Convertible Equity Options for Startups: SAFEs and KISSes

illustration of raising capitalWhen it comes to raising capital to get your new business off the ground, there’s a range of investment structures available, from common stock to exchangeable shares. One of the newer and most popular forms of financing for startups is convertible equity.

When raising an angel or seed round of financing, many startups increasingly opt to offer investors some form of convertible equity rather than more-traditional convertible notes, which require the company to repay the investment plus interest if the company is unable to raise future rounds. Convertible equity, on the other hand, removes the stress of possible repayment with interest, and gives the company the potential of starting out free of significant debt. [Read more…]

Pre-Money Valuation vs. Post-Money Valuation

The concept of pre-money valuation vs. post-money valuation can be a confusing one at first for many startup founders. Pre-money valuation refers to the valuation of the company prior to the investment whereas post-money valuation refers to the value after an investment has been made.

Most founders, when they think of the concept of valuation are referring to pre-money valuation. But calculating pre-money valuation is not intuitive or straightforward. [Read more…]

Negotiating a Convertible Note Financing

convertible note financing A convertible note is a hybrid of debt and equity, and it’s a popular form of financing for two main reasons. First, convertible notes are generally easy and cost-effective, because they require little negotiation and paperwork. Second, they allow the parties to put off valuation until a later time, which is useful, because accurately valuing a new company from the outset can be difficult.

Before you venture into a convertible note financing, it’s important to have a strong grasp of the terms of the note and how it will convert to equity.

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Understanding the Common Investment Structures for a Seed or Angel Round

businessman selling growthI’ve previously written about the steps that startups and emerging companies need to take to prepare for an angel or seed round, one of which is becoming familiar with the popular investment structures that are available. With the variety of funding options out there, it’s easy to feel confused or overwhelmed when deciding how to go about raising funds. In this post, I’ll explain more about the most common investment structures, to help you develop a customized funding strategy that works for your particular business. [Read more…]

Legal Considerations for Selling Your Emerging Growth Company Part 7: The Closing

businessman selling growth We’ve come to the end of our 7-part series on selling an emerging growth company, and now it’s time to seal the deal. The closing is the crucial final step in the sale, where ownership of your company officially changes hands.

The actual closing is a fairly straightforward affair, and not unlike the closing of a real estate purchase. Two main things will happen. First, the finalized deal documents, signed by all relevant parties, are exchanged. The signing may take place at the closing, but in some instances, the documents may be signed ahead of time. Second, the buyer pays the agreed purchase price to the seller. Once these two things are done, the business officially belongs to the buyer. [Read more…]