Posts Tagged ‘liquidation preference’
Convertible Note Seed Financings: Econ 101 for Founders
by Scott Edward Walker on April 22nd, 2012
This post is the second part of a three-part primer on convertible note seed financings. Part 1, entitled “Everything You Ever Wanted To Know About Convertible Note Seed Financings (But Were Afraid To Ask),” addressed certain basic questions, such as (i) what is a convertible note? (ii) why are convertible notes issued instead of shares of common or preferred stock? and (iii) what are the advantages of issuing convertible notes?
This part 2 will address the economics of a convertible note seed financing and the three key economic terms: (i) the conversion discount, (ii) the conversion valuation cap and (iii) the interest rate.
Part 3 will cover certain special issues, such as (i) what happens if the startup is acquired prior to the note’s conversion to equity? and (ii) what happens if the maturity date is reached prior to the note’s conversion to equity?
[Note: This post was originally published on TechCrunch.]
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Tags: conversion discount, conversion valuation cap, convertible note seed financings, convertible notes, discount cap, Fenwick, founders, liquidation preference, seed financings, series a preferred, usury
Posted in Angel Issues, VC Issues | No Comments »
Everything You Ever Wanted to Know About Convertible Note Seed Financings (But Were Afraid To Ask) – Part 1
by Scott Edward Walker on April 9th, 2012
Introduction
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, and the issuance of convertible notes for seed financing has never been more prolific. Indeed, as a corporate lawyer for 18+ years, I have seen this development first-hand.
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Tags: angels, convertible notes, Fred Wilson, liquidation preference, Paul Graham, preferred stock, seed, seed financings, Series A, series seed, Start Fund, startup, super angels, TechStars, venture capital, Y Combinator, Yuri Milner
Posted in Angel Issues, VC Issues | 2 Comments »
Should I Use My Investor’s Lawyer?
by Scott Edward Walker on August 31st, 2011
Introduction
This post was originally part of the “Ask the Attorney” series which I am writing for VentureBeat (one of my favorite websites for entrepreneurs). Please shoot me any questions you may have in the comments section – or feel free to call me directly at 415-979-9998 (San Francisco) or 310-288-6667 (Los Angeles). Thanks, Scott
Question
We’re a startup based in Palo Alto, and we just received a Series A term sheet for a $725,000 investment. The investor is kind of insisting that we use his lawyer at a big Valley firm to represent us. He said that he doesn’t need a lawyer, and this will save us a lot of money. We’re first time entrepreneurs, and we don’t know if this is standard practice and what we should do. Any advice would be appreciated.
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Tags: anti-dilution provisions, convertible note, drag-along rights, exploding term sheets, investor, lawyer, liquidation preference, New York, option pool, protective provisions, redemption rights, Series A term sheet, series seed, silicon valley, startup lawyer
Posted in Angel Issues, VC Issues | No Comments »
Doing Deals – 3 Tips for Entrepreneurs (Part 2)
by Scott Edward Walker on July 20th, 2011
Introduction
I’ve been doing deals as a corporate lawyer for 17+ years, and there are certain fundamental mistakes that I’ve seen entrepreneurs make over and over again. Accordingly, I thought it would be helpful to share three basic tips in connection with doing deals. This is part two of a three-part series; it was originally posted on Forbes. In part one, I discussed the importance of (i) being careful with letters of intent, (ii) creating a competitive environment and (iii) using your lawyer as a “bad cop.”
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Tags: cap, corporate lawyer, doing deals, entrepreneurs, liablility, liquidation preference, option pool, private equity
Posted in Dealmaking Generally | No Comments »
VC Term Sheets – Pay to Play Provisions
by Scott Edward Walker on May 19th, 2011
Introduction
This post originally appeared as part of the “Ask the Attorney” column I am writing for VentureBeat. Below is a longer, more comprehensive version, which is part of my ongoing series on venture capital term sheets. Here are the issues I have addressed to date:
In today’s post, I examine “pay-to-play” provisions, which can be an important protection for the founders.
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Tags: anti-dilution, full ratchet, liquidation preference, pay to play provisions, pay-to-play, protective provisions, pull-through provisions, pull-up provisions
Posted in VC Issues | No Comments »
VC Term Sheets – Drag-Along Provisions
by Scott Edward Walker on May 5th, 2011
Introduction
This post originally appeared as part of the “Ask the Attorney” column I am writing for VentureBeat. Below is a longer, more comprehensive version, which is part of my ongoing series on venture capital term sheets. Here are the issues I have addressed to date:
In today’s post, I examine “drag-along” or “bring-along” provisions, which can be very tricky.
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Tags: bring-along, drag-along, drag-along provisions, drag-along rights, liquidation, liquidation preference, Michael Arrington, TechCrunch, term sheets, vc
Posted in VC Issues | No Comments »
Should We Execute the “Series Seed” Documents with No Negotiations?
by Scott Edward Walker on April 21st, 2011
Introduction
This post was originally part of my “Ask the Attorney” series which I am writing for VentureBeat (one of my favorite websites for entrepreneurs). Below is a longer, more comprehensive version. Please shoot me any questions you may have in the comments section – or feel free to call me directly at 415-979-9998. Many thanks, Scott
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Tags: anti-dilution, convertible notes, entrepreneurs, liquidation preference, Paul Graham, protective provisions, series seed, series seed documents, silicon valley, startup, startups
Posted in VC Issues | 1 Comment »
How Do I Value My Startup?
by Scott Edward Walker on September 1st, 2010
Introduction
This post was originally part of my weekly “Ask the Attorney” series which I am writing for VentureBeat (one of my favorite websites for entrepreneurs). Please shoot me any questions you may have in the comments section – or feel free to call me directly at 415-979-9998. Many thanks, Scott
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Tags: 10X, attorney, DCF, entrepreneur, John Doerr, liquidation preference, return, startup, valuation, vc, venture
Posted in Ask the Attorney, VC Issues | No Comments »
What Is a Liquidation Preference?
by Scott Edward Walker on August 25th, 2010
Introduction
This post was originally part of my weekly “Ask the Attorney” series which I am writing for VentureBeat (one of my favorite websites for entrepreneurs). Please shoot me any questions you may have in the comments section – or feel free to call me directly at 415-979-9998. Many thanks, Scott
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Tags: entrepreneur, liquidation preference, liquidation preferences, multiple, participating preferred, pre, pre-money valuation, preferred stock, startup, valuation, vc
Posted in Ask the Attorney, VC Issues | 6 Comments »
Angel Financings: Legal Tips For Entrepreneurs – Part 1
by Scott Edward Walker on December 2nd, 2009
Introduction
I am currently working with several smart, young entrepreneurs who are trying to raise capital from “angels” (i.e., wealthy individuals who invest in start-up companies). Indeed, since I moved to Los Angeles from New York City in 2005, I have been involved in a number of angel financings; and what’s interesting from my perspective as a corporate attorney is that the deals run the gamut from an angel handing a check to an entrepreneur and instructing him to “send the paperwork when it’s ready” — to an angel retaining a large, aggressive law firm and insisting on shares of preferred stock, with all the “bells and whistles.” Below are five tips for entrepreneurs to help them through the angel financing process. (This is part one of a two-part series; I will provide five additional tips in my next post.) (more…)
Tags: angel, angel financings, angels, business attorneys, convertible notes, corporate attorney, entrepreneurs, liquidation preference, personal liability, Regulation D, rescission offers, SEC, securities laws, tips for entrepreneurs
Posted in Angel Issues | 12 Comments »
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