I recently launched a preferred financing calculations tool for you. It’s an online spreadsheet for you to enter some basic capitalization information, a target pre-money valuation, and a target investment amount. It then shows you the results for your cap table. Some inherent things about venture math that are embodied here but that you might…

Over the years I’ve had many occasions to figure out the price of an offering of preferred stock for a typical venture funded startup. This is different from, and definitely not to be confused with, the valuation of the company on a pre-money basis. That’s a topic for a later post. In its most simple…

Here’s a common set of angel-investor questions regarding a standard seed round term sheet for a tech company: Why are the shares divided into preferred and common? Why does the preferred stock have a limited “1x” return? What will happen with liquidation preferences in future rounds? What will happen with dividends? Does the preferred stock…

This post on the use of the term immediately, one of many similar explorations by Ken Adams, is the sort of thing that attracts me to contract drafting. There is a lot to be said for using the right language to convey an idea: language that is clear, concise, hard to misconstrue, and simple without…

I have more than one client currently considering convertible bridge notes as a parallel angel/seed round funding technique, and I have one who recently closed a small convertible note that will convert in the upcoming seed round. What’s a convertible bridge note? A convertible bridge note is a not-uncommon financing instrument in venture capital. This…

Due diligence is the catchall phrase used to describe both the amorphous investigative process that prospective investors and acquirors go through before, during, and after their initial decision to proceed with a transaction with your company as well as the materials (paper, electronic, and Q&A) that they and their advisors receive in response to their…

Here’s a link to a brief article about crowdsourcing as applied to startups. Grade for this article? Nominally 80% for 4 out of 5 right, but the wrong answer on financing can kill a company. This one gets a #FAIL from me. Hearkening back (or forward, since I don’t know if I’ve posted it yet)…

Crowd-everything is super hot, and super cool. The vastness of Wikipedia alone is sufficient to teach every one of us that when “crowd” is applied to your field, really neat and seemingly impossible things can happen. To me, “crowd” is just the plural of “open,” as in open data. But crowd doesn’t always work, and…

Here’s another LinkedIn-derived question that merits a better answer. The question was essentially whether the fellow with some IP to build a business on should form an LLC or a corporation. In typical LinkedIn fashion, off-the-cuff answers that are specific end up being wrong. In my mind, if someone is asking this question, they either…

Another LinkedIn user asked about how to structure a startup that would be a typical VC-funded software company. Here’s my edited answer: As someone who’s represented dozens of startups, closed probably 100 venture deals, and cleaned up too many small companies to count, there is in fact a right way and wrong way to do…

In a recent post referring to Ted Wang’s “simple series A” proposal, I noted that I would separately discuss legal opinions. Non-lawyers, and lawyers new to transactional practice, have probably never really heard of a legal opinion or what it does. Briefly, the legal opinion letter is a carefully prepared document that is designed to…

This article on a simpler approach to smaller Series A venture capital financings was written by Ted Wang, a partner at Fenwick & West, a well-known Silicon Valley law firm. Caveat: Ted and I worked on a deal several years ago where he represented the investors and I the company. So, my opinions of Ted’s…

Over on LinkedIn, this question caught my eye: How much do founders get diluted through exit? This isn’t a new question.I regularly answered it for founders, employees, and even angel investors during my time at Brobeck in Silicon Valley. There are lots of people concerned about “dilution” without really knowing what it is. Dilution means…