Below are the top three mistakes entrepreneurs tend to make when issuing equity. 1) They don’t create a capitalization table (commonly referred to as a cap table). A cap table provides clarity around ownership. It will assist entrepreneurs in understanding the effects of issuing too much equity too soon. Too often I see entrepreneurs freely […]
Pre-money valuation
8 Things to Know Before Raising a Seed Round
Minutes before the first meeting of my startup’s seed round, a wise advisor pulled me aside. “This is going to be wild,” he warned, with a knowing smile. “Brace yourself.” Several months later, after raising $850,000 for my startup, ReelGenie, the ride has stopped (for now). I hopped off the fundraising roller coaster with memories […]
Why You Shouldn’t Hire Family to Work at Your Start-Up
I’m going to make a statement that will surely make me the most unpopular person at my next family reunion: whatever you do, don’t hire your family to work at your start-up. Managing a start-up is a rewarding experience, and the workplace might even come to feel like your second home—which is exactly why you […]
VC 101: What Happens to the Employee Option Pool after an Acquisition?
I was recently asked by an entrepreneur, “What happens to the leftover option pool after an acquisition?” In short, the shares get a disappearing act. Not so fast, though! Where those shares magically disappear to is the key to all this. In most cases, the unused shares are redistributed to all shareholders proportionate to their […]
Structuring Your Financing as the Purchase and Sale of Convertible Notes
The convertible note is a “pre-closing” on a larger, future equity financing. The idea is that the principal and interest of the note will convert into equity in the future on the terms and at the price per share determined in the company’s next equity financing. Convertible notes are considered a good way to structure […]
How Many Shares Should You Issue to Founders?
How many shares should the corporation initially issue? Often times corporations will want to raise money, and corporations and investors like to price the first round of equity financing at $1.00 per share. This may give you some guidance on how many shares to authorize and initially issue. The price per share in an equity […]
How to Build a Bridge to a 10x Return for VC’s
Most entrepreneurs simply approach venture capitalists asking for money “hat in hand,” without educating the investor on how they will get a 10x return on their investment. They need to see this return for your idea to break through the clutter of other startups that approach them every year. This lesson is designed to help you build […]