Startup Company Lawyer

AUGUST 31, 2012

” As a result, Ted introduced the Series Seed preferred stock documents as an alternative to convertible debt for early stage investments. One major concern about convertible debt is that it eventually needs to be repaid if another round of financing doesn’t occur. The problem. Series A) or have to be repaid.

Convertible Security 73

Convertible Security Equity Security Preferred Stock 73

Steve Blank

APRIL 26, 2022

They offered desperate founders more cash but insisted on new terms, rewriting all the old stock agreements that previous investors and employees had. For existing investors, sometimes it was a “pay-to-play” i.e. if you don’t participate in the new financing you lose. A cram down is different than a down round. They’re Back.

Cram Down 417

Cram Down Founder Venture Capital Recapitalization 417

Both Sides of the Table

SEPTEMBER 8, 2012

But Paul Graham really did have a point in his “ high resolution fundraising ” post – that there is a problem – particularly in angel financing – with herding cats. We’re either “all in the round together” or we’re not.

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

David Teten

AUGUST 19, 2019

Does the traditional VC financing model make sense for all companies? 2018 also had the fewest number of angel-led financing rounds since before 2010. John Borchers, Co-founder and Managing Partner of Decathlon Capital, claims to be the largest revenue-based financing investor in the US. Absolutely not.

Revenue 60

Revenue Term Sheet Founder Technical Review 60

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?

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Gust

OCTOBER 5, 2011

Last week , we gave some attention to the “why” behind convertible note financing for early stage startups. As with so many subjects in law and finance, mastering the jargon is half the battle. This may seem like a no-brainer now that you understand the basic structure of a convertible debt financing.

Finance 79

Finance Preferred Stock Term Sheet Early Stage 79

Business Plan Blog

NOVEMBER 13, 2013

The first milestone in a new startup’s financing is called ‘Seed Capital’ which refers to the initial investment raised by the founders from their friends and family, or commonly referred to as FFF (Friends, Family and Founders), who mostly use their personal assets. *The Convertible Debt Financing. Raising Seed Capital.

Finance 93

Finance Accredited Investor Angel Investor Seed Capital 93

Scott Edward Walker

APRIL 22, 2012

This post is the second 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 certain basic questions, such as (i) what is a convertible note? (ii) What Is a Conversion Discount?

Pre-Money Valuation 72

Pre-Money Valuation Finance Liquidation Preference Founder 72

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.

Finance 64

Finance Founder Accredited Investor Preferred Stock 64

Both Sides of the Table

JULY 29, 2010

The downside is that people need to buy their stock. I talked also about 409a valuations and why common stock purchases cost less than preferred stock purchases. Most importantly we talked about my good friends at Okta who were financed by Andreesen Horowitz. Do it early. Check ‘em out!

Venture Capital 282

Venture Capital Term Sheet Valuation Stock Options 282

ReadWriteStart

JUNE 1, 2020

The shares given out can either be common stocks or preferred stocks. ? Debt investment. If you are facing any problem you can always check out this: Business Loan vs. Equity Financing. Equity investment is the most popular and most talked-about avenue for startup funding. Stages of Equity-based funding. ?

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

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.

Preferred Stock 56

Preferred Stock Term Sheet Dilution Stock 56

Gust

OCTOBER 21, 2011

To account for scenarios in which the startup is acquired before it has a chance to complete a priced equity financing round, most term sheets and deal documents contain a “ change in control ” provision. Suppose the notes converted as if the acquisition were an eligible financing round.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Gust

JUNE 7, 2014

5) Senior Preferred Stock and warrants. 6) Any preference multiple on (5). 7) Junior Preferred Stock and warrants. 8) Any preference multiple on (7). 9) Common Stock (including any Preferred that converted to Common, any exercised options, and all Founders stock) and Common stock warrants.

Warrant 157

Warrant Preferred Stock Early Stage Common Stock 157

Business Plan Blog

APRIL 10, 2012

Techcrunch just began a 3-Part series addressing convertible note seed financing that we feel our readers would be very interested in. But wait, what’s convertible note seed financing?? In layman’s terms, investors will give money to a startup but instead of getting money back, they get preferred stock in return.

Finance 40

Finance Preferred Stock Equity Stock 40

abovethecrowd.com

FEBRUARY 24, 2015

Historically, different financial institutions specialized in different stages, because the assessment of risk and opportunity was considered unique at each stage — for example, a seed investor was unlikely to do late-stage financing, and vice versa. These liquidation preferences give the investor a debt-like downside protection.

IPO 40

IPO Liquidation Preference Valuation Technical Review 40

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?

Liquidation Preference 57

Liquidation Preference Finance Preferred Stock Common Stock 57

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. Preference shares. A class of stock with special rights as described in your startup is called preference shares. Convertible notes.

Cap Table 112

Cap Table Pre-Money Valuation Stock Options Option Pool 112

ReadWriteStart

APRIL 7, 2011

But recognizing that the funding landscape has changed - more angels, more Web startups - this year the firm conducted its first Angel/Seed Financing Survey. Seed stage funds led 45% of the financings, individual angels led 31% and venture capital funds led 24%. The median amount raised in preferred stock financings was $1.1

Preferred Stock 115

Preferred Stock Silicon Valley Seed Stage Venture Capital 115

Gust

OCTOBER 26, 2011

As we conclude our convertible note financing series, there are assorted terms commonly seen in term sheets and deal documents that are worth touching on briefly. The Note Purchase Agreement and Convertible Promissory Note are essential documents for any convertible note financing.

Finance 79

Finance Term Sheet Covenant Accredited Investor 79

View from Seed

OCTOBER 15, 2014

Examples of housekeeping include the following list, though not every item will appear every time: Finance: Cash out date, burn rate, 409A valuation, cap table, common/preferred stock dashboard. Finance is mission critical, for instance – it just appears on a recurring basis.

Seed Stage 331

Seed Stage Cap Table Metrics Burn Rate 331

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. From +/- $1.5m

Finance 70

Finance Venture Capital Intellectual Property Early Stage 70

Hunter Walker

SEPTEMBER 29, 2022

As an early stage fund, often buying 10–15% of a company during its seed financing, this meant we were often being asked if we wanted to sell portions of our stakes to other approved investors (let alone the random pings from market-makers unaffiliated with the company).

Venture Capital 126

Venture Capital Cap Table LP Equity 126

Lightspeed Venture Partners

OCTOBER 7, 2012

Week three’s breakdown covered topics like how hard momentum is to turn around, and how participating preferred stock works. The company likely will run out of money well before it hits its projected Q4 sales ramp, which is why it needs an emergency financing today. This time I’ll break down week four of this season.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

ithacaVC

APRIL 25, 2014

This cap table can be used by a pre-funded startup and then a financing can be layered in. The model includes a simple waterfall analysis using both participating and non-participating preferred (see line 44 and then columns M and O). I thought it might be useful to post up a model cap table ( Cap Table Model with Waterfall ).

Cap Table 79

Cap Table Preferred Stock Pre-Money Valuation Participating Preferred 79

Startup Company Lawyer

MARCH 12, 2009

Any company that raises venture financing will need to be a C corp in order to issue preferred stock. If founders want the benefit of flow through tax treatment with respect to losses prior to an outside financing, an S corp election may make sense as long as there are no entity or non-U.S. citizen/resident stockholders.

LLC 61

LLC Stock Options Preferred Stock Stock 61

Up and Running

AUGUST 28, 2019

Because of its popularity, Delaware is also statistically a popular state for investors to finance businesses. This article will not delve into the more complex options and requirements for a corporation’s stock. You can read further about the details of preferred stock versus common stock Classes A and B. .

Delaware 83

Delaware Stock Nevada Technical Review 83

VC Cafe

OCTOBER 23, 2010

While there aren’t many issues to negotiate in simple equity financing at that stage, there’s been some debate in the venture capital and angel community on whether startups should use series seed documents or capped convertible debt. Preferred Stock Purchase Agreement Series Seed Form SPA.

Early Stage 80

Early Stage Term Sheet Preferred Stock Equity 80

Feld Thoughts

JULY 27, 2011

As a result, we created a Resources page on Ask the VC and decided to load it up with legal documents that are part of a venture capital financing. Series A Preferred Stock Purchase Agreement. As a step in the right direction, Jason and I decided to open source our Foundry Group form legal documents. Investor Rights Agreement.

Term Sheet 136

Term Sheet Preferred Stock Merger Venture Capital 136

The Startup Lawyer

MARCH 1, 2010

“The Series Seed Documents are a standardized set of documents that can be quickly and easily deployed for a seed investment: to help get a company financed properly, legally, quickly, and intelligently.&#. 2) Series Seed Stock Preferred Stock Purchase Agreement. 4) Term Sheet. Check out the docs here.

Preferred Stock 79

Preferred Stock Term Sheet Redemption Registration Rights 79

Startup Company Lawyer

APRIL 22, 2009

Always looking for ways to better serve the entrepreneurial community, Wilson Sonsini Goodrich & Rosati is pleased to announce the release of the WSGR Term Sheet Generator , a publicly available online tool that allows entrepreneurs and investors to generate an initial draft of a term sheet for a preferred stock financing.

Term Sheet 39

Term Sheet Finance Preferred Stock Kentucky 39

Both Sides of the Table

AUGUST 30, 2010

Funnily enough I just answered this question yesterday on Quora when somebody asked, “Why would an early-stage investor specifically NOT prefer a convertible note structure to straight equity (e.g. a priced/valued preferred stock financing)?&#. Here is my answer with some minor editing: _.

Equity 319

Equity Early Stage Angel Investor Valuation 319

Berkonomics

DECEMBER 20, 2018

Why are you so strongly sold on royalty licensing as the most effective way to finance a tech-based early stage company? In you experience, what are the pitfalls of using royalties instead of equity financing and selling product? I asked him five important questions, which he answered, and I’ve summarized below.

IP 54

IP Intellectual Property Investment Bankers Product 54

The Startup Lawyer

JULY 13, 2011

I’ve done quite a few recent seed deals using various ‘standard’ seed financing docs ( Series Seed , TechStars Series AA , etc.). For example, a startup requested I review a set of financing documents produced by investor counsel.

Preferred Stock 68

Preferred Stock Liquidation Preference Participating Preferred Stock 68

www.mattbartus.com

SEPTEMBER 24, 2011

First, you’d probably want them to receive common stock, not preferred stock (which is the likely next round). Matt is a lawyer representing technology companies through all phases of their lifecycle, from pre-incorporation, seed & VC financings, exit transactions and IPOs (read more). Recent Posts.

Equity 40

Equity Vesting Silicon Valley Intellectual Property 40

Berkonomics

DECEMBER 20, 2018

Why are you so strongly sold on royalty licensing as the most effective way to finance a tech-based early stage company? In you experience, what are the pitfalls of using royalties instead of equity financing and selling product? I asked him five important questions, which he answered, and I’ve summarized below.

IP 48

IP Intellectual Property Investment Bankers Product 48

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.).

Liquidation Preference 73

Liquidation Preference Pre-Money Valuation Participating Preferred Preferred Stock 73