VC Adventure

AUGUST 15, 2018

Most boards did some level of work to determine the FMV of a company’s stock but generally options were priced between 10% and 15% of a company’s then preferred price (because common equity sits behind preferred equity there is typically a discount applied to the FMV of common stock to account for this “overhang”).

Valuation 48

Valuation Common Stock Cap Table Software Review 48

Austin Startup

JULY 6, 2018

More traditional and comprehensive programs often require 5–8% of common stock, but often provide between $20K and $100K up-front as well. Anti-Dilution. See: Startup Accelerator Anti-Dilution Provisions; The Fine Print. Entrepreneurs often celebrate faking it until you make it. Know that some accelerators do the same.

Dilution 48

Dilution Startup Technical Review Equity 48

The Startup Lawyer

JANUARY 2, 2014

I typically advise issuing 50% to 80% of the authorized shares of Common Stock to the initial founders upon incorporation. Thus, if the certificate of incorporation authorizes 10,000,000 shares of Common Stock, an aggregate of 5,000,000 to 8,000,000 share should be issued at incorporation.

Common Stock 84

Common Stock Founder Aggregator Stock 84

Startup Company Lawyer

JANUARY 9, 2011

Tweaking convertible debt so that common stock (instead of preferred stock) is issued for the conversion discount in order to limit liquidation preference overhang. Note: A better way to make convertible debt identical to a seed financing is to have the convertible debt convert into its own series of preferred stock.

Liquidation Preference 57

Liquidation Preference Finance Preferred Stock Common Stock 57

ithacaVC

SEPTEMBER 20, 2011

That means, assuming a 1X liquidation preference, that the common stock should be worth zero NOW simply based on the fact that the aggregate liquidation preference exceeds the M&A revenue multiples. Tough to argue that it is not reasonable. Worth some thought and discussion.

Liquidation Preference 49

Liquidation Preference Common Stock Stock Options Valuation 49

K9 Ventures

MAY 14, 2011

<$50K in aggregate. Common Stock. Convertible Note or Preferred Stock. Convertible Note or Preferred Stock. Preferred Stock. Preferred Stock. Preferred Stock / Warrants. Lots, 20-100. 1-2 per partner. Individual / Partnership. Individual. Partnership. Individual. Individual. Partnership.

Preferred Stock 125

Preferred Stock Seed Stage Incubator Accredited Investor 125

ithacaVC

FEBRUARY 23, 2011

As the investors’ aggregate liquidation preference (ALP) increases typically the need for a MCOP also increases. The ALP is the total amount of $ that preferred stock holders are owed on a sale of the company under their liquidation preferences. A few key points to consider: 1.

Liquidation Preference 55

Liquidation Preference Management Preferred Stock Dividend 55