Preferred Stock - The 411 On Startups (tm)

Raising Angel Money — How Angels, Entrepreneurs, and VCs Think of Each Other

May

2012

This post is part of a series of posts called “Pitching a VC” that explains how to get access to VC’s, what to say when you get there and what will happen afterward. A friend of mine who lives in Silicon Valley called me lastt week to talk about his new company. He’s been a ...

Venture Hacks Series A Cap Table, with Note Conversion and Option Pool

Apr

2012

This is a Youtube video explanation of a cap (capitalization) table example that is available online. It may take a while get your head around the terminology and concepts involving the option pool and note conversion, and their impact on valuation. It is worth taking time to understand this if you want to see how ...

Everything You Ever Wanted To Know About Convertible Note Seed Financings (But Were Afraid To Ask)

Apr

2012

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. As a result, the pendulum has swung dramatically in the founders’ favor, ...

Why Super Pro-rata Rights are Not a Good Deal for Entrepreneurs

Sep

2011

Yesterday I saw a Tweet from Chris Sacca fly by that prompted me to want to write a blog post helping entrepreneurs understand why they should push back against VCs asking for “super pro-rata” rights. I’ll explain what they are and why you should avoid them if you can. A primer on “pro-rata” rights Institutional investors will ...

How do the sample Series Seed financing documents differ from typical Series A financing documents?

Sep

2011

After the recent announcement of the Series Seed Financing documents by Marc Andreesen, Brad Feld points out that there are now four sets of “open source” equity seed financing documents: TechStars Model Seed Funding Documents (by Cooley) Y Combinator Series AA Equity Financing Documents (by WSGR) Founders Institute Plain Preferred Term Sheet (by WSGR – disclaimer, I represent the Founders Institute and was involved ...

Series Seed Financing Documents

Sep

2011

…. I think this quote accurately captures the life-cycle of creating a simple set of documents for early stage investment. I’ve attached version 2.0 of the Series Seed Documents as well as a red-line showing the changes I’ve made from the original set. If you peruse the red-line, you will see that there are not ...

Series AA Equity Financing Documents

Sep

2011

Y Combinator and Wilson Sonsini Goodrich & Rosati are happy to announce the Series AA Equity Financing Documents. Their goal is to make angel funding rounds for startups easier for both sides. These documents were originally created for YC-funded startups to use when raising angel rounds. They seem to have worked well in trial runs ...

Multiple Preferred Stock Rounds | The Startup Lawyer

Dec

2008

You’ll see stories titled ‘Startup Raises $X Million in Y-round Financing.’ When the ‘Y’ in story is a large number, do not assume that the startup company is tanking. Instead, the startup could be gaining momentum and approaching positive cash flow….. but just needs one more round to get over the top. Rounds of financing ...

What is preferred stock and why is it issued to investors? : Startup Company Lawyer

Oct

2008

(Note: read the comments on this blog page.) Preferred stock generally has rights senior to common stock. Startup companies typically issue common stock to founders (and options to purchase common stock to employees) and preferred stock to investors. One reason for issuing preferred stock to investors is to preserve the ability of a company to ...