Startup Professionals Musings

SEPTEMBER 10, 2018

I always tell entrepreneurs that two heads are better than one, so the first task in many startups is finding a co-founder or two. Giving a co-founder a salary won’t get you the “fire in the belly” you want. Each co-founder should get equity for value, based on these key variables: Lived a key role in a previous startup.

Equity 238

Equity Cofounder Technical Cofounder Intellectual Property 238

View from Seed

JANUARY 13, 2021

The objection goes something like this: “yes, I can see rookie founders turning to you for a seed round. But won’t all good founders go to established firms that raise series A’s out of the gate?”. And yes, a seed fund may have a tougher time holding on to their ownership down the road, and thus get diluted down. But guess what?

Dilution 399

Dilution Later Stage Portfolio Technical Review 399

Both Sides of the Table

FEBRUARY 6, 2013

Quick summary: Be careful not to have too many co-founders. it’s the most expensive dilution you’ll ever face. I don’t think VCs care as much about co-founders & economics as people think. And you need to be careful about giving up control to cofounders as much as VCs. For the wrong reasons.

Cofounder 388

Cofounder Early Stage Startup Silicon Valley 388

Startup Professionals Musings

MAY 15, 2022

A particularly critical moment is when the founders hand over the leadership to a more managerial regime. A common practice is to hire local employees who know the geographic culture, even though this may well dilute the company culture. Geographic expansion. Product-line expansion. Efficiency and scale.

Dilution 355

Dilution Startup Merger Flash 355

Both Sides of the Table

SEPTEMBER 15, 2022

But it will be patiently deployed, waiting for a cohort of founders who aren’t artificially clinging to 2021 valuation metrics. Pitchbook estimates that there is about $290 billion of VC “overhang” (money waiting to be deployed into tech startups) in the US alone and that’s up more than 4x in just the past decade. What is a VC To Do?

Technical Review 416

Technical Review Pre-Money Valuation San Francisco Valuation 416

Both Sides of the Table

AUGUST 3, 2010

years ago and told me, “I just got offered the chance to buy this company because the founder doesn’t want to continue. How much dilution should I take for it?&# My friend’s company was pre-revenue. Me: “Zero dilution. A close friend of mine in LA who is 3 years into his startup called me about 2.5

Merger 276

Merger Technical Review Early Stage Dilution 276

Startup Professionals Musings

MAY 1, 2023

The CTO of many technical startups was the original founder. Of course, all cofounders need to remember that allocated percentages will be diluted as angel and VC investors are brought in. Keep your wits about you to make sure that dilution is done equitably and evenly.

Technical Cofounder 247

Technical Cofounder Equity Distribution Cofounder 247

View from Seed

MAY 2, 2019

There may be some twists and turns along the way, like a bridge or seed extension, but I think something like this is plan A for most founders. The challenge with pre-seed rounds is that pricing will sometimes be pretty dilutive. But I’ve recently noticed a few common offshoots of this path that I’ve seen repeated a number of times.

Early Stage 214

Early Stage Dilution Valuation .Net 214

Both Sides of the Table

SEPTEMBER 5, 2012

In fact, most early investor work hard to help their startups get to the next level so it makes no sense for the angel investor and founders to be at odds. Convertible debt WITH a cap is stupid for founders. It has nowhere near the same dilutive effects as a full ratchet except in extreme edge cases. Investors call Bull Cap.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

The Startup Magazine

AUGUST 9, 2022

As part of our Founder interview series , The Startup Magazine caught up with Salo Sterental, Co-Founder of the SoStereo, a marketing firm that enables brands and artists alike to unlock the marketing power of music. Salo: Zumba Fitness approached Beto (my co-founder) and I with a unique problem.

Cofounder 158

Cofounder Founder Miami Marketing 158

Startup Professionals Musings

JUNE 28, 2021

It doesn’t seem to matter what the founders’ projections are, or how fast they believe they will turn profitable. Thus every serious investor reserves a certain amount of his investment capital for follow-on rounds, which allows them to stay to course to success, even with dilution. All startups always need more money.

Angel Investor 361

Angel Investor Accredited Investor IRR Angel Groups 361

Startup Professionals Musings

MAY 11, 2011

It is just really hard to found a technology company successfully with only one founder, technical or non-technical. Focus on finding the right partner to double your strength rather than dilute it. Investors know this, and look for two or three-person teams who have the requisite complementary skills. Marty Zwilling.

Technical Review 236

Technical Review Partner Entrepreneur Dilution 236

Both Sides of the Table

SEPTEMBER 17, 2011

. “We’re all equal co-founders and we don’t care about titles.&# I usually encourage people to think about titles like, “Founder & CTO&# or “Founder & VP Marketing.&#. I usually encourage people to think about titles like, “Founder & CTO&# or “Founder & VP Marketing.&#.

Operations 292

Operations CTO Hire Startup Early Stage 292

The Next Web

NOVEMBER 20, 2013

With all other things equal, that means that a 50/50 split between two co-founders (evenly split if there are more than two), or a 66/33 split based on the premium for coming up with the original idea, and for starting the initial development efforts and sourcing the original team. Whose idea was it? How important is this person’s role?

Cofounder 136

Cofounder Equity Founder Seed Stage 136

Steve Blank

APRIL 10, 2019

In tech startups stock options were here almost from the beginning, first offered to the founders in 1957 at Fairchild Semiconductor , the first chip startup in Silicon Valley. The investors were giving away part of their ownership of the company — not just to the founders, but to all employees. Here’s why.

Stock Options 335

Stock Options Stock Vesting Common Stock 335

The Next Web

OCTOBER 7, 2013

They were referring to non-founder engineers, most commonly the first hire for technology businesses. is frequently granted ownership significantly less than that of the founders. However, at the very early stage, they are taking as much risk with their future as the founders. Engineer #1?

Engineer 129

Engineer Dilution Option Pool Vesting 129

Both Sides of the Table

OCTOBER 12, 2014

This might happen because to meet all investors needs they end up selling too much of the company, taking too much dilution and feeling beat up. Have you noticed the increase of founders selling their personal stock in what is known as a “secondary? If you listen to conventional wisdom this is the only thing happening.

Technical Review 336

Technical Review Later Stage Early Stage LP 336

Startup Professionals Musings

AUGUST 21, 2019

A particularly critical moment is when the founders hand over the leadership to a more managerial regime. A common practice is to hire local employees who know the geographic culture, even though this may well dilute the company culture. Geographic expansion. Product-line expansion. Efficiency and scale.

Dilution 224

Dilution Merger Flash Global 224

View from Seed

OCTOBER 24, 2019

As seed rounds have atomized, it’s not uncommon for founders to raise 3 or even 4 rounds prior to a series A. The reality is that if a founder raised every one of these rounds, and lead investors always got their “target” ownership, the level of dilution would be ridiculous. Founders with limited experience.

Dilution 149

Dilution B2B Burn Rate Early Stage 149

Feld Thoughts

SEPTEMBER 2, 2011

The founders each have common shares that will vest over four years. The vesting schedule protects each of the co-founders in case one gets hit by a bus or decides to drop the project after a short period of time. Bring Praveena in as a founder and offer 10-20% of the company as stock. Time to update the cap table.

Cap Table 133

Cap Table CTO Hire Technical Cofounder Cofounder 133

Both Sides of the Table

NOVEMBER 14, 2017

As the idea went from innovating on software & systems to launching a company to rolling it out in the field brought on Rahul Gandhi as his co-founder to physically launch the company. Sam & Rahul have worked closely together on “innovate & operate” since the earliest days of MakeSpace. Seriously, this happens.

Operations 286

Operations New York City Technical Review Startup 286

Startup Professionals Musings

MAY 9, 2014

It doesn’t seem to matter what the founders’ projections are, or how fast they believe they will turn profitable. Thus every serious investor reserves a certain amount of his investment capital for follow-on rounds, which allows them to stay to course to success, even with dilution. All startups always need more money.

Angel Investor 278

Angel Investor Angel Groups Accredited Investor IRR 278

Both Sides of the Table

SEPTEMBER 25, 2010

Paul Graham’s assertion that “any startup founder can tell you the most common question they hear from investors is not about the founders or the product, but “who else is investing?&# When I’m in, I’m in. rings true to me. Investors who commit early deserve to have a lower price.

Finance 286

Finance Term Sheet Technical Review Warrant 286

The Next Web

OCTOBER 10, 2013

How many founders are too many? You are the founder, the visionary, the uber-entrepreneur. VCs don’t fund sole founders and, if you are alone, you’ve either got too much ego or you can’t convince someone to join you. Two” – You have to have three founders. Too dilutive.”. Hire everyone you need as an employee.

Cofounder 143

Cofounder Technical Cofounder Kenya Dilution 143

Startup Professionals Musings

OCTOBER 14, 2013

A particularly critical moment is when the founders hand over the leadership to a more managerial regime. A common practice is to hire local employees who know the geographic culture, even though this may well dilute the company culture. Geographic expansion. Product-line expansion. Efficiency and scale.

Dilution 187

Dilution Merger Flash Global 187

Both Sides of the Table

AUGUST 14, 2017

I read commentary or Twitter or blogs and realize that there are also strongly held convictions that there are these evil VCs who do terrible things to mostly altruistic founders. But unlike the popular press reporting of this conflict — 80% of the time it is founder-to-founder conflict and not investor-to-founder conflict.

Cofounder 217

Cofounder Stock Options Equity Technical Review 217

Both Sides of the Table

JUNE 5, 2011

I’ve decided to take all of my private conversations and subjective points-of-view on the topic and make them public in a keynote speech at the Founder Showcase in San Francisco on June 15th. They get a cheaper price, they wipe out much founder stock value and they reissue you new options. Raise at the top end of normal.

Pre-Money Valuation 336

Pre-Money Valuation Valuation Silicon Valley Stock 336

VC Cafe

FEBRUARY 27, 2024

A founder asked me what makes a $2M round “pre-seed”? To reduce the impact of dilution, the expectation is that startup valuation should more or less double between the pre-seed to the seed, and seed to series A (ideally backed by reasonable traction/ revenue multiples). especially if the startup already has a product and revenue?

Valuation 186

Valuation Software Review Generative AI Technical Review 186

Steve Blank

NOVEMBER 13, 2018

Some (like your peers or even the founders) don’t understand it, and others (the VCs) realize it’s not in their interest to let you know. Unless you have them capture the unique aspects of the culture, it will become diluted and disappear among the new hires. Declare them cultural co-founders. Loss of Community? Lessons Learned.

Part-Time VPE 334

Part-Time VPE Employee Cofounder Hiring 334

Startup Professionals Musings

AUGUST 24, 2016

I always tell entrepreneurs that two heads are better than one, so the first task in many startups is finding a co-founder or two. Giving a co-founder a salary won’t get you the “fire in the belly” you want. Each co-founder should get equity for value, based on these key variables: Lived a key role in a previous startup.

Equity 120

Equity Cofounder Technical Cofounder Intellectual Property 120

Both Sides of the Table

FEBRUARY 20, 2019

One of the things that founders have the most angst about is whom they should have on their board and at what stage of the business. Why you should set up a board at the seed round of funding I know these days with SAFE documents and rolling convertible notes many founders prefer not to set up a board early on.

Venture Capital 236

Venture Capital Startup Angel Investor Silicon Valley 236

Both Sides of the Table

MAY 9, 2011

I covered what I call “the co-founder mythology.&# Either you’re not technical and you think you need a technical co-founder or vice-versa. Conventional wisdom says that you gain far more in working as a team than you lose by diluted by half before you start. Hire your co-founder. Vested over 4 years.

Cofounder 393

Cofounder Founder Vesting Founder Vesting 393

Feld Thoughts

MARCH 24, 2017

Foundry Group is best known for our investments in startups, but our vehicle currently investing in other venture funds, Foundry Group Next, is off to what we believe to be a great start and I wanted to share an update about it by talking about our new investment in a fund managed by Founder Collective.

Founder 77

Founder LP Technical Review Seed Stage 77

YoungUpstarts

OCTOBER 24, 2013

One of the challenges for investing in startups has always been the lack of an established way for founders and investors to actually measure and decide on the valuation of the startup concerned. “If you are an angel investor and a venture is seeking capital from you, insist on getting its Worthworm report.

Pre-Money Valuation 150

Pre-Money Valuation Web Technical Review Angel Investor 150

Startup Professionals Musings

DECEMBER 16, 2017

It doesn’t seem to matter what the founders’ projections are, or how fast they believe they will turn profitable. Thus every serious investor reserves a certain amount of his investment capital for follow-on rounds, which allows them to stay to course to success, even with dilution. All startups always need more money.

Angel Investor 190

Angel Investor Accredited Investor IRR Angel Groups 190

Both Sides of the Table

FEBRUARY 8, 2016

Optimize for a W more than % dilution in these circumstances. Founders hate them because they’re dilutive. But I would point out that raising money is an existential event and I think in the coming 12-18 months you may see loss ratios (companies going out of business or selling in fire sales) go up.

Burn Rate 150

Burn Rate Cap Table Startup Dilution 150

Startup Professionals Musings

SEPTEMBER 2, 2017

A particularly critical moment is when the founders hand over the leadership to a more managerial regime. A common practice is to hire local employees who know the geographic culture, even though this may well dilute the company culture. Geographic expansion. Product-line expansion. Efficiency and scale.

Dilution 134

Dilution Merger Flash Global 134