Startup Company Lawyer

AUGUST 31, 2012

Ted Wang believes that the “reason that capped convertible debt is the current market leader is that entrepreneurs have been conditioned over time to believe that convertible debt is (a) faster (b) cheaper and (c) better for them than equity investment.” Why convertible equity is better than preferred stock.

Convertible Security 73

Convertible Security Equity Security Preferred Stock 73

Steve Blank

APRIL 26, 2022

Some even insisted that all prior preferred stock had to be converted to common stock. Startups that can’t find product/market fit and/or generate sufficient revenue and/or lacked patient capital are scrambling for dollars – and the bottom feeders are happy to help. Why do VCs Do This?

Cram Down 404

Cram Down Founder Venture Capital Recapitalization 404

Both Sides of the Table

JULY 29, 2010

The A round was done in February 2000 (end of the bull market) and my B round was done in April 2001 (bear market). People buy companies for 3 primary reasons: 1) they want the management team / talent 2) they want the technology or 3) they want the market traction (revenue, customer base, profits, etc). Do it early.

Venture Capital 282

Venture Capital Term Sheet Valuation Stock Options 282

Startup Professionals Musings

JANUARY 29, 2018

Even though initial stock has no market value today, it is extremely valuable in dividing equity ownership between co-founders, investors, and early partners. To retain control of your business, you need to reclaim stock shares from anyone leaving the startup for any reason.

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. Even though the initial stock has no value or market, it is imperative that you document the division of ownership immediately between co-founders commensurate with their investment, contribution, and role.

LLC 210

LLC Limited Liability Company Cofounder Preferred Stock 210

Ben's Blog

JULY 16, 2013

What about the efficient market hypothesis? Aren’t markets rational? If markets behave rationally, one might expect the ratio of price to earnings to be reasonably stable over the period (click here for complete data set). Because markets are not logical; markets are emotional. How could this be? Things change.

Down Round 78

Down Round Marketing Preferred Stock Post-Money Valuation 78

YoungUpstarts

JUNE 26, 2020

To do that you have to show how your market is big enough (a multi-billion dollar market) to support that kind of valuation. Like Mark Zuckerberg, who built a site only for college students, we are looking for a small, protected market that you as an entrepreneur, can dominate. Why does it need to be a small market?

Finance 180

Finance Silicon Valley Valuation Startup 180

David Teten

AUGUST 19, 2019

According to Lighter Capital ,“ the RBI market has grown rapidly, contrasting sharply with a decrease in the number of early-stage angel and VC fundings ”. However, many industry experts question the accuracy of early-stage market data, given many startups are no longer filing their Form Ds. Also of interest.

Revenue 60

Revenue Term Sheet Founder Technical Review 60

Scott Edward Walker

APRIL 9, 2012

ii) why are convertible notes issued instead of shares of common or preferred stock? In the context of a seed financing, the debt typically automatically converts into shares of preferred stock upon the closing of a Series A round of financing. Friends and family are also often issued shares of common stock.

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

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. This isn’t a company yet, it’s an idea, and the founder could do a lot more on his own to validate product-market fit before raising capital. BACK 9 DIPS. They were right to do so.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

Agile VC

APRIL 17, 2011

Last week ZipCar began trading and has a market cap of about $1 billion. Only 7% of the search queries are performed by users referred by search engines, meaning Kayak’s brand is very strong and they continue to build it ($39M spent in 2010 on brand advertising, nearly $92M in total marketing spend). Quinstreet priced at $15.00/sh

Pre-Money Valuation 113

Pre-Money Valuation Liquidation Preference Dividend Common Stock 113

Startup Professionals Musings

AUGUST 1, 2016

Experienced entrepreneurs understand investor expectations of Board representation, preferred stock, and payments based on interim milestones. Marketing programs and distribution channels are required for even the best solutions, with an appropriate and viable rollout and growth strategy. Ask only for the money you can justify.

Due Diligence 120

Due Diligence Intellectual Property Preferred Stock Seed Stage 120

Ben's Blog

JULY 16, 2013

What about the efficient market hypothesis? Aren’t markets rational? If markets behave rationally, one might expect the ratio of price to earnings to be reasonably stable over the period (click here for complete data set). Because markets are not logical; markets are emotional. How could this be? Things change.

Marketing 46

Marketing Preferred Stock Post-Money Valuation Down Round 46

View from Seed

OCTOBER 15, 2014

Examples of housekeeping include the following list, though not every item will appear every time: Finance: Cash out date, burn rate, 409A valuation, cap table, common/preferred stock dashboard. Even if there’s some kind of product in the market during the first round of financing, it’s probably to be unproven.

Seed Stage 331

Seed Stage Cap Table Metrics Burn Rate 331

Up and Running

AUGUST 28, 2019

Stick to the basic requirements and save your unique flourishes for your mission statement and marketing materials. If you used an incorporation service, they might have sent you a nice binder with your bylaws template, stock certificates, and maybe even a nifty corporate seal embosser (neat!). Create a corporate record book.

Delaware 83

Delaware Stock Nevada Technical Review 83

Steve Blank

OCTOBER 24, 2017

Uber , Zenefits , Tanium , Lending Club CEOs of companies with billion dollar market caps have been in the news – and not in a good way. This era was a “buyer’s market” – there were more good companies looking to get funded than there were VCs. And while new markets were created (i.e. Board Control.

Founder 245

Founder Technical Review CTO Hire IPO 245

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. Facilitate an upgrade of founder’s common to founder’s preferred.

Stock 120

Stock Vesting Common Stock Founder Vesting 120

K9 Ventures

NOVEMBER 21, 2011

So when a valuation firm looks at the complete picture, the movement in the price of the Common Stock may either be small, or the price may not move at all because the transaction can be considered to be a one-off transaction (i.e. The concept of the Series FF stock is a good example of this.

Founder 87

Founder Common Stock Preferred Stock Stock 87

K9 Ventures

NOVEMBER 21, 2011

So when a valuation firm looks at the complete picture, the movement in the price of the Common Stock may either be small, or the price may not move at all because the transaction can be considered to be a one-off transaction (i.e. The concept of the Series FF stock is a good example of this.

Founder 84

Founder Common Stock Preferred Stock Stock 84

K9 Ventures

MAY 14, 2011

Common Stock. Convertible Note or Preferred Stock. Convertible Note or Preferred Stock. Preferred Stock. Preferred Stock. Preferred Stock / Warrants. Investment Structure. Debt or Convertible Note. Board Seats.

Preferred Stock 125

Preferred Stock Seed Stage Incubator Early Stage 125

Both Sides of the Table

AUGUST 30, 2010

I have to say that I didn’t take the question to mean that convertible debt had won for the entire market, but either way it’s clear that convertible debt has become an increasing trend. a priced/valued preferred stock financing)?&#. prefer equity to convertible debt): If you’re an early stage investor (e.g.

Equity 319

Equity Early Stage Angel Investor Valuation 319

Berkonomics

DECEMBER 20, 2018

These are your candidates, because they are companies already absorbing much or all the marketing expense necessary to make sales of your invention. They will be more willing to pay a royalty fee if your product gets them to market earlier or is protected by patent to create a barrier to their competition.

IP 54

IP Intellectual Property Investment Bankers Product 54

ithacaVC

DECEMBER 14, 2011

Specifically, “too much” liquidation preference (I will use “LP” for liquidation preference). As most of you probably know, LP is one of the fundamental economic attributes of preferred stock that preferred shareholders enjoy.

Liquidation Preference 49

Liquidation Preference LP Preferred Stock Liquidity Event 49

Berkonomics

DECEMBER 20, 2018

These are your candidates, because they are companies already absorbing much or all the marketing expense necessary to make sales of your invention. They will be more willing to pay a royalty fee if your product gets them to market earlier or is protected by patent to create a barrier to their competition.

IP 48

IP Intellectual Property Product Investment Bankers 48

Steve Blank

APRIL 10, 2019

The premise of Growth capital is that if that by staying private longer, all the growth upside that went to the public markets (Wall Street) could instead be made by the private investors (the VC’s and Growth Investors.). Before these three went public, they weren’t unicorns – that is their market cap was less than a billion dollars.

Stock Options 333

Stock Options Stock Vesting Common Stock 333

Scott Edward Walker

MAY 15, 2012

What Happens If a Startup is Acquired Prior to the Note’s Conversion to Shares of Preferred Stock? As discussed in part 1 , in the context of a seed financing, a convertible note is a loan that typically automatically converts into shares of preferred stock upon the closing of a Series A round of financing.

Finance 64

Finance Founder Accredited Investor Preferred Stock 64

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. Rasheen Carbin is currently Director of Marketing at nspHire. I’ll go into the difference between these in just a moment. Types of equity compensation.

Equity 60

Equity Employee Stock Options Vesting 60

Startup Company Lawyer

JANUARY 31, 2011

Optional maturity conversion : into Series AA Preferred Stock based on a $5M valuation. Please note that these are generally the terms of the Series AA Preferred Stock financing documents that Y Combinator previously published.). Once again, I don’t know how to get a better deal than this.).

Preferred Stock 60

Preferred Stock Liquidation Preference IPO Common Stock 60

www.payne.org

SEPTEMBER 22, 2011

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. 3 Dilution.

Equity 56

Equity Employee Vesting Preferred Stock 56

Agile VC

FEBRUARY 28, 2013

increasing dividends or issuing preferred stock). On paper it makes sense… ~$10B market cap, deals with lots of content owners, a nascent library of Netflix developed content, and a happy/loyal consumer base. Some people think Apple should buy Netflix.

Hungary 168

Hungary Dividend Vertical Preferred Stock 168

Both Sides of the Table

SEPTEMBER 5, 2012

Can you imagine investing in the stock market where your price was determined at a future date and the better that company performed the HIGHER the price you paid for that investment. This has worked very well in the 2009-2012 time frame because the tech market has boomed in this period. I’m starting to hear it more often.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Andrew Payne

JUNE 5, 2010

“Growth” investors focus on the idea: the team, market, and product. In contrast, value investors focus on the “deal”: investor rights & protections, aggressive preferred stock elements, etc. I’ve found venture investors can be categorized among similar lines.

Preferred Stock 60

Preferred Stock Stock Startup Portfolio 60

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

Tim Keane

JANUARY 12, 2010

Bottom Up Market Sizing » 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. Startups and angels: Along the way to success. times at 5 years and 11.39 here of 7.65 [2].

Term Sheet 68

Term Sheet Valuation Dividend Pre-Money Valuation 68

Growthink Blog

MAY 10, 2012

If it's not your plan to get venture capital down the road, then you'll probably stop in Stage 2-receiving enough funding to boost your marketing, sales, and infrastructure to grow organically from there to the point where you are satisfied or ready to sell. Series B is the round that follows series A in early stage financing.

Equity 88

Equity Mezzanine Later Stage Venture Capital 88

Both Sides of the Table

MARCH 21, 2010

As startup entrepreneurs we all want to work with them because having their name as reference clients makes it so much easier for marketing, PR, selling to other customers, fund raising and even recruiting. Make the warrants for common stock and not preferred stock. This is the same as with employee stock options.

Warrant 298

Warrant Dilution Startup Stock Options 298

ithacaVC

APRIL 25, 2012

Seriously, pre-money valuation is a function of many things (team strength, size of market, IP, hotness of sector, etc.) However, stating a desired pre-money valuation early in the process is not a good idea. Here is why. The good discussion will happen, but give the relationship a while to mature first.

Valuation 49

Valuation Pre-Money Valuation Liquidation Preference Preferred Stock 49