YoungUpstarts

AUGUST 25, 2015

One of the first actions you will take with your startup is to organize your company a separate legal entity to protect yourself from personal liability for the company’s debts. In the tech startup context, you’ll typically choose between a Corporation and a Limited Liability Company (“LLC”).

LLC 100

LLC Technical Review Software Review Limited Liability Company 100

Gust

MAY 24, 2012

As a quick review, most startups begin life as corporations with a single class of equity securities, referred to as Common Stock , issued to founders, employees, and outside service providers. Options and warrants, when issued, are also typically exercisable for shares of Common Stock.

IPO 159

IPO Equity Common Stock Stock 159

Startup Professionals Musings

NOVEMBER 30, 2015

A C-corporation is more complex and expensive, and is recommended only if you expect to pitch to professional investors who demand preferred stock, or to more than 100 potential shareholders. Very few individuals have the skills and energy to build a startup alone. Find a partner and core team early to supplement your expertise.

Intellectual Property 120

Intellectual Property Entrepreneur Preferred Stock Stealth 120

Startup Professionals Musings

JANUARY 4, 2020

They know from forums such as Shark Tank on TV that asking for either too much or too little will derail credibility in the eyes of the investor, and leave the entrepreneur with no money and a struggling startup. This is all about setting a credible current value on your startup -- not future value. Marty Zwilling.

Startup 337

Startup Preferred Stock Exit Strategy Equity 337

Startup Company Lawyer

AUGUST 31, 2012

Over the past few years, convertible debt has emerged as a quick and inexpensive method for startup companies to raise money from angel investors and early stage venture funds. ” As a result, Ted introduced the Series Seed preferred stock documents as an alternative to convertible debt for early stage investments.

Convertible Security 73

Convertible Security Equity Security Preferred Stock 73

www.paulgraham.com

APRIL 28, 2010

Want to start a startup? A typical startup goes throughseveral rounds of funding, and at each round you want to take justenough money to reach the speed where you can shift into the nextgear. Few startups get it quite right. 1 ] A startups life will be more complicated, legally, if any of theinvestors arent accredited.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

Startup Professionals Musings

MARCH 14, 2020

Experienced entrepreneurs understand investor expectations of Board representation, preferred stock, and payments based on interim milestones. Being first to market is not a strong competitive argument for startups, since larger existing players can easily overrun this position. Ask only for the money you can justify.

Due Diligence 308

Due Diligence Intellectual Property Preferred Stock Startup 308

Agile VC

APRIL 17, 2011

AGILEVC My idle thoughts on tech startups. Notes: In an IPO preferred share classes are converted into common stock, and liquidation preferences and accumulated but unpaid dividends essentially go away. One can infer valuations based on per share prices of preferred stock and oustanding common shares (~5.3M

Pre-Money Valuation 113

Pre-Money Valuation Liquidation Preference Dividend Common Stock 113

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. I’ve been writing up reviews of this season’s Shark Tank pitches from a silicon valley VCs perspective. This time I’ll break down week four of this season. BACK 9 DIPS.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

Both Sides of the Table

MARCH 21, 2010

This is part of my ongoing series on Startup Advice. As startup entrepreneurs we all want to work with them because having their name as reference clients makes it so much easier for marketing, PR, selling to other customers, fund raising and even recruiting. Make the warrants for common stock and not preferred stock.

Warrant 298

Warrant Dilution Startup Stock Options 298

Startup Professionals Musings

OCTOBER 7, 2022

They know from forums such as Shark Tank on TV that asking for either too much or too little will derail credibility in the eyes of the investor, and leave the entrepreneur with no money and a struggling startup. This is all about setting a credible current value on your startup -- not future value. Marty Zwilling.

Preferred Stock 304

Preferred Stock Exit Strategy Equity Angel Investor 304

Startup Professionals Musings

MARCH 11, 2013

If you aren’t so sure, need something fast, or need to keep your costs low, then an LLC is the best legal and taxable entity to facilitate your startup. Incorporate your startup after the business plan, but before you spend a dollar on product development. Every startup business needs annual tax return coverage.

LLC 234

LLC Nevada Delaware Limited Liability Company 234

Startup Professionals Musings

JANUARY 15, 2021

Even though initial stock has no value or market, it is extremely valuable in dividing entity ownership between multiple co-founders, commensurate with their investment, contribution and role. Startup owners need to assume a three to five year wait for a liquidity event, such as acquisition or going public, before they can cash out.

Vesting 298

Vesting Dilution Stock Founder Vesting 298

Steve Blank

APRIL 26, 2022

At the turn of the century after the dotcom crash, startup valuations plummeted, burn rates were unsustainable, and startups were quickly running out of cash. Some even insisted that all prior preferred stock had to be converted to common stock. You can do another startup again with your head held high.

Cram Down 417

Cram Down Founder Venture Capital Recapitalization 417

Startup Company Lawyer

MARCH 14, 2010

In addition, I think that a “peace treaty&# between early-stage investors and startup companies on standard terms (at least at a term sheet level) is a step in the right direction. To differentiate it from typical “Series A&# preferred stock, which comes with certain expectations with regard to rights.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Both Sides of the Table

JULY 25, 2011

When I first started as a startup CEO in 1999 there were no guides on raising venture capital. To this day I’m still surprised how few CEOs really understand the differences between 2x liquidation preference and a liquidation preference with a 2x cap. Every startup needs the knowledge in this book.

Liquidation Preference 304

Liquidation Preference Term Sheet Cap Table Participating Preferred 304

Startup Professionals Musings

DECEMBER 11, 2022

Experienced entrepreneurs understand investor expectations of Board representation, preferred stock, and payments based on interim milestones. Being first to market is not a strong competitive argument for startups, since larger existing players can easily overrun this position. Ask only for the money you can justify.

Due Diligence 271

Due Diligence Intellectual Property Entrepreneur Preferred Stock 271

Startup Company Lawyer

MARCH 12, 2009

Almost all technology startup companies that I work with are C corps. Any company that raises venture financing will need to be a C corp in order to issue preferred stock. C corps, LLCs, and S corps differ significantly in the areas of taxation, ownership, fundraising, governance and structure, and employee compensation.

LLC 61

LLC Stock Options Preferred Stock Stock 61

Tim Keane

JANUARY 12, 2010

Startups and angels: Along the way to success. Term-sheets for preferred stock offerings are designed to protect the investor in case things don’t go as well as planned.   Posted at 04:19 PM in Funding startups | Permalink. Funding startups. Startup ideas. Resources for startups. September 2011.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

View from Seed

DECEMBER 4, 2014

Editor’s note: Understanding how to divide founder equity at a startup can be tricky, even to the point of reaching emotional riffs between founders. Across both the startups I’ve personally been involved in (PayPal and LinkedIn) and the startups in which I’ve been an investor, I’ve seen a broad range of co-founder equity splits.

Equity 315

Equity Founder Sweat Equity Cofounder 315

YoungUpstarts

JUNE 26, 2020

by Rizwan Virk, author of “ Startup Myths and Models: What You Won’t Learn in Business School “. If you are building a startup, you’ll find no shortage of people who are willing to give you advice, particularly when it comes to raising financing. I used to think a valuation was kind of like a stock price of a public company.

Finance 205

Finance Silicon Valley Valuation Startup 205

Gust

SEPTEMBER 29, 2011

The most successful serial entrepreneurs in the world may found three or four, perhaps even eight or ten venture-backed startups over the course of their careers. For more on working with startup lawyers, see Mark Suster’s classic post, How To Work With Lawyers At A Startup.). Knowledge is power.

Finance 178

Finance Term Sheet Preferred Stock Bridge Financing 178

Startup Professionals Musings

SEPTEMBER 27, 2023

Even though initial stock has no value or market, it is extremely valuable in dividing entity ownership between multiple co-founders, commensurate with their investment, contribution and role. Startup owners need to assume a three to five year wait for a liquidity event, such as acquisition or going public, before they can cash out.

Stock 240

Stock .Net Vesting Founder Vesting 240

View from Seed

OCTOBER 15, 2014

Over the summer, based on feedback from our portfolio and the broader startup community, NextView created pre-formatted board deck templates for seed-stage startups — part of our Growth Guides series. A seed-stage mobile startup’s housekeeping section might look something like this: Section 3: Core Metrics.

Seed Stage 331

Seed Stage Cap Table Metrics Burn Rate 331

www.quora.com

JANUARY 16, 2011

Find Questions, Topics and People Add Question Add Question Venture Capital Venture Capital Term Sheets Startups Term Sheets What are examples of good startup term sheets? Back in March, Andreessen Horowitz and Fenwick & West, LLP published a series of documents that would help structure early stage investments in startups.

Term Sheet 41

Term Sheet Startup Angel Investor Wiki 41

Both Sides of the Table

SEPTEMBER 8, 2012

I recently wrote about my views that startups rounds should be priced. Here is what I recommend very often – privately – to startup entrepreneurs for angel funding. Almost every startup needs an anchor. And a few others. Luckily there are tools like Storify – so you can actually see a synopsis here.

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

Agile VC

DECEMBER 4, 2014

Across both the startups I’ve personally been involved in (PayPal and LinkedIn) and the startups in which I’ve been an investor, I’ve seen a broad range of co-founder equity splits. As a result, one of the trickier things co-founders tackle is determining the equity split amongst the founding group of individuals.

Cofounder 255

Cofounder Equity Founder Sweat Equity 255

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

Startup Professionals Musings

SEPTEMBER 26, 2015

Perhaps they're way off in their valuation (usually far too high), or paralyzed by fear at seeing the other terms, because they have no idea what's normal, and what's worth a fight to the death (their startup's). In very early startups, which have no valuation, the term sheet may specify a convertible note.

Term Sheet 120

Term Sheet Demand Preferred Stock Liquidation Preference 120

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)?&#. Tags: Raising Venture Capital Startup Advice.

Equity 319

Equity Early Stage Angel Investor Valuation 319

Startup Professionals Musings

FEBRUARY 8, 2019

File an 83(b) election with the IRS within 30 days of founding the company, while the market value of your startup is essentially zero. Failing to file or waiting to incorporate until a first investor arrives could lead to a nasty tax bill in the middle of startup rollout when you can least afford it.

LLC 210

LLC Limited Liability Company Cofounder Preferred Stock 210

Startup Professionals Musings

MAY 18, 2015

Even though initial stock has no value or market, it is extremely valuable in dividing entity ownership between multiple co-founders, commensurate with their investment, contribution and role. Startup owners need to assume a three to five year wait for a liquidity event, such as acquisition or going public, before they can cash out.

Stock 120

Stock Vesting Common Stock Founder Vesting 120

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. The median amount raised in preferred stock financings was $1.1 million and $600,000 in convertible note financings.

Preferred Stock 115

Preferred Stock Silicon Valley Seed Stage Venture Capital 115

VC Cafe

OCTOBER 23, 2010

B ack in March, Andreessen Horowitz and Fenwick & West, LLP published a series of documents that would help structure early stage investments in startups. Preferred Stock Purchase Agreement Series Seed Form SPA. The documents have since been used in many deals already according to the site, SeriesSeed.

Early Stage 79

Early Stage Term Sheet Preferred Stock Equity 79

Scott Edward Walker

APRIL 9, 2012

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. ii) why are convertible notes issued instead of shares of common or preferred stock?

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

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. It’s called restricted stock because it often comes with restrictions, such as vesting. See Also: 10 Tips for Dealing With Startup Stock Options.

Equity 60

Equity Employee Stock Options Vesting 60

Both Sides of the Table

APRIL 14, 2010

In straight preferences the investors only get this money in a “downside&# scenario as protection that they get their money back if your company isn’t successful. Tags: Entrepreneur Advice Raising Venture Capital Start-up Advice Startup Advice. But pass they will. Brain damage. Reputation.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289