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

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 has done $400k in sales in less than two years and had an early test deal with a local supermarket chain that they were massively overperforming on. in 2012 sales and $2M in income.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

ReadWriteStart

JUNE 1, 2020

The shares given out can either be common stocks or preferred stocks. ? Debt investment. Instead of funding, you pay the investors a structured royalty, which is a portion of the sales. If you are facing any problem you can always check out this: Business Loan vs. Equity Financing. Inception stage.

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

Gust

JUNE 7, 2014

Every investment round in a company is made on the basis of extensivepaperwork (often upwards of 100 pages in total) specifying *precisely* what happens when it comes time to pay out the proceeds (if any) from the sale or dissolution of the company. 5) Senior Preferred Stock and warrants. 6) Any preference multiple on (5).

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Warrant Preferred Stock Early Stage Common Stock 157

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

Feld Thoughts

SEPTEMBER 27, 2011

In this case, the convertible debt document doesn’t allow the debt to convert into anything, but at the same time mandates that upon a sale the debt must be paid off. If it’s not a stock deal, then one normally sees one of the above scenarios. So the lenders don’t see any of the upside on the acquisition. Typical language follows.

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Conversion Sales Later Stage Preferred Stock 96

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.

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Preferred Stock Term Sheet Dilution Stock 56

Gust

OCTOBER 21, 2011

For convertible notes, the only liquidity event we need be concerned with is an acquisition of the startup in the near future, before the maturity date; otherwise, the notes will convert to equity of one kind or another, and the eventual sale of that equity (in a public offering, acquisition, or private sale) is a different subject for another day.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

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). If you do that well it’s very difficult to mess it up.

Venture Capital 126

Venture Capital Cap Table LP Equity 126

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

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

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? These are your candidates, because they are companies already absorbing much or all the marketing expense necessary to make sales of your invention. So, there you have it.

IP 54

IP Intellectual Property Investment Bankers Product 54

Up and Running

MAY 23, 2016

In the tactics section, list your sales channels and describe how you will be selling your products. While it’s useful to be able to have a sales forecast and expense budget early on, it’s not something you need until you’ve validated your idea. A few resources you may want to check out include: How to Forecast Your Sales.

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Software Review Software Delaware Forecast 74

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. Co-Sale Agreement. As a step in the right direction, Jason and I decided to open source our Foundry Group form legal documents.

Term Sheet 136

Term Sheet Preferred Stock Merger Venture Capital 136

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? These are your candidates, because they are companies already absorbing much or all the marketing expense necessary to make sales of your invention. So, there you have it.

IP 48

IP Intellectual Property Investment Bankers Product 48

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. The IRA does not provide for any registration rights.

Preferred Stock 79

Preferred Stock Term Sheet Redemption Registration Rights 79

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.).

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Liquidation Preference Pre-Money Valuation Participating Preferred Preferred Stock 73

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.

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Term Sheet Finance Preferred Stock Kentucky 39

Tim Keane

JANUARY 12, 2010

For angel groups, the distinction between groups and VCs on this issue is dwindling, especially as angel groups do bigger rounds of financing.   Note that this applies only to earl stage Series A-type equity financings and assumes no cash dividends are paid to investors. . Let’s start at the end.   First , dividends.

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Term Sheet Valuation Dividend Liquidation Preference 68

Up and Running

DECEMBER 1, 2015

Typically, employers that offer employees equity compensation will do so in the form of common stock, preferred stock, or stock options. And is willing to share company finances, future, etc.”. I’ll go into the difference between these in just a moment. Types of equity compensation.

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Equity Employee Stock Options Vesting 60

Startup Company Lawyer

JANUARY 31, 2011

Automatic conversion: on a $1M equity financing with no conversion discount and no price cap , provided that the transaction documents provide for a right to purchase a pro rata share of future financings. (I Optional equity conversion: on other equity financings with no conversion discount and no price cap.

Preferred Stock 60

Preferred Stock Liquidation Preference IPO Common Stock 60

Growthink Blog

MAY 10, 2012

Mezzanine Financing Most companies that raise equity capital and are eventually acquired or go public receive multiple rounds of financing first. No right or wrong answer here, but if this is your vision then it's important to consider when negotiating deal terms on earlier stage financing rounds. Seed Funding 3.

Equity 88

Equity Mezzanine Later Stage Venture Capital 88

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. The IRA does not provide for any registration rights.

Preferred Stock 40

Preferred Stock Term Sheet Redemption Registration Rights 40

ithacaVC

DECEMBER 14, 2011

Specifically, “too much” liquidation preference (I will use “LP” for liquidation preference). As most of you probably know, LP is one of the fundamental economic attributes of preferred stock that preferred shareholders enjoy. Ok, enough of the background.

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Liquidation Preference LP Preferred Stock Liquidity Event 49

ithacaVC

DECEMBER 13, 2013

They are typically pretty simple: (i) shares owned by founders and (ii) shares authorized for issuance in a stock option pool, some of which may be issued to employees already and some of which will be available for future issuance. S0, being able to clearly state how many options you want to grant at the time of the financing is KEY.

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Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

ithacaVC

FEBRUARY 23, 2011

The MCOP can serve a critical role as founders and other management team members are diluted down by rounds of financing or if their equity is not in the money. As the investors’ aggregate liquidation preference (ALP) increases typically the need for a MCOP also increases. But when should the MCOP be adopted?

Liquidation Preference 55

Liquidation Preference Management Preferred Stock Dividend 55

Scott Edward Walker

MAY 30, 2013

What Does This All Mean? The more stockholders a startup has and the less sophisticated they are (e.g., a dentist, a neighbor, a stranger), the more likely officers and directors will get sued.

Delaware 68

Delaware Founder Cofounder Due Diligence 68

Startup Company Lawyer

JANUARY 11, 2010

I seem to be doing a lot of pre-Series A convertible bridge note financings these days. 50%) or warrant coverage are typically more company-favorable than a Series A financing where a valuation is set. If the investor had invested $500K in a Series A Preferred Stock at a $4.5M Assume the angel investor invests $500K.

Angel Investor 39

Angel Investor Valuation Bridge Financing Preferred Stock 39

Startup Company Lawyer

JULY 20, 2009

Starting capital gains holding period in the event of a stock sale. If a founder sells stock of a company in a taxable transaction and it is held for greater than one year, then the capital gains tax rate is 15% for founders in the 25% tax bracket and higher.

IP 67

IP Stock Options Preferred Stock Capital Gains 67

www.payne.org

SEPTEMBER 22, 2011

Your offer will almost surely be for common stock. Preferred stock classes typically go to investors, and in some cases founders (usually where the founders have already invested some of their own money to build the company). If the company is acquired or liquidated, the preferred stock holders will get paid first.

Equity 56

Equity Employee Vesting Preferred Stock 56

Startup Company Lawyer

FEBRUARY 21, 2010

Due to aggregate liquidation preferences that may exceed the acquisition price in an M&A deal, common stock may be rendered worthless. If you can’t figure this out yourself, you should probably build a liquidation preference spreadsheet to model how liquidation preferences work depending on M&A transaction value.

Retention 31

Retention Liquidation Preference Employee Common Stock 31

Startup Company Lawyer

APRIL 23, 2009

Adeo was focused on creating mechanisms to protect founders who may lose control of the companies they created after raising financing from investors. The current customary form of venture financing documents has not changed much since with mid-1970s when they first became widely adopted in Silicon Valley. Protective provisions.

Common Stock 33

Common Stock Stock Dividend Delaware 33

Tim Keane

APRIL 12, 2006

What’s your attitude about “next round” financing? We are open to them and prefer to begin to co-invest at. Preferred Stock is the most usual form of investment today. What’s your attitude about “next round” financing? We are open to them and prefer to begin to co-invest at. A list of possible answers: 1.

Entrepreneur 60

Entrepreneur Valuation Sweat Equity Common Stock 60

www.vccafe.com

MARCH 11, 2013

turn customer feedback into sales and relationships. easy business finance software. YCombinator Series AA Equity Financing Documents. SaaS Sales Team Compensation â?? Startup Threads. Videos/presentations. SlideShare. Haiku Deck. GoAnimate *. Customer service. Get Satisfaction. Event platforms. Eventbrite. Women Focus.

Software Review 53

Software Review Technical Review Israel Startup 53