startup equity: what founders need to know

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STARTUP EQUITY: WHAT FOUNDERS NEED TO KNOW Peter Stone Counsel Hopkins & Carley Glenn McCrae Chief Strategy Officer Early Growth Financial Services #StartupEquity

Post on 17-Oct-2014

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If you’re going to raise capital, you have to be thinking about equity. But, what exactly do you need to know? In this presentation, Peter Stone, of Counsel in Hopkins & Carley’s Corporate, Tax & Business Transactions department, and Glenn McCrae, Chief Strategy Officer for Early Growth Financial Services (EGFS) will dig into the nitty gritty of startup equity and how it’s a huge key to your startup success story. Topics include anatomy of a capital structure, priced vs unpriced rounds, how much equity to incent with, and more.

TRANSCRIPT

Page 1: Startup Equity: What Founders Need to Know

STARTUP EQUITY: WHAT FOUNDERS

NEED TO KNOW

Peter StoneCounselHopkins & Carley

Glenn McCraeChief Strategy OfficerEarly Growth Financial Services

#StartupEquity

Page 2: Startup Equity: What Founders Need to Know

2

About Us

Page 3: Startup Equity: What Founders Need to Know

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Introduction You're getting ready to raise capital … what do you need

to know? Who are the players? Startups are equity plays Key stakeholders and considerations What’s included in “startup equity” and what’s not

Page 4: Startup Equity: What Founders Need to Know

4

Getting Ready for the “First Real Round”

Have a capital strategy as part of your business plan How much do you

need? Where are you going

to get it? What milestones are

you going to achieve?

Page 5: Startup Equity: What Founders Need to Know

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Sidebar – Anatomy of a Capital Structure

Authorized shares

Issued and outstanding

Fully diluted

Common stock

Preferred stock

Page 6: Startup Equity: What Founders Need to Know

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Founder Stock

Starting with 100% Co-Founders Initial capital

contributions To vest or not to vest?

Page 7: Startup Equity: What Founders Need to Know

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Seed Stage Investors Profile of seed stage investors

Friends and family More sophisticated angels

Negotiating the deal Legal agreements Convertible notes Cap Transition to next stage – impact on Series A

Page 8: Startup Equity: What Founders Need to Know

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Board of Advisors

The role of a Board of AdvisorsStock compensation for AdvisorsSidebar – Advisors v. Directors

Page 9: Startup Equity: What Founders Need to Know

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Service Providers

Distinguish role from other early players

Page 10: Startup Equity: What Founders Need to Know

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Early Employees

Startup employees are different How employees look at equity:

the naïve and the savvy The employee pool Attracting talent: putting a

package together: options + cash

Legal structures and issues for employee equity

Contractors?

Page 11: Startup Equity: What Founders Need to Know

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Transitioning from Seed to Series A

Every decision on equity affects Series A (and beyond) Living with your early shareholders Introducing your new shareholders

Seed Series A

Page 12: Startup Equity: What Founders Need to Know

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Thanks and Q&A

Hopkins & Carley, A Law Corporation200 Page Mill Road, Suite 200

Palo Alto, CA 94306T: (650) 804-7600

@HOPKINSCARLEY

Peter F. Stone, Esq., Of [email protected]

Glenn [email protected]

2033 Gateway Place, 5th Fl.San Jose, CA 95110T: (415) 320-5753

@EARLYGROWTHFS