Author: Ryan Roberts
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The 83(b) Election For Startup Founders
If founders stock is issued subject to a vesting period, each founder should make a Section 83(b) election with the IRS within 30 days of purchasing the restricted stock. If a founder fails to make a 83(b) election, each vesting milestone will be a taxable event for the founder. “Income” will be calculated as the…
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Don’t Oversmart Your Startup’s Business Plan
A couple of weeks ago, I retweeted a Brad Feld post titled “Startup Cost Projections for First-Time Entrepreneurs.” The passage that interested me the most was: The biggest mistake first time entrepreneurs make is that they fall prey to the idea that they need to put together a five year P&L forecast and cash flow…
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What is a Liquidation Preference?
The liquidation preference is the amount that must be paid to the preferred stock holders before distributions may be made to common stock holders. The liquidation preference is payable on either a liquidation of the company, asset sale, merger, consolidation or any other reorganization resulting in the change of control of the startup. It is…
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Stock for Fees
Recently I’ve written about potential conflicts of interest between you and your startup lawyer. Now for the main event: Stock for Fees. This situation arises when a startup company offers stock to a lawyer in exchange for legal services. I’ve derived the following 2 postulates to explain why startups and lawyers agree to this setup:…
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The Funded Founder Institute Posts “Class F” Startup Documents
I got a tip from @Pietari that another set of startup documents were released today. The Funded Founder Institute just released a very founder-favorable set of startup documents centered around “Class F Common Stock.” The Class F Common offers founders various protective provisions such as: -2 to 1 Board votes per founder relative to non-founder…
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Should Your Startup Lawyer Get a Finder’s Fee?
Heck no. Your lawyer should not get a contingent finder’s fee for introducing you to investors or potential acquirers. I think taking a finder’s fee would be a greater conflict than sitting on your startup’s board of directors. I’ve always felt introductions, whether to an accountant, potential co-founder, or investor is just part of the…
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Should your Startup Lawyer also be a Director?
Startup founders sometimes ask their startup lawyer to serve on the board of directors. The founders may feel that their lawyer is a prime candidate for a board seat since their lawyer (a) is familiar with their startup, and (2) has dealt with a myriad of startup company issues through the lawyer’s representation of such…
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Google Officially Launches Venture Capital Fund
I Google will commit about $100MM to the fund. According to their blog post, they plan on investing in other sectors than just Internet and software: We’ll be focusing on early stage investments across a diverse range of industries, including consumer Internet, software, clean-tech, bio-tech, health care and, no doubt, other areas we haven’t thought…
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Why LegalZoom Fails Startups
Thinking of saving some cash and using LegalZoom to incorporate your startup? Think again. While incorporating with LegalZoom is a viable option for some new businesses, LegalZoom comes up way short for startups. LegalZoom just doesn’t offer the documents a typical startup needs: Shareholders Agreement? Nope. Stock Purchase Agreements? No. Tech transfer agreements? Nada. What…
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TechStars Releases Model Seed Funding Documents
TechStars released a set of model seed funding documents that they use as a staring point for their seed stage financings. The model seed funding documents include: Term Sheet. This sets out the terms of the proposed seed investment into your startup and alsos include the proposed cap table (reflecting the seed investment). Amended and…