This guide provides a framework and process to help startup founders answer this common question.
Equity ownership affects the culture and sense of wellbeing of a startup. Founders typically sacrifice a great deal of other life opportunities to work on a startup effort. In exchange for that sacrifice, a founder wants to feel the ownership equation with any co-founders is fair.
In detail, this Founder’s Pocket Guide walks entrepreneurs though the following elements:
• Take The Founder Test to make sure everybody deserves founder status
• Review the case for splitting your founder equity into equal parts
• Use the Equity Split Scorecard as a fair method to allocate more equity to highly skilled cofounders
• Solve common equity problems using founder vesting structures
• Answer common equity split questions like IP and founder-investors
Note that this guide does not go into how to use equity to attract employees or using equity to pay service providers, advisors, development companies, or other contractors. This guide focuses solely on the best practices of deciding the equity ownership split between the founders of a startup venture.
Author Caspian Woods is a renowned entrepreneur and this book includes his vast experience of starting businesses, coaching new start-ups and interviewing hundreds of successful entrepreneurs from Bob Geldof to Phillip Green.
You will learn how to:
• feel positive, energised and enthused
• be clear about the start-up process
• be able to tailor it to suit their individual needs
• know which parts to focus on for success
• where to go for further reading/support.
This new edition features new material on using social media to reach new markets, improve customer service and recruit staff. It also features new information that accommodates recent changes in the economy.
Discounts and premiums do not just affect the value of a company; they play a crucial role in influencing a host of other factors and conditions that can make or break a deal. When it comes to business valuations, it's the business appraiser's responsibility to be intimately knowledgeable with every aspect of discounts and premiums: the different types, the situations when they may or may not apply, and how to quantify them.
In this newly updated edition of Business Valuation: Discounts and Premiums, Shannon Pratt—one of the nation's most recognized and respected business valuation consultants—brings together the latest collective wisdom and knowledge about all major business discounts and premiums.
Addressing the three basic approaches to conducting a valuation—the income approach, the market approach, and the asset approach—Shannon Pratt deftly and logically details the different discounts or premiums that may be applicable, depending on the basic valuation approach used, and how the valuation approaches used affect the level.
Clearly written and thorough, Business Valuation: Discounts and Premiums, Second Edition provides business appraisers, accountants, attorneys, and business owners with an arsenal of information for their professional toolkit that can be applied to every major evaluation case they might face in any deal.
This updated edition features timely, comprehensive coverage on:Strategic acquisitions Extensive empirical data Pre-IPO marketability discount studies Merger and acquisition negotiations, empirical evidence from completed transactions, and positions taken by courts in litigations Strategic acquisition premiums Studies on minority discounts
Detailed, authoritative, and complete in its coverage, Business Valuation: Discounts and Premiums, Second Edition gets to the core of one of the more complex challenges faced by business appraisers, and arms readers with the understanding and techniques needed to successfully meet and exceed their job expectations.
Expanding on these fundraising concepts, this Founder’s Pocket Guide helps startup founders learn:
What a term sheet is and how to summarize the most important deal terms for your fundraising and startup building goals.
How preferred stock shares differ from common shares, with review of how each key preferred share right and preference is tied to the investor’s shares.
Key terms and definitions associated with equity fundraising, such as pre-money valuation, founder dilution, and down round.
How to decipher legalese associated with a term sheet deal, such as pro rata, fully diluted, and pari passu.
The full list of the most common term sheet clauses, their plain English meaning, and their importance to an early-stage investment deal.
Simple math for the key term sheet financial aspects, including calculating fully diluted shares outstanding, investor equity ownership percentages, and the impact of option pools on founder dilution.
Example exit scenarios, showing how term sheet deal points impact how exit proceeds get divided among investors and founders.
Expanding on these key skills every startup founder should know, this Founder’s Pocket Guide helps you learn how to:
• Build your basic cap table step by step, including founder’s shares, option pools, angel investor rounds, and VC rounds.
• Decipher cap table specific lingo, such as fully-diluted shares outstanding, preferred shares vs. common shares, Series A, Series B, and so on.
• Establish a stock option pool in your cap table and understand the option pool effect on founder dilution.
• Understand the simple math behind cap table formulas and calculations, including calculating fully diluted shares outstanding, investor equity ownership percentages, and share price.
There are two ways to make money in startups: create something valuable—or invest in the people that are creating valuable things.
Over the past twenty-five years, Jason Calacanis has made a fortune investing in creators, spotting and helping build and fund a number of successful technology startups—investments that have earned him tens of millions of dollars. Now, in this enlightening guide that is sure to become the bible for twenty-first century investors, Calacanis takes potential angels step-by-step through his proven method of creating massive wealth: startups.
As Calacanis makes clear, you can get rich—even if you came from humble beginnings (his dad was a bartender, his mom a nurse), didn’t go to the right schools, and weren’t a top student. The trick is learning how angel investors think. Calacanis takes you inside the minds of these successful moneymen, helping you understand how they prioritize and make the decisions that have resulted in phenomenal profits. He guides you step by step through the process, revealing how leading investors evaluate new ventures, calculating the risks and rewards, and explains how the best startups leverage relationships with angel investors for the best results.
Whether you’re an aspiring investor or a budding entrepreneur, Angel will inspire and educate you on all the ins of outs. Buckle up for a wild ride into the world of angel investing!
· The Startup Valuation Explorer
· Expanded coverage of Valuation Methods
· Responding to investor questions about your valuation
· Understanding option pool impact on your valuation
For many early-stage entrepreneurs assigning a pre-money valuation to your startup is one of the more daunting tasks encountered during the fundraising quest. This guide provides a quick reference to all of the key topics around early-stage startup valuation and provides step-by-step examples for several valuation methods.
This Founder’s Pocket Guide helps startup founders learn:
• What a startup valuation is and when you need to start worrying about it.
• Key terms and definitions associated with valuation, such as pre-money, post-money, and dilution.
• How investors view the valuation task, and what their expectations are for early-stage companies.
• How the valuation fits with your target raise amount and resulting founder equity ownership.
• How to do the simple math for calculating valuation percentages.
• How to estimate your company valuation using several accepted methods.• What accounting valuation methods are and why they are not well suited for early-stage startups.