Startup Company Lawyer

MARCH 14, 2010

After the recent announcement of the Series Seed Financing documents by Marc Andreesen, Brad Feld points out that there are now four sets of “open source&# equity seed financing documents: TechStars Model Seed Funding Documents (by Cooley). Y Combinator Series AA Equity Financing Documents (by WSGR). under $500K).

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

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

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

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

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.

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Convertible Security Equity Security Preferred Stock 73

YoungUpstarts

JUNE 26, 2020

If you are building a startup, you’ll find no shortage of people who are willing to give you advice, particularly when it comes to raising financing. For some entrepreneurs, raising financing can seem like a full time job, particularly in these trying times. Unfortunately, much of this advice is wrong. Well not, wrong exactly.

Finance 205

Finance Silicon Valley Valuation Startup 205

David Teten

JANUARY 19, 2021

Eligible for favorable treatment under Qualified Small Business Stock exemption, if structured as equity. This applies if the investment converts into common stock; details are beyond this essay’s scope. Typically promissory note or non-voting common stock, with covenants. Founder retains control. Governance.

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Cofounder Technical Review Equity Dividend 78

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

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

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 Development 70

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

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

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 Pre-Money Valuation 289

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

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

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

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

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

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 40

IP Software Review Founder Technical Review 40

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

Tim Keane

JANUARY 12, 2010

For angel groups, the distinction between groups and VCs on this issue is dwindling, especially as angel groups do bigger rounds of financing.   Note that this applies only to earl stage Series A-type equity financings and assumes no cash dividends are paid to investors.   First , dividends.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

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

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?

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Preferred Stock Finance Common Stock Liquidation Preference 87

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

Startup Company Lawyer

MAY 4, 2009

If a founder’s company raises more than $50,000 in debt or equity financing, excluding funds from the founder, within 18 months of formation, then the founder must pay a tuition fee of $4,500, which is used to cover the Institute’s expenses in providing the program.

Founder 28

Founder Warrant San Francisco Intellectual Property 28

venturehacks.com

MARCH 21, 2008

Advisor compensation Whether you’re hiring a normal advisor or super advisor: Advisory shares are usually issued as common stock options. Advisory shares are normal common stock. The options typically vest monthly over 1-2 years with 100% single-trigger acceleration and no cliff. What are advisory shares?

Advisory Board 44

Advisory Board Cap Table Vesting Equity 44

Gust

OCTOBER 17, 2011

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 158

Term Sheet Pre-Money Valuation Due Diligence Angel Investor 158

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

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

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

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

www.mattbartus.com

SEPTEMBER 24, 2011

First, you’d probably want them to receive common stock, not preferred stock (which is the likely next round). Matt is a lawyer representing technology companies through all phases of their lifecycle, from pre-incorporation, seed & VC financings, exit transactions and IPOs (read more). [link] mattbartus.

Equity 40

Equity Vesting Silicon Valley Intellectual Property 40

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

AUGUST 17, 2015

Additionally, I had already studied Economics and Finance during undergrad, making the academic part of an MBA seem a little redundant. C Corp versus LLC, non-competes, liquidation preferences, preferred versus common stock, and so on). Is business school really necessary?

Entrepreneur 60

Entrepreneur Cofounder Angel Investor eCommerce 60

keen.io

FEBRUARY 5, 2013

To begin answering this question, I started on a quest to understand startup financing. This book was written to help founders negotiate financing with investors, but it really helped me understand Keen’s financial situation, and I highly recommend it to anyone joining a startup. First, I read Venture Deals by Brad Feld.

Salary 50

Salary Equity Startup San Francisco 50

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

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