Category: Startup Issues
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Venture Studio Taking 50% Equity for $0: Half Your Company for Promises
tl;dr: “50% for $0” is usually a brutal trade: you’re handing over permanent ownership to a venture studio for promised introductions + some operating help…often while the studio’s equity doesn’t vest. If they’re truly acting like co-founders, make them earn it via vesting/milestones. Otherwise, walk. They are trying to make you glorified employees. If you’re…
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Online Cap Tables: Great Tools, Real Limits
If you’re looking at online cap tables like Carta, Pulley, Morgan Stanley’s Shareworks, or Fidelity’s Private Shares, the short answer is: they’re a helpful secondary record and workflow tool, not the actual “truth” of your capitalization. They can be great for issuing and tracking equity, running option exercises, generating certificates, and modeling financings. But the platform’s outputs…
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Founder Loans: How to Avoid Cap Table Poison
If you’re thinking about “loaning money to your startup,” the short answer is: founder loans can be totally fine as a temporary bridge, but they’re one of the fastest ways to create weird priority fights in a future venture financing if you paper them poorly (or pretend they’re “just informal”). The risk isn’t that investors…
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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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Big Boy Expenses for Entrepreneurs
While the stereotypical tech startup entrepreneur is 23 years old, single and has no children, the reality is that many tech startup entrepreneurs are married and/or have children. Don’t avoid “big boy” expenses just because you are bootstrapping. That is, make sure you have (or at least look into obtaining) insurance against life’s big risks…
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The $10,000 Sentence
You’re building a startup, and everything is scarce, especially capital. So when a legal issue pops up (like incorporation), it’s normal to do a cost-benefit analysis before hiring a startup lawyer. I understand the instinct to make sure you’re getting value for a small budget. I did the same thing when I hired a large…
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November Rain
Axl Rose started working on “November Rain” in 1983, about eight years before Guns N’ Roses released it. Early on, he had a piano-only version. By 1991, the final track was a full-scale power ballad that fit the moment and the band’s sound. What worked as a concept in 1983 still worked in 1991, but…
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If I Launched a Startup
Here’s what I’d do in the beginning: Incorporation (1) Entity Choice: Corporation or Corporation (2) State of Incorporation: Delaware (3) Authorized Shares in Charter: 0,000,000 Shares (4) Type of Shares: Common Stock (5) Par Value of Common: $0.0001 (6) Initial Founders Issuance: 8,000,000 Shares (7) Founders Equity Split: Depends on the Team, But Quickly and…
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It Is Not Your Baby Anymore
Many entrepreneurs treat their startup like their baby. And rightfully so. The entrepreneur has likely shed blood, sweat, tears, and some cash on the startup, therefore the entrepreneur wants to keep the startup in its grasp and control at all times. But once you issue equity in exchange for services or investment, your startup isn’t…
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White-Label Mobile App Users: Who Owns Them?
As mobile applications continue to gain popularity, more white-label mobile app deals are popping up. And while both the startup and the large company will certainly contract with respect to intellectual property asset ownership, an asset that may be overlooked is the ownership of the white-label mobile app’s users. Worst-case scenario, ownership of the white-label…