The Startup Lawyer

DECEMBER 10, 2015

A startup founder’s desire to hold equity better than plain-vanilla common stock isn’t new. Several years ago, Series FF stock for founders was all the rage when it came to founder liquidity at subsequent financing rounds. We implemented Series FF for a handful of clients back then but we haven’t done so recently.

Common Stock 40

Common Stock Stock Founder Equity 40

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

Feld Thoughts

JUNE 11, 2021

We didn’t have any financing except for Brad’s credit card and the $10 with which we had purchased our common stock. We employed half a dozen programmers, most of whom were undergraduates from our fraternity working part-time. Dave walked into Brad’s office after calculating preliminary financial results for January.

Common Stock 70

Common Stock Europe Boston Software Developers 70

Steve Blank

APRIL 26, 2022

For existing investors, sometimes it was a “pay-to-play” i.e. if you don’t participate in the new financing you lose. Some even insisted that all prior preferred stock had to be converted to common stock. Other times it was simply a take-it-or-leave-it, here are the new terms. A cram down is different than a down round.

Cram Down 417

Cram Down Founder Venture Capital Recapitalization 417

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). Seems like a win-win. The investor suggested to the faculty member that the investment be convertible debt.

Common Stock 45

Common Stock Stock Cap Table Preferred Stock 45

Both Sides of the Table

SEPTEMBER 8, 2012

But Paul Graham really did have a point in his “ high resolution fundraising ” post – that there is a problem – particularly in angel financing – with herding cats. We’re either “all in the round together” or we’re not.

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

ReadWriteStart

JANUARY 28, 2022

Common stock. The holding of common stock in a company indicates ownership in the corporation. Investors of common stock are eligible for : The choice of the Board of Directors. However, the holder of a warrant holds a leveraged bet on the corporation’s common shares. Preferred shares.

Valuation 108

Valuation Equity Warrant Common Stock 108

Both Sides of the Table

MAY 27, 2013

In this period (less than 2 years) he has brought on incredibly talented senior execs is sales, marketing, product management, client services, finance, vp engineering and more. In addition to helping manage the board Chris also helps represent the interests of the angel investors / common stock holders.

Advisory Board 365

Advisory Board CTO Hire Fractional CTO Los Angeles 365

Scott Edward Walker

OCTOBER 19, 2020

The nightmare scenario for founders is that they are heads-down and working on their startup for a number of years and finally get some headlines on a successful financing or exit. Then the prior employer rears its ugly head and claims that it actually owns the startup’s IP. Moreover, the IP creation and assignment is forward-looking. .

IP 52

IP Software Review Founder Technical Review 52

OnlyOnce

FEBRUARY 1, 2024

But think of it as a tool in the M&A/financing tool belt. The post The Dowry appeared first on The Startup CEO blog.

Cap Table 71

Cap Table Common Stock Acquisition Stock 71

Both Sides of the Table

SEPTEMBER 18, 2014

It’s like we need a finance 101 course for entrepreneurs. In finance they call it “terminal value” but the truth is the price is as arbitrary at your A round as it is at your seed round. If you want to give them a 33% discount you offer them half of a $1 common-stock warrant for every $1 share they purchase.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Business Plan Blog

NOVEMBER 13, 2013

The first milestone in a new startup’s financing is called ‘Seed Capital’ which refers to the initial investment raised by the founders from their friends and family, or commonly referred to as FFF (Friends, Family and Founders), who mostly use their personal assets. *The Convertible Debt Financing. Raising Seed Capital.

Finance 93

Finance Accredited Investor Angel Investor Seed Capital 93

Startup Company Lawyer

AUGUST 31, 2012

One major concern about convertible debt is that it eventually needs to be repaid if another round of financing doesn’t occur. ” If the company didn’t raise a round of financing, the convertible debt would convert into the last round of financing (i.e. Series A) or have to be repaid.

Convertible Security 73

Convertible Security Equity Security Preferred Stock 73

Both Sides of the Table

SEPTEMBER 5, 2012

Was Paul Graham right in his “high resolution” financing post? valuation and another person funds you with convertible debt at $5m valuation (high resolution financing) and your equity round finally closes at a $10 million valuation. Some thoughts on raising angel money. So let me weigh in more loudly than in the past.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Gust

OCTOBER 12, 2011

Last week , we took the plunge and began dissecting an example term sheet for a convertible debt financing round piece by piece. In Part II, we looked at the mandatory conversion language that is at the heart of any convertible debt financing. First, a word about the maturity date.

Finance 107

Finance Term Sheet Pre-Money Valuation Early Stage 107

The Next Web

JUNE 15, 2012

From Silicon Valley to Peoria, Illinois, cash-strapped startups look for inventive way to finance their business – often handing out equity to employees, consultants, vendors, and other service providers. It’s a logical solution. But beyond motivation, there are more pragmatic factors at play here too.

Equity 116

Equity Stock Options Vesting Stock 116

Scott Edward Walker

APRIL 9, 2012

Introduction We are in the golden age of seed financing. 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. Why Can’t a Startup Issue Shares of Common Stock to Investors?

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Scott Edward Walker

MAY 15, 2012

This post is the third part of a three-part primer on convertible note seed financings. Part 1, entitled “ Everything You Ever Wanted To Know About Convertible Note Seed Financings (But Were Afraid To Ask) ,” addressed the basics. Part 2, entitled “ Convertible Note Seed Financings: Econ 101 for Founders ,” addressed the economics.

Finance 64

Finance Founder Accredited Investor Preferred Stock 64

Up and Running

AUGUST 28, 2019

Because of its popularity, Delaware is also statistically a popular state for investors to finance businesses. This article will not delve into the more complex options and requirements for a corporation’s stock. You can read further about the details of preferred stock versus common stock Classes A and B. .

Delaware 83

Delaware Stock Nevada Technical Review 83

Startup Company Lawyer

APRIL 23, 2009

Adeo was focused on creating mechanisms to protect founders who may lose control of the companies they created after raising financing from investors. The current customary form of venture financing documents has not changed much since with mid-1970s when they first became widely adopted in Silicon Valley. Protective provisions.

Common Stock 33

Common Stock Stock Dividend Delaware 33

Both Sides of the Table

JULY 29, 2010

The downside is that people need to buy their stock. I talked also about 409a valuations and why common stock purchases cost less than preferred stock purchases. Most importantly we talked about my good friends at Okta who were financed by Andreesen Horowitz. Do it early. Check ‘em out!

Venture Capital 282

Venture Capital Term Sheet Valuation Stock Options 282

Gust

OCTOBER 21, 2011

To account for scenarios in which the startup is acquired before it has a chance to complete a priced equity financing round, most term sheets and deal documents contain a “ change in control ” provision. Suppose the notes converted as if the acquisition were an eligible financing round.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

ReadWriteStart

JUNE 1, 2020

The shares given out can either be common stocks or preferred stocks. ? Debt investment. If you are facing any problem you can always check out this: Business Loan vs. Equity Financing. Equity investment is the most popular and most talked-about avenue for startup funding. Stages of Equity-based funding. ?

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

Gust

JUNE 7, 2014

5) Senior Preferred Stock and warrants. 7) Junior Preferred Stock and warrants. 9) Common Stock (including any Preferred that converted to Common, any exercised options, and all Founders stock) and Common stock warrants. 2) Secured creditors. 3) Un-secured trade creditors.

Warrant 157

Warrant Preferred Stock Early Stage Common Stock 157

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. Some accelerators will require you to “make room” for them in future financings up to a certain amount. Anti-Dilution. See: Startup Accelerator Anti-Dilution Provisions; The Fine Print.

Dilution 48

Dilution Startup Technical Review Equity 48

Early Growth Financial Services

FEBRUARY 3, 2015

From time to time on Founders Workbench we give a brief primer on common terms and issues in venture financings. This post by Ian Engstrand first appeared on Founders Workbench. management). Participating versus non-participating: what’s the difference?

Preferred Stock 28

Preferred Stock Stock Finance Participating Preferred 28

Gust

OCTOBER 3, 2011

For a first time entrepreneur trying to figure out the arcane world of startup financing, it can be very confusing to understand the roles that different types of investors play in funding promising companies, as well as the point in a company’s life at which they enter the stage.

Finance 70

Finance Venture Capital Intellectual Property Early Stage 70

Startup Company Lawyer

JANUARY 9, 2011

Convertible debt with a price cap seems to be the preferred structure for early-stage financings. 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. Is a priced Series A financing a valid alternative?

Liquidation Preference 57

Liquidation Preference Finance Preferred Stock Common Stock 57

Scott Edward Walker

NOVEMBER 22, 2015

prior to incorporation is typically assigned to the company as part of the founder’s restricted stock purchase agreement (or a separate assignment agreement). Any IP created or acquired by a founder (e.g., code, a patent, etc.) Moreover, I recently saw this problem in the context of the sale of startup we were representing.

IP 40

IP Software Review Due Diligence Intellectual Property 40

www.inc.com

SEPTEMBER 24, 2011

Finance | Tuesdays. Financing a Small Business. Financing A Small Business. Personal Finance. 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. Start-up | Mondays. Technology | Thursdays. Franchises.

Arizona 40

Arizona Equity Iowa Venture Capital 40

Startup Professionals Musings

JANUARY 27, 2012

As the company grows and the second or third group of investors comes in, the terms of each subsequent financing grow in size, scope, and the number of lawyers’ fingerprints on them. The first capital a young company receives usually takes the form of common stock, the same class of shares the founders hold.

Term Sheet 223

Term Sheet Pre-Money Valuation Due Diligence Angel Investor 223

Haystack

JULY 8, 2018

For employees at early-stage companies… the equity you’ve been granted is likely common stock, just like the founders. You can read more about the types of stock granted in startups here. That can seem dire, but the new age also presents opportunities in hotly-contested secondaries.

Early Stage 95

Early Stage Dilution Private Equity Equity 95

The Startup Magazine

JUNE 7, 2018

So, if your finances are low, you may want to start investing. Penny Stocks. If you aren’t all that savvy when it comes to investments, start with penny stocks. Think of investing as a way to enhance your income rather than supplement it, by taking a close look at your business goals, business plan , financing and debt load.

Small Business 77

Small Business Jacksonville Stock Florida 77

Startup Professionals Musings

SEPTEMBER 14, 2010

As the company grows and the second or third group of investors comes in, the terms of each subsequent financing grow in size, scope, and the number of lawyers’ fingerprints on them. The first capital a young company receives usually takes the form of common stock, the same class of shares the founders hold.

Term Sheet 227

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

The Startup Magazine

NOVEMBER 14, 2018

Stock Options. Investing in stocks is another alternative to generate additional income streams. Choosing a common stock to invest in requires little to no experience even if you have not invested in stocks in the past. Common stocks provide you with a percentage of ownership in a company or entity.

Common Stock 103

Common Stock Stock Stock Options Startup 103

Gust

SEPTEMBER 17, 2014

It’s like we need a finance 101 course for entrepreneurs. In finance they call it “terminal value” but the truth is the price is as arbitrary at your A round as it is at your seed round. 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