Both Sides of the Table

SEPTEMBER 18, 2014

Less than you’ll probably grant your most junior employees in stock options? 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.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

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

Employee Benefits. Jumpstart wasnt much at the time, just four employees working from home offices. But as Arizona Bay grew--it now has 40 employees and more than a dozen clients--Graham began to worry that he was missing out. Financing A Small Business. Business Taxes. Selling A Business. Bookkeeping. Exit Strategies.

Arizona 40

Arizona Equity Iowa Venture Capital 40

Both Sides of the Table

MARCH 21, 2010

A “warrant&# is a right, but not an obligation for a company to buy stock in your company at a future date and at a pre-agreed price. Think of it as similar to an employee stock option. So let’s think first about employee options and how they can be similar to company warrants. Should You Offer Them?

Warrant 298

Warrant Dilution Startup Stock Options 298

keen.io

FEBRUARY 5, 2013

From there, I began googling things like “first employee startup equity” and “startup offer negotiation.” These were the best resources I found: Equity for Early Employees in Early Stage Startups. Startup Equity for Early Employees. We had a big team meeting, with all three founders and all three potential new employees.

Salary 50

Salary Equity Startup San Francisco 50

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. Or they bring you a handful of great employees. Advisory shares are normal common stock.

Advisory Board 44

Advisory Board Cap Table Vesting Equity 44

Tim Keane

JANUARY 12, 2010

Especially in situations where the founders have a large position and are key employees, it is not uncommon for investors to request that they agree to have some portion of their holdings vest on a schedule.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Gust

SEPTEMBER 17, 2014

Less than you’ll probably grant your most junior employees in stock options? 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

SEPTEMBER 20, 2021

Furthermore, there are various forms of equity, such as preferred stock, common stock, and convertible notes, which influence the present and potential future investors. Total share ownership is the sum of the common stock, stock options, preferred stock, and any other stock category for a single individual.

Cap Table 112

Cap Table Pre-Money Valuation Stock Options Option Pool 112

Austin Startup

JULY 22, 2021

All finalists will receive: A fast track into the Capital Factory portfolio where you will receive opportunities to get in front of potential investors, customers and employees. Any software, hardware, or CPG startup in Texas with a female founder or co-founder can apply to participate. Female Founders!

San Antonio 107

San Antonio Dallas Houston Founder 107

ithacaVC

DECEMBER 13, 2013

They are typically pretty simple: (i) shares owned by founders and (ii) shares authorized for issuance in a stock option pool, some of which may be issued to employees already and some of which will be available for future issuance. This clearly illustrates the power of a conversion discount. I have posted on this previously.

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

Berkonomics

JANUARY 6, 2022

A rather common but small dividend rate of six percent becomes a massive amount after seven years, almost half again the value of the original investment. Conversely, I have praised and seen others praise VCs who volunteer to eliminate participation clauses even before knowing the ultimate sales price in a deal.

Dividend 62

Dividend IRR Preferred Stock Participating Preferred 62

Berkonomics

OCTOBER 1, 2015

A rather common but small dividend rate of six percent becomes a massive amount after seven years, almost half again the value of the original investment. Conversely, I have praised and seen others praise VCs who volunteer to eliminate participation clauses even before knowing the ultimate sales price in a deal.

Dividend 48

Dividend Preferred Stock IRR Participating Preferred 48

Austin Startup

AUGUST 1, 2017

This is most clearly highlighted in the “unicorn” boom we all saw over the past few years, where founders raised very large rounds, with terms very onerous to the underlying common stock, hoping they could eventually justify billion dollar valuations to skeptical acquirers or public market investors.

Liquidation Preference 48

Liquidation Preference Common Stock Valuation Silicon Valley 48

venturehacks.com

OCTOBER 21, 2010

As your lawyer explains that the so-called pre-money valuation always includes a large unallocated option pool for new employees, your stomach sinks. 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