The Dangers of Pretend VCs: How Founders Can Protect Themselves
In the dynamic world of startups, venture capitalists (VCs) are vital. They provide the necessary funding, mentorship, and network connections that help startups thrive. However, not everyone who claims to be a VC genuinely fits the bill. Some individuals adopt the title for the cachet, to enhance their resumes, or [...]
How To Invest in a Startup as an Angel Investor
tl;dr – Angel investors are generally high net worth individuals who provide capital to early-stage businesses (I.e. start-ups). Angel investing is a great way to provide a high-growth startup with its initial outside capital while investors build a portfolio. Understanding who can become an angel investor, how to start investing [...]
The Problem with Finders
The Problem with Finders tl;dr – When companies have issues raising capital they engage finders. However, using a finder opens you up to substantial legal and reputational risk for a high cost. If you do hire a finder make sure they a registered broker-dealer if they are taking a percentage [...]
Funding Resources for Underrepresented Founders
tl;dr As awareness of the VC funding gap has grown, initiatives designed specifically to invest in companies led by folks from underrepresented backgrounds (e.g., Black, Latinx) have emerged. Underrepresented founders seeking capital for their ventures can tap into these growing opportunities to make it to their next growth milestone. --------------------------------------------------------------------------------------------------- [...]
5 Things to Keep in Mind When Picking Investors
tl;dr – Startup founders need to consider items beyond capital when choosing investors to join their team. You must assess investors for personality fit, fund horizon, time commitment, the ability to fill gaps, and belief in you and your team. As a startup founder, picking the right investors for [...]
10 Key Series A Terms
tl;dr – A Series A term sheet will serve as the document that defines your definitive deal documents which serve as a baseline for future rounds. Understanding key terms in the term sheet empowers you to better negotiate your rights and understand investor wants while raising [...]
The Power of the QSBS Tax Exemption
tl;dr - If you are a small business corporation that issues stock (not units or interests) then your stockholders can be exempt from taxes on the greater of $10 million or 10x your basis (price you paid) if you held the stock for at least 5 years. Intro [...]
Money Talk — Funding Your Startup with Revenue Sharing Loans
tl;dr – Understand different loan options - traditional vs. revenue sharing loans - and choose what works best for your business. Below are some key differences and terms to learn. Generally, revenue sharing loans will cost you more than a traditional but also provide the comfort of not having a [...]
Let’s Talk Loans — Funding Your Startup 101
tl;dr - Traditional sources of startup funding are drying up due to the fallout from Covid-19. Traditional loans may be an alternative route to pursue during this time. Below are some key sources and terms to learn. When it comes to funding your startup, there are a few different avenues [...]
3 Tips for Startups Dealing with Runway Issues Resulting From the Coronavirus
tl;dr - Make sure you properly transition any employees being terminated or moved into a non cash paying consulting role, review your contracts and negotiate with everyone, and look for alternative financing including the recent SBA disaster loan. No preamble here let’s get right to it. Everyone is worried about [...]
6 Ways to Finance Your Startup Without VC
tl;dr - If you choose or cannot go down the VC path in financing your startup there are other options. Bootstrapping, finding patient money, crowdfunding, financing via personal loans & credit cards, and reinvesting any profit are paths you can take to grow your startup. My favorite is for a [...]
Should You Raise From VCs?
This game ain’t for everybody…and that’s OK. "Do you plan on raising capital from VC’s?” That is one of the first questions I ask founders that I meet whose companies are in early stage. The question is quickly followed by a “Why?” I find too often that [...]
Board of Directors v. Board of Advisors
What’s the difference? tl;dr – A company’s Board of Directors has decision making authority for major business conducted by the company as well as a fiduciary duty to the company. A Board of Advisors advises the company on strategic matters but does not have decision making authority or a fiduciary [...]
Accelerators — 7 Things to Keep in Mind Before You Join One (Part 1)
tl;dr - Joining an accelerator can be a great idea for your startup if you feel like you need help with 1) connections to investors, mentors, & partners, 2) filling knowledge gaps through programming and mentors that understand your business and industry, and 3) signaling to the outside world that your [...]
7 Key Terms in a Convertible Note
After reading about the “proper” way to raise a seed round you decide you are ready to raise capital through a convertible note. At this point you will probably ask yourself – “What are the material terms in a convertible note?” I am glad you asked. Below are 7 key [...]
SAFEs v Convertible Notes – What are the Differences?
tl;dr – Convertible Notes and true debt instruments with interest and maturity dates while SAFEs are generally more founder friendly with the exception of Pro Rata rights. It’s important to understand what market in your area is when deciding which to use in fundraising. You learned of the standard way [...]
How to Properly Raise Seed Capital from Family & Friends
In my last post we ran through a scenario where a founder excitedly decided to sell equity to her uncle, an unsophisticated investor. That decision led to the unintended consequences of inflating the value of the company’s stock at an early stage as well as creating a giant tax liability [...]
The dangers of selling equity to friends and family for early stage startups
You just received an email from your rich uncle who normally invests in real estate. He is excited about your company and wants to put in $25k for 0.1% of your company, your first outside capital. That gives you a pre-money valuation of $25M! So everything is great, right? Cue [...]
Should you hire an independent contractor or an employee?
The short answer of course is – it depends. A founder must balance the following needs: Responsiveness Cash burn Ability to control and command Administrative burden Culture & commitment. This blog post isn't a technical one about the nuances about the law - we'll get into that in future posts [...]
Non-competes 101
As a startup founder you should be aware that executing a contract containing non-compete and non-solicit language with your team member is an excellent way to protect your company. This post focuses on non-compete provisions. What restrictions are created by non-compete/non-solicit provisions? At a high level the non-compete language restricts [...]
Your Startup’s Initial Investors – Up to Series Seed
tl;dr - A high-growth startup will likely eventually need outside capital. Family and friends invest in companies when they are little more than an idea. Angels invest when the startup starts to gain traction. Traditional accelerators invest cash as well as resources for a piece of equity. Seed funds write [...]
What is the forgotten founder problem? How to avoid or fix this issue.
tl:dr - A forgotten founder is someone who initially works on the product of a company, never assigns his IP to the company, and re-appears when the company is looking at exit event. The best way to handle this issue is by avoiding it by having them sign an IP [...]
The Dangers of Pretend VCs: How Founders Can Protect Themselves
In the dynamic world of startups, venture capitalists (VCs) are vital. They provide the necessary funding, mentorship, and network connections that help startups thrive. However, not everyone who claims to be a VC genuinely fits the bill. Some individuals adopt the title for the cachet, to enhance their resumes, or [...]
How To Invest in a Startup as an Angel Investor
tl;dr – Angel investors are generally high net worth individuals who provide capital to early-stage businesses (I.e. start-ups). Angel investing is a great way to provide a high-growth startup with its initial outside capital while investors build a portfolio. Understanding who can become an angel investor, how to start investing [...]
The Problem with Finders
The Problem with Finders tl;dr – When companies have issues raising capital they engage finders. However, using a finder opens you up to substantial legal and reputational risk for a high cost. If you do hire a finder make sure they a registered broker-dealer if they are taking a percentage [...]
Funding Resources for Underrepresented Founders
tl;dr As awareness of the VC funding gap has grown, initiatives designed specifically to invest in companies led by folks from underrepresented backgrounds (e.g., Black, Latinx) have emerged. Underrepresented founders seeking capital for their ventures can tap into these growing opportunities to make it to their next growth milestone. --------------------------------------------------------------------------------------------------- [...]
5 Things to Keep in Mind When Picking Investors
tl;dr – Startup founders need to consider items beyond capital when choosing investors to join their team. You must assess investors for personality fit, fund horizon, time commitment, the ability to fill gaps, and belief in you and your team. As a startup founder, picking the right investors for [...]
10 Key Series A Terms
tl;dr – A Series A term sheet will serve as the document that defines your definitive deal documents which serve as a baseline for future rounds. Understanding key terms in the term sheet empowers you to better negotiate your rights and understand investor wants while raising [...]
The Power of the QSBS Tax Exemption
tl;dr - If you are a small business corporation that issues stock (not units or interests) then your stockholders can be exempt from taxes on the greater of $10 million or 10x your basis (price you paid) if you held the stock for at least 5 years. Intro [...]
Money Talk — Funding Your Startup with Revenue Sharing Loans
tl;dr – Understand different loan options - traditional vs. revenue sharing loans - and choose what works best for your business. Below are some key differences and terms to learn. Generally, revenue sharing loans will cost you more than a traditional but also provide the comfort of not having a [...]
Let’s Talk Loans — Funding Your Startup 101
tl;dr - Traditional sources of startup funding are drying up due to the fallout from Covid-19. Traditional loans may be an alternative route to pursue during this time. Below are some key sources and terms to learn. When it comes to funding your startup, there are a few different avenues [...]
3 Tips for Startups Dealing with Runway Issues Resulting From the Coronavirus
tl;dr - Make sure you properly transition any employees being terminated or moved into a non cash paying consulting role, review your contracts and negotiate with everyone, and look for alternative financing including the recent SBA disaster loan. No preamble here let’s get right to it. Everyone is worried about [...]
6 Ways to Finance Your Startup Without VC
tl;dr - If you choose or cannot go down the VC path in financing your startup there are other options. Bootstrapping, finding patient money, crowdfunding, financing via personal loans & credit cards, and reinvesting any profit are paths you can take to grow your startup. My favorite is for a [...]
Should You Raise From VCs?
This game ain’t for everybody…and that’s OK. "Do you plan on raising capital from VC’s?” That is one of the first questions I ask founders that I meet whose companies are in early stage. The question is quickly followed by a “Why?” I find too often that [...]
Board of Directors v. Board of Advisors
What’s the difference? tl;dr – A company’s Board of Directors has decision making authority for major business conducted by the company as well as a fiduciary duty to the company. A Board of Advisors advises the company on strategic matters but does not have decision making authority or a fiduciary [...]
Accelerators — 7 Things to Keep in Mind Before You Join One (Part 1)
tl;dr - Joining an accelerator can be a great idea for your startup if you feel like you need help with 1) connections to investors, mentors, & partners, 2) filling knowledge gaps through programming and mentors that understand your business and industry, and 3) signaling to the outside world that your [...]
7 Key Terms in a Convertible Note
After reading about the “proper” way to raise a seed round you decide you are ready to raise capital through a convertible note. At this point you will probably ask yourself – “What are the material terms in a convertible note?” I am glad you asked. Below are 7 key [...]
SAFEs v Convertible Notes – What are the Differences?
tl;dr – Convertible Notes and true debt instruments with interest and maturity dates while SAFEs are generally more founder friendly with the exception of Pro Rata rights. It’s important to understand what market in your area is when deciding which to use in fundraising. You learned of the standard way [...]
How to Properly Raise Seed Capital from Family & Friends
In my last post we ran through a scenario where a founder excitedly decided to sell equity to her uncle, an unsophisticated investor. That decision led to the unintended consequences of inflating the value of the company’s stock at an early stage as well as creating a giant tax liability [...]
The dangers of selling equity to friends and family for early stage startups
You just received an email from your rich uncle who normally invests in real estate. He is excited about your company and wants to put in $25k for 0.1% of your company, your first outside capital. That gives you a pre-money valuation of $25M! So everything is great, right? Cue [...]
Should you hire an independent contractor or an employee?
The short answer of course is – it depends. A founder must balance the following needs: Responsiveness Cash burn Ability to control and command Administrative burden Culture & commitment. This blog post isn't a technical one about the nuances about the law - we'll get into that in future posts [...]
Non-competes 101
As a startup founder you should be aware that executing a contract containing non-compete and non-solicit language with your team member is an excellent way to protect your company. This post focuses on non-compete provisions. What restrictions are created by non-compete/non-solicit provisions? At a high level the non-compete language restricts [...]
Your Startup’s Initial Investors – Up to Series Seed
tl;dr - A high-growth startup will likely eventually need outside capital. Family and friends invest in companies when they are little more than an idea. Angels invest when the startup starts to gain traction. Traditional accelerators invest cash as well as resources for a piece of equity. Seed funds write [...]
What is the forgotten founder problem? How to avoid or fix this issue.
tl:dr - A forgotten founder is someone who initially works on the product of a company, never assigns his IP to the company, and re-appears when the company is looking at exit event. The best way to handle this issue is by avoiding it by having them sign an IP [...]