Startup 131: Term Sheet Dilution Calculator

Well, it’s been a little long since my last post and I apologize.  Life sometimes has a way of getting busy but it’s been great.  Anyway, given all the interest and posts about Startup Term sheets, I thought it would be useful to share a tool that Charlie Fortenbach, Vontu’s head of finance and operations extraordinaire, created for calculating dilution at various stages of investments.

It’s an excel spreadsheet and fairly straight forward.  Please consider it a beta release and we would love feedback, comments, bug fixes, and suggestions for improvement.  Also, if you make changes, it would be great if you can send them back to me and then we can incorporate them for everyone.  Read more... (445 words, estimated 1:47 mins reading time)

Startup 129: Term Sheet – Board of Directors

This post is a continuation of the series about venture capital term sheets.  If you have not yet read the previous posts on Valuation and Dilution, Liquidation Preferences, Anti-Dilution, and Voting Rights and Protective Provisions, you might want to start with them.  In particular, when thinking about the Board it’s important to understand investors Voting Rights and Protective Provisions, and the requirement of investors’ consent on certain decision.   (The links are at the bottom of the post as well…)

There are lots of things to consider for a startup’s Board of Directors including its role, who should be on it, and how to best work with the board.  Read more... (945 words, estimated 3:47 mins reading time)

Startup 127: Term Sheet – Voting Rights and Protective Provisions

This is the latest in a continuing series of posts about venture capital term sheets.  The first three dealt with term sheet issues around ownership, dilution and the impact of Valuation, Liquidation Preferences, and Anti-dilution.   You might want to start with those three posts before diving into this latest which covers Voting Rights and Protective Provisions that venture capitalists require in their term sheets.

Voting Rights – What’s the Big Idea?
Voting Rights are pretty straightforward.   The language you will find in a term sheet usually looks something like this:  Read more... (997 words, estimated 3:59 mins reading time)

Startup 126: Term Sheet – Anti-Dilution

This is the third post in a series attempting to demystify venture capital term sheets.  The first two posts are on Valuation and Liquidation Preferences and are a good place to start.

Delusional on Dilution
As mentioned in the previous posts, a venture capital (VC) term sheet is a non-binding letter of intent that outlines a potential investment in a startup.  Much of what a term sheet covers is the value of the company and how much ownership the founders and other shareholders give up in order to get the investment.  The amount of ownership a company gives up is called dilution.  And between valuation discussions, liquidation preferences and especially with the math for anti-dilution, this whole process might start to make you a little delusional.  But hang in there, as this is the last big term dealing with dilution.  Read more... (1545 words, 1 image, estimated 6:11 mins reading time)

Startup 125: Term Sheet – Liquidation Preferences

This is the second post in a series attempting to demystify venture capital term sheets.  If you have not read the first post about Valuation, you can find it here.

Talking Stock
As mentioned in the previous post, a venture capital term sheet is a letter of intent that outlines a potential investment in a startup.  The first and usually most debated item is the valuation as it has the largest effect on the dilution or amount of ownership you give up in order to receive funding.  Once you agree on valuation (while keeping in mind the option pool twist), it’s important to understand what you have actually sold.  Read more... (1375 words, 1 image, estimated 5:30 mins reading time)

Startup 124: Term Sheet – Valuation and Dilution

Lots of folks have asked a very common question about startups: “What is a Venture Capital Term Sheet and what do all the terms mean?”  Since there are lots of terms to discuss, I will break the answers into multiple posts to get the content out more quickly and in smaller digestible chunks.

What’s the Big Idea?

Before jumping into post-money valuations, liquidity preferences and other legal mumbo jumbo, you must first decide whether you want to go down the path of taking venture capital.  Read more... (1758 words, 2 images, estimated 7:02 mins reading time)