This post is the third in a series giving practical advice to startups with respect to understanding and negotiating a venture capital term sheet. This post will focus on dividends on the preferred stock issued in a venture deal. In the prior two posts, we provided an introduction to negotiation of the term sheet and discussed binding and non-binding provisions and discussed valuation, cap tables, and price per share. [Read more...]
Venture Capital Term Sheet Negotiation — Part 2: Valuation, Capitalization Tables, and Price per Share
This post is the second in a series giving practical advice to startups on understanding and negotiating a venture capital term sheet. This post will focus on pre-money valuation, capitalization, and price per share.
Previously, we provided a general overview of venture capital terms sheets and some of the pitfalls a startup may encounter when it comes to “binding” vs. “non-binding” provisions. In this post, we will discuss the issue that is usually in the forefront of most founder’s minds: the valuation of the company. [Read more...]
This post is the first in a series giving practical advice to startups on understanding and negotiating a venture capital term sheet.
One of the most significant events in a startup company’s life cycle is raising its first round of venture capital. Up to that point, most companies have survived by owners “bootstrapping it” with perhaps some help from friends and family and maybe an angel or two. These earlier rounds of financing are usually relatively simplistic and don’t involve overly complex securities or intense negotiations with the investors. However, when the startup enters the venture world, all this changes dramatically: complexity and intense negotiation is the norm, and startups are now faced for the first time with concepts such as participating preferred stock, conversion rights, anti-dilution, and a whole host of other fairly new and complex topics. [Read more...]
For the first time, regulators are taking action against one of the many crowdfunding sites that have sprung up since the passage of the JOBS Act. The Ohio Division of Securities issued a notice of intent to issue a cease-and-desist order against the Cincinnati-based crowdfunding platform SoMoLend and majority owner/CEO Candace Klein in June. If issued, the order will shut down SoMoLend. [Read more...]
On August 12, 2013, the crowdfunding platform AngelList submitted some really great and thoughtful comments to the SEC with respect to the SEC’s proposed Reg. D amendments related to new Form D filing requirements and enhanced penalties for failure to file (which you can read more about here). AngelList expressed its concern that the newly proposed Form D rules would result in “disastrous unintended consequences” for startups, observing that proposed rules reflect how sophisticated Wall Street issuers, investment banks, and law firms, rather than early stage businesses, engage in capital raising. [Read more...]