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I’m not sure I really even need to write this at length because Nivi absolutely nailed the topic in his article “ The OptionPool Shuffle.&#. When I went to raise money in 2006 I thought I knew every term in a term sheet but somehow I still got a bit duped by the optionpool shuffle. No optionpool shuffle.
When you consider that they’ll also want a 15-20% optionpool in the company you’re talking about founders owning as little as 40% after just one round. There are ones I’ve worked with like True Ventures, First Round Capital, Greycroft, Rincon Ventures … just to name a few.
Tim Friedman, Founder, PE Stack , said, “If I could offer one piece of advice to today’s managers, it would be to take the time to understand the demands of the modern institutional LP. Pro Publica has a Nonprofit Explorer database searchable by principal name on all nonprofit filings, so you can see a person’s nonprofit activities. .
Idont know which name will stick. 5 ]In a series A round, you usually have to give up more thanthe actual amount of stock the VCs buy, because they insist youdilute yourselves to set aside an "optionpool" as well. Valuation However, the VCs have a weapon they can use against the super-angels,and they have started to use it.
A lawyer I asked about it said: When the company goes public, the SEC will carefully study all prior issuances of stock by the company and demand that it take immediate action to cure any past violations of securities laws. A big-name VC firm will not screwyou too outrageously, because other founders would avoid them ifword got out.
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