Startup Company Lawyer

AUGUST 31, 2012

In fact, the form of convertible debt documents that YC recommends that their companies use has been recently revised to include a provision that forces a conversion of the debt into a pre-negotiated Series AA preferred stock upon the consent of a majority in interest of the convertible note holders.

Convertible Security 73

Convertible Security Equity Security Preferred Stock 73

Up and Running

SEPTEMBER 19, 2017

For a business that anticipates needing, for example, $500,000 in startup capital, that means that best-case scenario Klemm can expect to give up half of his business’s common stock (and an even larger percentage of control of the business once the deal’s fine print provisions are considered).

Private Equity 94

Private Equity Pre-Money Valuation Equity Startup 94

Agile VC

DECEMBER 4, 2014

But delaying or avoiding the conversation often results in it being more awkward than it needs to be. You can then work with your law firm to formally draw up founder common stock paperwork either then or subsequently. Once you have the framework, it’s simply a matter of having the conversation and reaching an agreement.

Cofounder 173

Cofounder Equity Founder Sweat Equity 173

www.inc.com

SEPTEMBER 24, 2011

Theres a huge opportunity cost in not taking equity," he says. He prefers to work with companies that are building Web-based applications and have relatively low start-up costs. Graham also pushes for common stock, the right to participate in future funding rounds to preserve the size of the stake, and a guaranteed seat on the board.

Arizona 40

Arizona Equity Iowa Venture Capital 40

Up and Running

AUGUST 17, 2015

C Corp versus LLC, non-competes, liquidation preferences, preferred versus common stock, and so on). By the time of their restaurant’s grand opening, they were able to build a brand around their restaurant, perfect their menu, and develop a clear understanding of their operating costs.

Entrepreneur 60

Entrepreneur Cofounder Angel Investor eCommerce 60

Austin Startup

JULY 6, 2018

Re: cash, the more “unbundled” types of accelerators (less formalized, less equity) tend to not provide any cash upfront, but also typically “cost” less in equity, often just 1–2% of your fully diluted capitalization. Others find it a necessary cost to getting access to the accelerator’s network, which is what they’re really there for.

Dilution 48

Dilution Startup Technical Review Equity 48

venturehacks.com

MARCH 21, 2008

If an advisor can uncork a million dollars of your company’s latent value with 15 minutes of conversation or a single introduction, you should pay him appropriately. 0.25% of a company’s post-Series A stock. Advisory shares are normal common stock. The opportunity cost is probably too high.

Advisory Board 44

Advisory Board Cap Table Vesting Equity 44

Tim Keane

JANUARY 12, 2010

.   In some rare cases, there may also be a participation provision for dividends which pays the preferred a dividend beyond their own equal to any dividend paid to the common.   It is very expensive if you’re the entrepreneur since it doubles the cost to the company of paying dividends to the entrepreneur.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

keen.io

FEBRUARY 5, 2013

If this were like one of the strategy board games we regularly play, I’d be trying to win at all costs, giving my friends bad advice and hoping they’d screw up their trades. Kirk dropped an even-bigger weight onto the conversation when he added, “You’re asking me to give up about a half a million dollars.” Kyle was quick to respond.

Salary 50

Salary Equity Startup San Francisco 50

Gust

DECEMBER 18, 2013

The other factors bearing on the advisability of doing a convertible note are that it is debt, not equity (good for the investor, because in a down liquidation scenario the note gets paid out ahead of anything going to the founder; bad for the investor, because in an up liquidation scenario prior to conversion, the company can just pay off the note (..)

Founder 150

Founder Valuation Seed Money Common Stock 150

Gust

SEPTEMBER 17, 2014

There are a million ways to do quick, easy, low-cost rounds with prices. These are all real conversations. What if when you have that conversation you don’t agree? If you want to give them a 50% discount offer them $1 of common-stock warrants (no liquidation preference) for every $1 of stock they buy.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

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. Conversely, very junior employees have relatively little influence over the company, so their equity grants should be correspondingly much smaller, if at all.”.

Equity 60

Equity Employee Stock Options Vesting 60

Scott Edward Walker

APRIL 9, 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? (ii) ii) what happens if the maturity date is reached prior to the note’s conversion to equity? Why Can’t a Startup Issue Shares of Common Stock to Investors? Speed, simplicity and cost.

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

ReadWriteStart

MAY 8, 2012

I did recover from this, but when you start the funding process, evaluate exactly what you need to do to get to the next steps and how much that will cost. Now, we’re focusing early conversations intently on our strategy for winning and our progress thus far, which gives investors a clearer picture of who we are and where we’re headed.”

Cofounder 140

Cofounder Startup San Francisco Silicon Valley 140

Austin Startup

JULY 22, 2021

Austin based ZPEG developed an upgraded compression algorithm for streaming videos based on an advanced human visual model that reduces streaming costs for 4K streams by 30%. Dallas’ YouGoNatural designs luxury headwraps and offers an extensive collection of looks that makes protecting hair a stylish experience. Female Founders!

San Antonio 107

San Antonio Dallas Houston Founder 107

The Startup Lawyer

FEBRUARY 4, 2011

Thus your startup needs to determine the intangible value offered by the incubator (and yes, a $150,000 convertible note with no cap and no conversion discount qualifies as an intangible). 8) Determine the Opportunity Costs. As you can see, I don’t think any startup has joined an incubator based solely on the pre-money valuation.

Incubator 105

Incubator Pre-Money Valuation Option Pool Advisory Board 105

venturehacks.com

OCTOBER 21, 2010

If you don’t keep your eyes on the option pool, your investors will slip it in the pre-money and cost you millions of dollars of effective valuation. This reverse dilution benefits all classes of stock proportionally even though the common stock holders paid for all of the initial dilution in the first place!

Option Pool 68

Option Pool Pre-Money Valuation Dilution Warrant 68

This is going to be BIG.

AUGUST 4, 2024

In explaining how this will kill the startup industry, they get the basics of how it works wrong—leaving out exceptions for illiquidity, the five-year amortization, the fact that you can also write off unrealized losses, and not factoring in the obvious factors of vesting, common stock 409a discounts.

United States 167

United States Cofounder Myanmar Silicon Valley 167