A convertible note is a type of debt instrument that allows the holder to convert their debt into equity at a predetermined valuation at a future round of funding. For example, let’s say you have a startup that has raised $100,000 in debt from 10 different investors. The terms of the convertible note may state…
Hiring for a startup is different than hiring for an established company. Its small size typically characterizes a startup, limited resources, and quick pace of work. Startups are often built around a new product or service, and are typically founded by entrepreneurs passionate about their idea and driven to turn it into a success. Because…
An investor’s right to have their money returned before common stock holders, which usually includes founders and employees of a company, is called a liquidation preference. In other words, the liquidation preference determines how much money must be returned before founders and employees of a company can receive returns in case of liquidation such as…
Anyone who has ever started a business knows that the path to success is seldom straight or easy. There are countless pitfalls and distractions that can lead you astray, and it’s often difficult to know which decision is the right one. For startups in particular, one of the most dangerous traps is confirmation bias. Confirmation…
Startup equity is essentially ownership of a company expressed in shares of stock. Founders who incorporate their companies (likely in Delaware) without outside investors have 100% ownership on day one. You may have put in your own money along with your co-founders. You may have worked without compensation for some time, and your opportunity cost of…
How much is a share of your company worth to you? The market sets the value for public companies. Private companies, however, rely on independent appraisers. Hopefully, someday those stock options will be worth a boatload for you, your employees, and your investors. However, you need to set a basis for the company to issue…
Stock options allow employees to purchase shares at a fixed price. Many companies, startups, or private companies often include these options in compensation packages for potential employees. Stock options are not shares of stock. These options allow you to buy certain numbers of company shares at a fixed price. This is often called a grant, striking price, or exercise…
Product-led Growth (PLG) refers to software products that are open to end users and allow them to use it immediately. One example of a product that many people use daily that uses a PLG model is Slack. Also open source companies like End users can sign up for amazing products and then immediately begin using them. End…
