Venture Hacks

How common is accelerated vesting on change in control (AVCoC)? Noam Wasserman from HBS has the answer in Unlocking Your Golden Handcuffs:
“I recently got an email from a serial entrepreneur who has been brought on as the head of finance and operations in a mobile-services start-up. One of his questions was: How often [...]

[Read more →]

Suzanne Dingwall Williams is publishing M&A hacks on her excellent blog, Venture Law Lines. She call the series: ‘Selling the Startup’,
Selling the Startup: Can you sell your subscriber base?
“Recently, a new client received a very favourable takeover offer for her business, including its subscriber base. Problem: the privacy policy did not permit her to provide [...]

[Read more →]

Q: Should I raise money from VCs or angels, all things being equal?
There is no prototypical VC or angel. Instead of pitting VCs versus angels, consider their perceived pros and cons and choose the best available investor.
Angels are perceived to have less money, invest for fun, make their investment decisions quickly, and not ask for [...]

[Read more →]

Q: Should I sell my company or raise capital and go for it?
Sell if it dramatically changes the lives of the founders and the early team. Every dollar after your “fuck you money” is icing—get your financial independence first and make the icing at your next company. You can also use an earn-out at the [...]

[Read more →]

Summary: Angels make more introductions than VCs because angels need co-investors. You can’t clear the market in series–you can only clear it in parallel. Tranches are dumb–they have zero upside and catastrophic downside. Two investors aren’t always better than one. Finally, a ‘very special’ message to graduating Y Combinator founders: don’t do deals on D-Day [...]

[Read more →]

“AOL almost sold to Compuserve in 1991 for $60M. The VCs wanted to sell. [Steve] Case won by 1 vote. 10 years later, [AOL was] worth $100 billion.”
– Mark Pincus
Summary: Protective provisions let preferred shareholders veto certain actions, such as selling the company or raising capital. They protect the preferred, who are minority shareholders, from [...]

[Read more →]

Summary: Convert your debt into equity if you can’t pay it on time. Determine your lender’s return if you sell the company early. Reserve the right to raise more debt. Finally, reserve the right to amend the debt agreement.
Previous convertible debt hacks have discussed

The benefits of debt in a seed round
The economics of debt vs. [...]

[Read more →]

Summary: Seed investors often argue that debt doesn’t incent them to (1) help the business and (2) increase the share price of the eventual Series A. Actually, (1) debt does incent investors to help the business and (2) equity may also incent investors to decrease the Series A share price. That said, you can make [...]

[Read more →]

Summary: Convertible debt is often the best choice for a seed round. It is convenient, cheap, and quick. It lets you close the financing quickly and turn your focus back to your customers—that’s good for the company and its investors.
When your business is very young, raising a seed financing ($50K-$500K) via convertible debt is a [...]

[Read more →]

Our previous vesting hacks have discussed getting vested for time served, acceleration upon termination, and acceleration upon a sale. This article is a collection of four vesting microhacks you can use to supersize your vesting.
1. Reclaim a terminated co-founder’s unvested shares.
A terminated co-founder’s unvested shares are typically cancelled. The resulting reverse dilution benefits the founders, [...]

[Read more →]