Startup Company Lawyer

AUGUST 31, 2012

Over the past few years, convertible debt has emerged as a quick and inexpensive method for startup companies to raise money from angel investors and early stage venture funds. However, most typical convertible debt issued by startups have a maturity date of typically one year or later from the time of issuance. Background.

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Convertible Security Equity Security Preferred Stock 73

Agile VC

DECEMBER 4, 2014

Across both the startups I’ve personally been involved in (PayPal and LinkedIn) and the startups in which I’ve been an investor, I’ve seen a broad range of co-founder equity splits. But delaying or avoiding the conversation often results in it being more awkward than it needs to be.

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Cofounder Equity Founder Sweat Equity 255

Austin Startup

JULY 6, 2018

Background Reading: Why startups need signals. More traditional and comprehensive programs often require 5–8% of common stock, but often provide between $20K and $100K up-front as well. See: Startup Accelerator Anti-Dilution Provisions; The Fine Print. Anti-Dilution. Originally published at Silicon Hills Lawyer.

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Dilution Startup Technical Review Equity 48

Both Sides of the Table

SEPTEMBER 18, 2014

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. Startup Lessons' I have them all the time. I’m bored of it.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

keen.io

FEBRUARY 5, 2013

How I negotiated my startup compensation. When I started thinking about joining Keen, I quickly realized there is a lot I don’t know about startups. For example: Don’t accept equity compensation (stock shares) without knowing the percentage of the company you’ll own. I knew enough to know I wanted to join a startup.

Salary 50

Salary Equity Startup San Francisco 50

Both Sides of the Table

MARCH 21, 2010

This is part of my ongoing series on Startup Advice. 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.

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Warrant Dilution Startup Stock Options 298

Both Sides of the Table

APRIL 14, 2010

Liquidation preference is the amount of money that an investor gets paid before the common stock (e.g. It also gets the new investor concerned that management (common stock holders) will not be incentivized because they realize that the investors will take most of the money unless there is a big upside scenario.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

Tim Keane

JANUARY 12, 2010

Startups and angels: Along the way to success.   This is perceived by some investors as a way to assure that the founders are in the game for the long run. ·       Conversion provisions allowing preferred to convert to common if they choose or upon the closing of an IPO at a specified price.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Agile VC

DECEMBER 4, 2014

Across both the startups I’ve personally been involved in (PayPal and LinkedIn) and the startups in which I’ve been an investor, I’ve seen a broad range of co-founder equity splits. But delaying or avoiding the conversation often results in it being more awkward than it needs to be.

Cofounder 173

Cofounder Equity Founder Sweat Equity 173

Both Sides of the Table

SEPTEMBER 8, 2012

I recently wrote about my views that startups rounds should be priced. Here is what I recommend very often – privately – to startup entrepreneurs for angel funding. This is occasionally how convertible notes are structured at the time of conversion anyways. Almost every startup needs an anchor.

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

Startup Professionals Musings

SEPTEMBER 14, 2010

The first capital a young company receives usually takes the form of common stock, the same class of shares the founders hold. This clause attempts to protect the conversion price of stock of angel investors, prior to additional financing, from being reduced to a price equal to the price per share paid in a later “down” round.

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Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 227

The Startup Lawyer

MARCH 17, 2010

4) Type of Shares: Common Stock. (5) 5) Par Value of Common: $0.0001. (6) 7) Founders Equity Split: Depends on the Team, But Quickly and After the Awkward & Difficult Conversations. (8) 2) Fees Paid to Pitch my Startup: $0. (3) Tags: Startup Issues Incorporation raising capital startup.

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Accredited Investor Delaware NDA Vesting 112

The Startup Lawyer

MARCH 17, 2010

4) Type of Shares: Common Stock. (5) 5) Par Value of Common: $0.0001. (6) 7) Founders Equity Split: Depends on the Team, But Quickly and After the Awkward & Difficult Conversations. (8) 2) Fees Paid to Pitch my Startup: $0. (3) Tags: Startup Issues Incorporation raising capital startup.

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Accredited Investor Delaware NDA Vesting 112

Up and Running

AUGUST 17, 2015

As I read stories of college dropouts who had successfully sold tech companies, or entrepreneurs with innovative ideas who made it big on Shark Tank, it became clear that there was no set path to startup success. C Corp versus LLC, non-competes, liquidation preferences, preferred versus common stock, and so on).

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Entrepreneur Cofounder Angel Investor eCommerce 60

venturehacks.com

MARCH 21, 2008

Venture Hacks Good advice for startups. 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.

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Advisory Board Cap Table Vesting Equity 44

Startup Professionals Musings

JANUARY 27, 2012

The first capital a young company receives usually takes the form of common stock, the same class of shares the founders hold. This clause attempts to protect the conversion price of stock of Angel investors, prior to additional financing, from being reduced to a price equal to the price per share paid in a later “down” round.

Term Sheet 223

Term Sheet Pre-Money Valuation Due Diligence Angel Investor 223

www.inc.com

SEPTEMBER 24, 2011

Advisor. ); STARTUP. 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. Entrepreneur news from reporter Eric Markowitz. Sales & Marketing | Wednesdays. Email address: Home. Tools & Research. Newsletters. Subscriptions.

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Arizona Equity Iowa Venture Capital 40

ithacaVC

APRIL 5, 2011

One rule of simple cap tables is to issue “normal” stock to founders (common stock only) and investors (typically preferred stock, but sometimes common stock to early friends and family). I hope the investor agrees.

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Common Stock Stock Cap Table Preferred Stock 45

ReadWriteStart

MAY 8, 2012

Approaching investors for the first time is a daunting exercise for any startup. The best way to do that is to leverage the hard-won experience of real-world startup. Turns out that while every startup is unique, they share some common difficulties in trying to find just the right strategies and tactics for funding their companies: 1.

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Cofounder Startup San Francisco Silicon Valley 140

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.

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Equity Employee Stock Options Vesting 60

Business Plan Blog

NOVEMBER 13, 2013

Most startup founders do not have enough capital to launch their companies and need to raise money at some point. Individual investors who provide financial funding to startups are called ‘Angel Investors.’ Among the most common methods of funding used by startups when raising seed capital is “Convertible Debt Financing.”

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Finance Accredited Investor Angel Investor Seed Capital 93

Gust

OCTOBER 12, 2011

In Part II, we looked at the mandatory conversion language that is at the heart of any convertible debt financing. In my experience, a term of 12 to 24 months is common, with 12 months being on the short end. Readers may find it helpful to download the sample term sheet from my firm’s website and follow along with the commentary.

Finance 107

Finance Term Sheet Pre-Money Valuation Early Stage 107

The Startup Lawyer

FEBRUARY 4, 2011

Great news — your startup just got accepted to an incubator! But before your startup signs up and cashes that $[XX,000] check, your startup’s co-founders should sit down and evaluate the incubator’s offer. Pre-money valuations startups receive from incubators are typically low…really low.

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Incubator Pre-Money Valuation Option Pool Advisory Board 105

Gust

DECEMBER 18, 2013

For example, let’s say the “real” value of a startup is $900,000, a seed investor puts in $100,000 on a Convertible Note with a 20% discount, and the company then raises a Series A round of $1 million at a $4 million ‘pre-money’ valuation.

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Founder Valuation Seed Money Common Stock 150

Scott Edward Walker

APRIL 9, 2012

Venture capital funds, seed funds, super angels, angel groups, incubators, and “friends and family” are all playing the seed financing game and investing early in startups in an attempt to land the next Facebook. ii) what happens if the maturity date is reached prior to the note’s conversion to equity?

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Preferred Stock Finance Common Stock Liquidation Preference 87

Austin Startup

JULY 22, 2021

On October 4th, five technology startup finalists will pitch to a panel of advisors and judges made up of successful investors, entrepreneurs, and industry leaders. Any software, hardware, or CPG startup in Texas with a female founder or co-founder can apply to participate. Startups, submit your application now! Who Can Apply?

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San Antonio Dallas Houston Founder 107

Up and Running

SEPTEMBER 20, 2021

Since almost all startups do not possess traditional debt lenders, the list usually consists of data of the shareholders and the percentage they own. Furthermore, there are various forms of equity, such as preferred stock, common stock, and convertible notes, which influence the present and potential future investors.

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Cap Table Pre-Money Valuation Stock Options Option Pool 112

Gust

OCTOBER 21, 2011

For convertible notes, the only liquidity event we need be concerned with is an acquisition of the startup in the near future, before the maturity date; otherwise, the notes will convert to equity of one kind or another, and the eventual sale of that equity (in a public offering, acquisition, or private sale) is a different subject for another day.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

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

Startup Company Lawyer

JANUARY 9, 2011

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. Tweaking convertible debt so that common stock (instead of preferred stock) is issued for the conversion discount in order to limit liquidation preference overhang.

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Liquidation Preference Finance Preferred Stock Common Stock 57

Startup Company Lawyer

JANUARY 31, 2011

Automatic conversion: on a $1M equity financing with no conversion discount and no price cap , provided that the transaction documents provide for a right to purchase a pro rata share of future financings. (I Optional equity conversion: on other equity financings with no conversion discount and no price cap.

Preferred Stock 60

Preferred Stock Liquidation Preference IPO Common Stock 60

Tim Keane

APRIL 12, 2006

Startups and angels: Along the way to success. It also gives investors information about your intellectual integrity and some glimmer of how you will face adversity in the startup process. Common stock is a vehicle for sharing risk equally with insiders who have more knowledge and ability to affect business results.

Entrepreneur 60

Entrepreneur Valuation Sweat Equity Common Stock 60

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. You always want to raise cash from equity investors with experience in building startup businesses, often with a rolodex of potential business contacts and lessons learned from their past investments.

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Equity Valuation Preferred Stock Common Stock 60

Austin Startup

MAY 17, 2017

It’s pretty well known that startups usually undergo a meaningful change in Board composition at their Series A round. Less has been written about what startup boards tend to look like before a Series A round. Their interests as an investor are more aligned with the new VCs investing in the Series A than they are with the Common Stock.

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Seed Stage Startup Cap Table Angel Investor 48

thestartuplawyer.com

FEBRUARY 24, 2010

Contact The Startup Lawyer: Home Page About Contact FAQs Glossary Ryan Roberts Law: Home Page Social Networks: Facebook Twitter LinkedIn Flickr Delicious Digg Last.FM He obviously never launched a startup and got shafted by a co-founder. He obviously never launched a startup and got shafted by a co-founder.

Cofounder 40

Cofounder Founder Preferred Stock Startup 40

Scott Edward Walker

JUNE 9, 2019

Accordingly, I thought it would be helpful for founders to discuss these rights and to point out the problems they create for startups. Over the past few weeks, two of my clients have received financing term sheets in which the investors requested super pro rata rights. Pro Rata Rights.

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Preferred Stock Term Sheet Dilution Stock 56

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. One Shot” incentives.

Liquidation Preference 48

Liquidation Preference Common Stock Valuation Silicon Valley 48