicariously.

Preferred Stock 125

Preferred Stock Seed Stage Incubator Early Stage 125

www.payne.org

SEPTEMBER 22, 2011

Startup Equity For Employees. 2 Stock Classes: Common and Preferred. 5 Stock vs Options. 6 Founders / Restricted Stock. The re-heating of the venture funded tech market has pushed a heat up of the hiring market, and Im getting more calls from friends asking for help understanding startup stock (equity) offers.

Equity 56

Equity Employee Vesting Preferred Stock 56

www.mattbartus.com

SEPTEMBER 24, 2011

Perspectives on issues affecting founders, startups and investors from a veteran startup lawyer in Silicon Valley. People tend to underestimate how much record keeping is involved with managing employees and consultants, and this just adds an unacceptable extra burden. I have moved my startup practice to Cooley from Dorsey.

Equity 40

Equity Vesting Silicon Valley Intellectual Property 40

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

Andrew Payne

JUNE 5, 2010

In contrast, value investors focus on the “deal”: investor rights & protections, aggressive preferred stock elements, etc. . “Growth” investors focus on the idea: the team, market, and product. They want investments that can be run-away successes. In practice, it’s not really this black and white.

Preferred Stock 60

Preferred Stock Stock Startup Portfolio 60

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

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

JUNE 20, 2011

Cost is the overriding issue for startups when it comes to properly engaging a lawyer. Here are 5 clues that you need a good startup lawyer (and this is just 5 out of many): 1. If you are doing a convertible debt round, expect legal fees of between $3,000 to $10,000 depending on the number of investors and length of negotiation.

Stock Options 58

Stock Options Vesting Subscription Agreement Founder Vesting 58

The Next Web

JUNE 17, 2015

Giving up equity in your business, as an alternative to paying cash, often sounds like a great idea to cash-starved startups. When you can, raising capital from a professional third-party investor is always preferred. For example, let’s stay your startup is worth $1,000,000. Are There Any Strings Attached?

Equity 60

Equity Valuation Preferred Stock Common Stock 60

The Startup Lawyer

MARCH 1, 2010

The drafters are “open sourcing&# the documents so that they may be continually improved by the startup community. The board is set up to consist of 3 directors: 1 director elected by the common (founders); 1 directors elected by the preferred (investors); 1 “independent&# director (i.e., Check out the docs here.

Preferred Stock 40

Preferred Stock Term Sheet Redemption Registration Rights 40

Austin Startup

OCTOBER 27, 2017

Out of State VCs When you’re not CEO Material Preferred Stock v. Common Stock Ask the Users Because we’re known as Startup/VC lawyers who don’t represent VCs (just companies), I often get asked about my thoughts on “founder friendliness.” Good entrepreneurs and advisors know that. Background reading: Local v.

Founder 48

Founder Cap Table Preferred Stock Common Stock 48

Up and Running

MAY 23, 2016

To give you a better idea of what entrepreneurs in this industry are thinking about during each phase of the startup process, I interviewed SaaS entrepreneurs from all over the world, including our own COO Noah Parsons. Eric Ries, a Silicon Valley entrepreneur and author of The Lean Startup, popularized this strategy for web applications.

Software Review 74

Software Review Software Delaware Forecast 74

Ben's Blog

JULY 16, 2013

If you run a startup and are currently raising money, you probably planned for a somewhat different fundraising environment than the one you find yourself in today. 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.

Down Round 78

Down Round Marketing Preferred Stock Post-Money Valuation 78