Author: Ryan Roberts
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Right of First Refusal in Company Bylaws
A Right of First Refusal (ROFR) provision gives a startup the right to step into the shoes of a third-party buyer when a current stockholder wants to sell their shares. In other words, before the shares can be sold to an outside purchaser, the company has the option to buy the shares itself on the…
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Convertible Note Maturity Date Terms
Convertible notes are a very common startup financing method. They typically include a maturity date, at which point the notes are, in theory, due and payable with interest. Convertible note maturity is often set 18 to 24 months after the first note investment. In practice, repayment at maturity is usually not a great outcome for…
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Dual Class Common Stock Structure for Founders
A startup founder’s desire to hold equity better than plain vanilla common stock is not new. Several years ago, Series FF stock for founders was a popular approach for founder liquidity in subsequent financing rounds. We implemented Series FF for a handful of clients back then, but we have not done so recently. In the…
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How to Survive a Co-Founder Divorce while at an Accelerator
Accelerators can certainly help a startup reach new levels. But if the relationship between the startup’s co-founders is already on shaky ground when they enter, the only thing the accelerator (through no fault of its own) may accelerate is a co-founder divorce…and possibly the death of the startup. The Co-Founder Divorce Problem In a co-founder…
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Accelerator Demo Days and General Solicitation
If you have been to accelerator demo days, you have probably seen a pitch that mentions a financing round in progress, or the details of a proposed round. In the last several years, some accelerators have worried that demo day presentations could be viewed as a general solicitation for purposes of Rule 502(c) of Regulation…
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The Undercurrent of the Dallas Startup Ecosystem
The Dallas startup scene is often described as a great environment for tech startups because of (1) the relatively low cost of living (especially compared to California or New York) and corresponding quality of life, and (2) the high number of tech jobs. Those factors absolutely make Dallas attractive to larger tech companies. But they…
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Crowdfunding Should Be Used as a Last Resort
I recently wrote a commentary piece for the Dallas Business Journal regarding equity crowdfunding titled: “Here’s Why Crowdfunding Should Be Your Last Resort” I thought some of my readers would enjoy it. Some of the main take-homes from the article are: (1) It may not provide the boon of capital some predict Even if a startup is…
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Unintended Consequences of a Long Additional Closing Period
Some financing rounds close on one specific day. Meaning, all investors fund their full investment amounts on the same date. This is common when a round has a small number of investors who can coordinate with the startup on logistics (wires, signature pages, and final documents). As the number of investors increases, coordinating everyone for…
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Introducing the Startup Law Glossary
In case you didn’t know, this blog includes a growing Startup Law Glossary —a plain‑English guide to terms and concepts that founders and startup teams run into from incorporation all the way through fundraising, growth, and ultimately an acquisition or IPO. You can find it at the top of each page by clicking “Glossary”, or…
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Why Seed Round Due Diligence Should Not Start Too Early
Occasionally, early-stage investors will send a startup an extensive seed round due diligence request far too early, sometimes an 8+ page list, before they’ve made any real commitment to invest. That “too early” diligence request is problematic for a few reasons. By “extensive,” I mean requests that go well beyond basic founder diligence (a pitch…