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

ReadWriteStart

JUNE 1, 2020

The shares given out can either be common stocks or preferred stocks. ? Debt investment. Instead of funding, you pay the investors a structured royalty, which is a portion of the sales. If you are facing any problem you can always check out this: Business Loan vs. Equity Financing. Inception stage.

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Startup Entrepreneur Elevator Pitch Seed Stage 150

Gust

JUNE 7, 2014

Every investment round in a company is made on the basis of extensivepaperwork (often upwards of 100 pages in total) specifying *precisely* what happens when it comes time to pay out the proceeds (if any) from the sale or dissolution of the company. 5) Senior Preferred Stock and warrants. 7) Junior Preferred Stock and warrants.

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Warrant Preferred Stock Early Stage Common Stock 157

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.

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Finance Founder Accredited Investor Preferred Stock 64

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

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.

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Finance Pre-Money Valuation Term Sheet Liquidity Event 79

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).

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Private Equity Pre-Money Valuation Equity Startup 94

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.

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Common Stock Stock Dividend Delaware 33

www.inc.com

SEPTEMBER 24, 2011

Finance | Tuesdays. Sales & Marketing | Wednesdays. Financing a Small Business. Financing A Small Business. Personal Finance. SALES & MARKETING. 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

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). Moreover, I recently saw this problem in the context of the sale of startup we were representing. Any IP created or acquired by a founder (e.g., code, a patent, etc.)

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IP Software Review Due Diligence Intellectual Property 40

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. management). management). Participating versus non-participating: what’s the difference?

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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.

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Finance Venture Capital Intellectual Property Early Stage 70

The Startup Magazine

JUNE 7, 2018

You may also be able to save big by purchasing one of the Jacksonville homes for sale and increase your odds of developing a successful business at the same time. 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.

Small Business 77

Small Business Jacksonville Stock Florida 77

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.

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Early Stage Dilution Private Equity Equity 95

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?

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Liquidation Preference Finance Preferred Stock Common Stock 57

Version One Ventures

APRIL 6, 2021

This capped off an incredible month for them, with over $29M in total sales volume in March. The company expects its direct listing to occur on April 14, 2021 with its Class A common stock trading on the NASDAQ under the ticker symbol COIN. Preemadonna raised over $5M in seed financing. A strategic $2.7M

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Portfolio SEC Common Stock Angel Investor 60

Scott Edward Walker

JUNE 9, 2019

Over the past few weeks, two of my clients have received financing term sheets in which the investors requested super pro rata rights. Simply put, pro rata rights permit the investor to maintain its percentage ownership in subsequent financing rounds. Introduction. Pro Rata Rights.

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Preferred Stock Term Sheet Dilution Stock 56

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?

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Entrepreneur Cofounder Angel Investor eCommerce 60

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. . Let’s start at the end.   First , dividends.

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Term Sheet Valuation Dividend Liquidation Preference 68

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. How to scale from the first sale to the millionth.

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Founder Warrant San Francisco Intellectual Property 28

Growthink Blog

MAY 10, 2012

Mezzanine Financing Most companies that raise equity capital and are eventually acquired or go public receive multiple rounds of financing first. No right or wrong answer here, but if this is your vision then it's important to consider when negotiating deal terms on earlier stage financing rounds. Seed Funding 3.

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Equity Mezzanine Later Stage Venture Capital 88

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. And is willing to share company finances, future, etc.”. I’ll go into the difference between these in just a moment. Types of equity compensation.

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Equity Employee Stock Options Vesting 60

The Startup Lawyer

JANUARY 10, 2012

In most equity financing rounds, an investor will ask for (and get) a term called a liquidation preference. A liquidation preference is the amount that must be paid to a preferred stock holder before any sale proceeds may be paid to the holders of common stock (i.e., founders, option holders, etc.).

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Liquidation Preference Pre-Money Valuation Participating Preferred Preferred Stock 73

ithacaVC

MAY 1, 2013

In a sale, the original amount and the interest all come due. It must be paid out before the common shares, which are typically held by the founders and other employees.” It is ONLY once the VC’s liquidation preference is cleared that the common stock held by founders and employees is worth anything.

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Dividend Liquidation Preference Common Stock Venture Capital 45

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. S0, being able to clearly state how many options you want to grant at the time of the financing is KEY.

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Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

Eric Friedman

JUNE 27, 2016

I have seen what I call “predatory advisors” come in and really mess up a cap table by promising big intros and sales contracts only to disappear after the first 6-12 months. People claim to be incredible, but you don’t know until you work with them. Tread cautiously here. So why would you do this? strike price.

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Equity Vesting Cap Table Common Stock 98

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.

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Preferred Stock Liquidation Preference IPO Common Stock 60

Gust

DECEMBER 8, 2011

Enter into agreements between Newco and founders, early contributors, outside advisors or service providers under which they contribute or assign all intellectual property related to the company’s business to Newco in exchange for the issuance of founders’ stock (Common Stock). Make escrow arrangements for restricted stock (i.e.,

Intellectual Property 139

Intellectual Property Non-disclosure Agreement Delaware Stock 139

ithacaVC

FEBRUARY 23, 2011

The MCOP can serve a critical role as founders and other management team members are diluted down by rounds of financing or if their equity is not in the money. The ALP is the total amount of $ that preferred stock holders are owed on a sale of the company under their liquidation preferences.

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Liquidation Preference Management Preferred Stock Dividend 55

Startup Company Lawyer

FEBRUARY 21, 2010

I was speaking at an event last month to a group of CEOs and was surprised by the number of CEOs that were worried about the value of their common stock in a M&A transaction. Due to aggregate liquidation preferences that may exceed the acquisition price in an M&A deal, common stock may be rendered worthless.

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Retention Liquidation Preference Employee Common Stock 31

www.payne.org

SEPTEMBER 22, 2011

Stock Classes: Common and Preferred. Most venture-funded startups have different classes of stock: common and various flavors of preferred. Your offer will almost surely be for common stock. If the company is acquired or liquidated, the preferred stock holders will get paid first. 1% ownership).

Equity 56

Equity Employee Vesting Preferred Stock 56

Startup Company Lawyer

JULY 20, 2009

Starting capital gains holding period in the event of a stock sale. If a founder sells stock of a company in a taxable transaction and it is held for greater than one year, then the capital gains tax rate is 15% for founders in the 25% tax bracket and higher.

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IP Stock Options Preferred Stock Capital Gains 67

blog.simeonov.com

FEBRUARY 22, 2010

If such individuals do not form a business entity to conduct business in the Field of Interest, but instead sell or assign their developments and technology in the Field of Interest to an unrelated party, I shall be entitled to [ this will vary based on the type of founder ] of the net consideration received by reason of such sale or assignment.

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Founder Vesting Agile Startup 44

Tim Keane

APRIL 12, 2006

What’s your attitude about “next round” financing? Common stock is a vehicle for sharing risk equally with insiders who have more knowledge and ability to affect business results. Fewer investors will take common stock in early stage transactions. Preferred Stock is the most usual form of investment today.

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Entrepreneur Valuation Sweat Equity Common Stock 60

Professor VC

FEBRUARY 18, 2011

A stock acquisition is a bet that would provide significant upside (and possible downside) opportunity. I was curious about the sale price (not announced in any of the acquisition articles), but was disclosed in Linked-Ins S1 filing at cash proceeds of $2,394,000. I also teach Entrepreneurial Finance at San Jose State.

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Acquisition San Jose Angel Investor IPO 31