David Teten

JANUARY 19, 2021

More and more startups are pursuing Revenue-Based VCs , but “RBI” doesn’t fit everyone. Flexible VC 101: Equity Meets Revenue Share. By tying payments to actual revenues, founders and investors remain aligned around the company’s real-time performance, good or bad. Flexible VC: Revenue -based. Of the Inc.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

ReadWriteStart

JUNE 1, 2020

The primary source of your funds should be your paying customers, i.e., your business should generate enough revenues and profits to fund the growth and expansion. The shares given out can either be common stocks or preferred stocks. ? Debt investment. Then we have startup platforms like incubators and accelerators.

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

Scott Edward Walker

SEPTEMBER 28, 2011

Indeed, you must make sure that all of the shares of common stock issued by the corporation to the founders are subject to vesting restrictions – which means that ownership of the shares would vest over time (instead of all of the shares being owned outright on day one). Vesting Restrictions. IP Ownership.

Vesting 89

Vesting Software Review IP Intellectual Property 89

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. Much of our revenue for the month had come from one highly productive though erratic undergraduate developer, Mike, who was working on a billable client project.

Common Stock 70

Common Stock Europe Boston Software Development 70

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

Both Sides of the Table

SEPTEMBER 18, 2014

Revenue multiple? 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. 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. Your A round? ” Simple.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

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

Steve Blank

APRIL 26, 2022

Some even insisted that all prior preferred stock had to be converted to common stock. For the common shareholders (employees, advisors, and previous investors), a cram down is a big middle finger, as it comes with reverse split – meaning your common shares are now worth 1/10th, 1/100th or even 1/1000th of their previous value.

Cram Down 417

Cram Down Founder Venture Capital Recapitalization 417

Startup Professionals Musings

OCTOBER 29, 2013

Angels might be interested during “early stage” if you have a prototype, but VCs won’t bite until you have a product, customers, and revenue. The most common case is an equity investment, but there are many terms that can impact what request size is credible. Calculate what you need, and add a buffer. Single or staged delivery.

Valuation 258

Valuation Early Stage Warrant Common Stock 258

www.inc.com

SEPTEMBER 24, 2011

But with the help of Grahams company, which specializes in creating tech systems for start-ups, Jumpstart grew to more than $50 million in revenue--enough to make it an attractive acquisition for media conglomerate Hachette Filipacchi. Arizona Bay has also blended equity payments with revenue-sharing deals.

Arizona 40

Arizona Equity Iowa Venture Capital 40

Startup Professionals Musings

SEPTEMBER 19, 2012

Angels might be interested during “early stage” if you have a prototype, but VCs won’t bite until you have a product, customers, and revenue. The most common case is an equity investment, but there are many terms that can impact what request size is credible. Calculate what you need, and add a buffer. Single or staged delivery.

Valuation 236

Valuation Early Stage Warrant Common Stock 236

Startup Professionals Musings

JULY 8, 2011

Angels might be interested during “early stage” if you have a prototype, but VCs won’t bite until you have a product, customers, and revenue. The most common case is an equity investment, but there are many terms that can impact what request size is credible. Calculate what you need, and add a buffer. Single or staged delivery.

Entrepreneur 234

Entrepreneur Valuation Early Stage Warrant 234

Startup Professionals Musings

JUNE 9, 2010

Angels might be interested during “early stage” if you have a prototype, but VCs won’t bite until you have a product, customers, and revenue. The most common case is an equity investment, but there are many terms that can impact what request size is credible. Calculate what you need. See where your cashflow bottoms out.

Valuation 227

Valuation Early Stage Warrant Startup 227

Both Sides of the Table

MARCH 21, 2010

Plus, we’re all allured by the false sense that our contract with BigCo is going to “make us&# because once they start using us it will spread like wildfire and the revenue will flow in. They negotiate a “master agreement&# to work with your company with some maybe minimum guarantees in terms of revenue.

Warrant 298

Warrant Dilution Startup Stock Options 298

Gust

JUNE 28, 2012

But I’m sure there will be many, many stories of all kinds once the final provisions go into effect in January, and it will take quite a while for this all to shake out.

Common Stock 143

Common Stock Equity Stock Revenue 143

Scott Edward Walker

OCTOBER 19, 2020

Usually this is done as part of the founder’s Restricted Stock Purchase Agreement pursuant to which the IP is contributed to the startup as full or partial consideration for the shares of common stock issued to him in a tax-free transaction under Section 351 of the Internal Revenue Code.

IP 40

IP Software Review Founder Technical Review 40

Startup Company Lawyer

MAY 4, 2009

What are common planning mistakes and how do you to avoid them? June 23rd, 2009: Create a revenue model for your business. The Founder Institute has developed Class F common stock , which provides founders with a maximum amount of control over the founder’s company. Description: How to get it. How to grow it.

Founder 28

Founder Warrant San Francisco Intellectual Property 28

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.)

IP 40

IP Software Review Due Diligence Intellectual Property 40

ReadWriteStart

JANUARY 28, 2022

The market regards equity as an ownership “share” in a corporation’s income revenue stream. 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.

Valuation 108

Valuation Equity Warrant Common Stock 108

Tim Keane

JANUARY 12, 2010

3]   However, if they are built bottom up, they demonstrate and make explicit a range of business model assumptions the entrepreneur is using to think about his business and its revenue model.   Pre-bubble Siliicon Valley deals were popularly valued at multiples of revenue. This is why a bottom up approach is more credible.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

www.paulgraham.com

APRIL 28, 2010

There never has to be atime when you have no revenues. Some VCsnow require that in any sale they get 4x their investment backbefore the common stock holders (that is, you) get anything, butthis is an abuse that should be resisted. Theres only common stock at this stage.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

YoungUpstarts

JUNE 26, 2020

When a VC’s website says they do “early stage” – to a VC that means a product has already been built and generating some revenue, while to an entrepreneur it means “just an idea.”. Setting aside the issues of valuation of common stock vs. preferred stock, what I really didn’t understand was that a valuation is a set of expectations.

Finance 205

Finance Silicon Valley Valuation Startup 205

Gust

SEPTEMBER 17, 2014

Revenue multiple? 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. 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. Your A round? I’m not sure.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Gust

OCTOBER 12, 2011

In my experience, a term of 12 to 24 months is common, with 12 months being on the short end. There are as many variations on this scenario as there are startups, but here are some common scenarios upon maturity: The startup negotiates with the bridge lenders to extend the maturity date. First, a word about the maturity date.

Finance 107

Finance Term Sheet Pre-Money Valuation Early Stage 107

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

Agile VC

FEBRUARY 2, 2012

How They Make Money : Facebook’s primary revenue stream is of course selling advertising on Facebook.com, which in total accounts for 85% of revenue. The next chunk comes from Facebook’s platform, in essence “taxing” the revenues of app developers like Zynga, which represents 15% of revenue.

IPO 100

IPO South Korea Venezuela Revenue 100

Berkonomics

APRIL 14, 2012

Summarizing income statements with a line for revenues, cost of revenue, general and administrative expenses, sales and other direct costs – all leading to net income, would satisfy the legal requirement for statement of income and expense.

Stock Options 81

Stock Options Balance Sheet Stock Common Stock 81

Lightspeed Venture Partners

OCTOBER 1, 2012

On the other hand, a 7% royalty means that Kevin and Barbara got to keep 93% of future revenues. Even with another $100k, I’m not optimistic that with the same guy in charge, things will go dramatically differently. He might have been better off letting them work for him, instead of him working for Mark and Daymond.

Pre-Money Valuation 158

Pre-Money Valuation Valuation Participating Preferred Preferred Stock 158

Berkonomics

DECEMBER 6, 2010

Because the valuation is now a requirement under Rule 409a of the Internal Revenue Code, most companies with stock option plans today have fairly valued common stock with known prices per share.

Stock Options 61

Stock Options Stock Warrant Common Stock 61

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

ithacaVC

SEPTEMBER 20, 2011

Let’s say a given company has raised $15mm in VC funding and is generating about $3mm in revenue and starting to ramp up quickly. Furthermore, it is in an industry where M&A transactions typically happen in the 3-4X revenue range.

Liquidation Preference 49

Liquidation Preference Common Stock Stock Options Valuation 49

Growthink Blog

MAY 10, 2012

Put everything else on your "wish list" to buy with revenues from sales or additional financing. Stage #2: Seed Funding Seed funding (also called seed capital) typically ranges from $100,000 to $500,000 and is often provided by angel investors, and is usually structured as convertible notes or common stock.

Equity 88

Equity Mezzanine Later Stage Venture Capital 88

Up and Running

NOVEMBER 23, 2010

But, tragically, 3 years after their apex, this firm sold for less than their annual revenue, laid off nearly the entire staff, and left common stock shareholders, my friends included, with nothing. At its height, the company employed more than 130 people and their products reached customers in dozens of countries.

Common Stock 63

Common Stock Stock Options Stock Cofounder 63

Ben's Blog

JULY 16, 2013

Perhaps you are caught in the “Series A crunch” or perhaps you are a consumer company and expected that you would be valued on users rather than revenue like the last time. They might have said something ridiculous like: “Based on the current price of the preferred stock, your offer is already worth $5M.” How could this be? Silly them.

Down Round 73

Down Round Marketing Preferred Stock Post-Money Valuation 73

Berkonomics

APRIL 4, 2019

Summarizing income statements with a line for revenues, cost of revenue, general and administrative expenses, sales and other direct costs – all leading to net income, would satisfy the legal requirement for statement of income and expense.

Stock Options 48

Stock Options Balance Sheet Stock Common Stock 48

Pascal's View

MARCH 9, 2010

I see the auditors forcing excessive quarterly compliance burdens on the general partners, and this trend has been developing since the institution of 409a valuations for common stock. The reason I feel this burden is unnecessary is because, in my view, the additional information may be very precise without being accurate.

Government 31

Government Private Equity Institutional Investors Venture Capital 31

Ben's Blog

JULY 16, 2013

Perhaps you are caught in the “Series A crunch” or perhaps you are a consumer company and expected that you would be valued on users rather than revenue like the last time. They might have said something ridiculous like: “Based on the current price of the preferred stock, your offer is already worth $5M.” How could this be? Silly them.

Marketing 36

Marketing Preferred Stock Post-Money Valuation Down Round 36