Berkonomics

OCTOBER 3, 2013

Well-maintained deal rooms enhance a company’s image with a buyer, quicken the pace of the deal, help maintain secrecy from employees while due diligence is in process, and lower the stress levels of all parties during the process. The liquidity event and beyond' Email readers, continue here.]

Software Review 76

Software Review Due Diligence Liquidity Event Intellectual Property 76

Berkonomics

AUGUST 1, 2024

Others aim for financial success during the growth of their business and at the liquidity event or sale of the business – someday. Some work to achieve good deeds and hope that their efforts will result in financial success over time. So, this is important. Is this important?

Liquidity Event 62

Liquidity Event Revenue Email Employee 62

Berkonomics

JANUARY 7, 2021

So, co-management is the second group to share in the bounty upon a liquidity event. Email readers, continue here…] Often, if not co-founders, this group is rewarded through issuance of stock options from a pool of available options that usually totals 15-20% of the total company’s equity divided among all employees.

Liquidity Event 96

Liquidity Event Pre-Money Valuation Cofounder Initial Public Offering 96

Startup Professionals Musings

AUGUST 10, 2019

The right motivated employees dilemma. If you take investor money, expect a push for hockey-stick growth and a liquidity event, like going public (IPO) or sale (M&A), to get the payback. No one wants to put in money until you have a product, and you need money to build the product. Later you need specialists and managers.

Hockey Stick 243

Hockey Stick Cofounder Liquidity Event Startup 243

Berkonomics

AUGUST 6, 2020

Your skilled employees? It will help you to explain the value of your business to potential investors and certainly help focus your efforts as you advance toward that goal of a liquidity event in your future. Would it be your intellectual property? Your brand and market recognition? Your distribution channel relationships?

Liquidity Event 62

Liquidity Event Intellectual Property IPO Equity 62

Up and Running

SEPTEMBER 19, 2017

practice in mid-sized or large organizations and act more as employees than owners of the medical practice. Over the next decade, most experts predict that independent dentists will rapidly consolidate into larger and larger practices, where eventually their role will shift to that of the employee as opposed to small business owner.

Private Equity 94

Private Equity Pre-Money Valuation Equity Startup 94

Gust

DECEMBER 1, 2011

Notice what is missing from this list of priorities: The company itself – that is, a business entity, most often a corporation , that will own the entire business (however defined), issue equity to founders, take investment capital , enter into contracts, make sales, pay employees and contractors, and so forth.

IP 114

IP Intellectual Property Equity Liquidity Event 114

Hunter Walker

SEPTEMBER 29, 2022

So for the most part a venture investor holds their equity until the company exits via an acquisition, IPO, or some sort of other liquidity event (management buyout, whatever). And I’d say, it does even if it sucks for other investors and the employee common shareholders. You might think, “Hunter!

Venture Capital 126

Venture Capital Cap Table LP Equity 126

View from Seed

MAY 19, 2015

Without a full corporate infrastructure of support, and more importantly, without extensive monetary resources, founders and employees must spend wisely. Even if VC financing has been raised, extravagant and wasteful spending by a few founders or company leadership sets the tone for the entire organization.

Seed Stage 120

Seed Stage Liquidity Event Cofounder Startup 120

Startup Professionals Musings

DECEMBER 14, 2014

The right motivated employees dilemma. If you take investor money, expect a push for hockey-stick growth and a liquidity event, like going public (IPO) or sale (M&A), to get the payback. No one wants to put in money until you have a product, and you need money to build the product. Later you need specialists and managers.

Hockey Stick 268

Hockey Stick Cofounder Entrepreneur Liquidity Event 268

Berkonomics

SEPTEMBER 12, 2013

Your skilled employees? It will help you to explain the value of your business to potential investors and certainly help focus your efforts as you advance toward that goal of a liquidity event in your future. The liquidity event and beyond' Would it be your intellectual property? Your brand and market recognition?

Liquidity Event 76

Liquidity Event Intellectual Property IPO Equity 76

Berkonomics

JUNE 12, 2014

So co-management is the second group to share in the bounty upon a liquidity event. Often, if not co-founders, this group is rewarded through issuance of stock options from a pool of available options that usually totals 15-20% of the total company’s equity divided among all employees. Think of it as the rule of the thirds.

Liquidity Event 85

Liquidity Event Pre-Money Valuation Cofounder Initial Public Offering 85

Gust

JUNE 7, 2014

The technical term for this is the “liquidation waterfall”, because on a liquidation event (whether good, as in a large buyout, or bad, as in a distress sale, investors (and others) get paid out in a specified order. So, here is the typical payout order, from first to last: 1) Salaries owed to employees.

Warrant 157

Warrant Preferred Stock Early Stage Common Stock 157

Startup Professionals Musings

AUGUST 19, 2017

The right motivated employees dilemma. If you take investor money, expect a push for hockey-stick growth and a liquidity event, like going public (IPO) or sale (M&A), to get the payback. No one wants to put in money until you have a product, and you need money to build the product. Later you need specialists and managers.

Hockey Stick 144

Hockey Stick Cofounder Entrepreneur Liquidity Event 144

Steve Blank

JUNE 23, 2016

Capital is returned to these investors through liquidity events (originally public offerings, but today mostly acquisitions). But starting in the last quarter of that century and accelerating in this one, a new form of financing – risk capital (angel and venture capital) — emerged.

Architecture 227

Architecture IRR Balance Sheet Liquidity Event 227

Hunter Walker

MARCH 8, 2014

The Early Team Still There and They’ll Be Your Tribe for Years : The founders and early team are still in place because there hasn’t been a liquidity event and the work is still exciting for them.

Liquidity Event 134

Liquidity Event Early Stage Seed Stage Startup 134

Berkonomics

MARCH 21, 2019

To grow your business to a size that will be attractive to a VC or angel making an investment now, you’ve got to show that the business will be large enough at the time of the investor’s liquidity event (cashing out) to make the investment attractive at all. Remember your employee option allocation.

Hockey Stick 63

Hockey Stick Liquidity Event Valuation Balance Sheet 63

Berkonomics

SEPTEMBER 5, 2013

Such thoughts just do not occur to most of us until the business is substantially far enough along in its growth to have multiple layers of management and enough employees and stakeholders that there is a board of directors and calls for key man insurance and succession planning. The liquidity event and beyond'

Liquidity Event 73

Liquidity Event Employee Conversion Management 73

Steve Blank

JULY 15, 2010

Number of Venture Backed Liquidity Events 1991-2000. Number of Venture Backed Liquidity Events 2000-2010. They’ve created virtual IPO’s for founders and employees via late-stage private financing. During the decade between 1991 and 2000, nearly 2000 venture backed companies went public. Source: NVCA.).

Venture Capital 306

Venture Capital IPO Liquidity Event Entrepreneur 306

Startup Professionals Musings

JULY 19, 2013

The right motivated employees dilemma. If you take investor money, expect a push for hockey-stick growth and a liquidity event, like going public (IPO) or sale (M&A), to get the payback. No one wants to put in money until you have a product, and you need money to build the product. Later you need specialists and managers.

Founder 245

Founder Hockey Stick Cofounder Liquidity Event 245

Up and Running

SEPTEMBER 20, 2021

A convertible note is like a loan, but this amount can be converted into company equity later on, usually during a liquidation event, like the acquisition of the company. Here you can see that the founders own most of the shares at 67.7%, then the ESOP (employee stock option pool) at 12.31 Convertible notes.

Cap Table 112

Cap Table Pre-Money Valuation Stock Options Option Pool 112

Berkonomics

AUGUST 27, 2020

Well-maintained deal rooms enhance a company’s image with a buyer, quicken the pace of the deal, help maintain secrecy from employees while due diligence is in process, and lower the stress levels of all parties during the process. When to start a data room?

Software Review 62

Software Review Due Diligence Intellectual Property IPO 62

Startup Professionals Musings

SEPTEMBER 7, 2015

They haven’t yet faced the realities of new employee benefits, escalating salaries and the true overhead of scaling the business. Show a liquidity event and investor return at the end of the period. For most industries that means projected margins greater than 50 percent. Base your funding requests on projected cash shortfalls.

Liquidity Event 120

Liquidity Event Startup Initial Public Offering Equity 120

Berkonomics

JUNE 2, 2010

How about incentives for employees all the way down the line and through the corporation? But how about awarding stock options to all employees? . Tech companies, particularly early stage and startups, still award options aggressively. Email readers continue here.]

Liquidity Event 86

Liquidity Event Stock Options IPO Stock 86

Board Effect

MAY 10, 2019

There’s the owner—maybe a partner or two—but unless employees are offered equity from the get-go, there’s typically not a whole lot of dilution. These events add complexity to a company’s equity and ownership structure, making the need for maintaining an organized cap table all the more evident. Liquidation Preferences.

Cap Table 40

Cap Table Liquidation Preference Dilution Liquidity Event 40

Board Effect

MAY 13, 2019

Investors are likely searching for an estimate of what they stand to gain; either at the time of their anticipated exit or in a variety of hypothetical liquidity events. Some startup companies also choose to implement an employee stock purchase plan (ESPP). What does above and beyond look like in this context?

Cap Table 40

Cap Table Management Liquidity Event Dilution 40

Berkonomics

NOVEMBER 1, 2018

Some companies, especially those financed by angel or VC investors, have good, formal stock option plans with properly priced options set to reward all employees and managers in the event of a corporate sale. Usually, the higher the ranks, the more the options held and therefore the greater reward at exit.

Stock Options 192

Stock Options Stock Distribution Programming 192

YoungUpstarts

MARCH 11, 2015

But it’s an important consideration, especially for companies that plan to offer alternative compensation such as employee stock options, which will usually require a 409A valuation. Startup companies are often cash poor and have little in the form of current monetary compensation to offer their employees.

Valuation 100

Valuation Stock Options CPA Merger 100

Berkonomics

MAY 26, 2010

In a previous insight, we explored the common percentage of a company’s fully diluted stock that is often granted in the form of options for new employees. (See Many skilled, experienced executives have jumped from mature companies to more risky positions in smaller, fast growing enterprises primarily for the options.

Employee 54

Employee Liquidity Event Stock Options Salary 54

Berkonomics

SEPTEMBER 26, 2013

First, should you inform your employees of the deal? The liquidity event and beyond' The months between the LOI and the closing are as stressful as any you will experience as a CEO, and there are few ways to reduce the stress. Professional advice before and during the process is necessary.

Due Diligence 85

Due Diligence Liquidity Event Intellectual Property SEC 85

Hunter Walker

AUGUST 24, 2014

When Google went public in August of 2004 one of the first things I did with my employee grants was sell enough to pay off my student loans. Did I work any less hard the next day because of my liquidity event? Done properly I don’t believe it will disincentivize or send wrong signals to employees or future investors.

Founder 112

Founder San Francisco Liquidity Event LP 112

Berkonomics

SEPTEMBER 12, 2024

And there are gray areas for former key employees who signed a non-compete with a limited life as part of the sale but remained on with the buyer for some time thereafter. Does the non-compete start anew upon the departure of each continuing employee?

Non-Compete 62

Non-Compete Bankruptcy Sales Employee 62

Gust

NOVEMBER 4, 2011

This discussion expands on my Quora answer to a specific question: “ Why were the stock options of MySpace employees worthless even though the company was sold to News Corporation for hundreds of millions? ” The complete story includes a startup-within-a-startup, investments and exits by two VC firms, and some genuine corporate drama.

Valuation 98

Valuation Pre-Money Valuation Merger Vesting 98

Business Plan Blog

SEPTEMBER 30, 2012

This is because most small companies do not have quick and easy exits, it is onerous to require directors and advisors to pay cash for shares in a company that is far from a liquidity event. Employee optionees holding ISOs receive other forms of compensation, while directors and advisors of start-ups typically do not.

Stock Options 45

Stock Options Stock Liquidity Event Employee 45

dondodge.typepad.com

JANUARY 15, 2011

Community is more powerful than money or technology » August 11, 2007 How much equity for investors and employees? How much equity should I grant to early employees? Founders usually end up with 10% to 20%, all the other employees end up with about 15%, and the VCs end up with about 60% to 75%. 5% Managers -.25%

Equity 40

Equity Employee Dilution Valuation 40

Berkonomics

DECEMBER 17, 2020

If you have a virtual company with your employees working from home locations, as many startups do, it should be the location of the founder. VCs often invest no less than $2 million in a single deal, finding it difficult to put less money to work and still spend time on boards and coaching entrepreneurs to a successful liquidity event.

Equity 62

Equity Finance Liquidity Event Angel Groups 62

abovethecrowd.com

APRIL 20, 2016

All Unicorn participants — founders, company employees, venture investors and their limited partners (LPs) — are seeing their fortunes put at risk from the very nature of the Unicorn phenomenon itself. We have already seen examples of founders and management obtaining liquidity in front of investors.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40