Founders Law LLC’s Post

Check out the most recent article by Founders Law LLC's Thomas Budnik on Understanding Equity Rounds - it's always important to understand the game you're playing if you want to win! #startups #fundraising #thoughtleadership #equity #equityfunding #preseed #seedfunding #founders #foundersjourney #attorney

Startup #founders face countless decisions every day. Fortunately, there aren't too many early #legal decisions that can have lasting, irreversible implications for founders down the road. However, your #equity arrangement with co-founders and early cap table should be carefully considered to avoid massive headaches later. KO partner John Gaddis shares 4 important decisions for #startup founders to get right from the start.

Are you nodding along to #VC jargon without really understanding what it all means? Don't worry, you're not alone! That's why we've compiled a list of 30 essential VC terms every #founder should know. From anti-dilution clauses to warrants, we've got you covered. Whether you're a seasoned #entrepreneur or just starting out, this list will help demystify the language of investors and empower you to navigate funding discussions with confidence. https://lnkd.in/dRm5B5mT #startup #forstartupsonamission #founderessentials

Dive into the intricacies of startup financing with Steve Reale (KF Class 14), CFO and Venture Partner at Ulu Ventures. Steve sheds light on the evolving landscape of financing: the shift from hefty upfront costs to capital-efficient strategies. But here's the catch—those convertible notes and SAFEs lurking beneath the surface can significantly impact a company's trajectory 📈 https://lnkd.in/ebgeqccW Ever wondered how seemingly positive valuation leaps might not always work in founders' favor? Steve breaks it down in this Kauffman Fellows Journal guest post: how multiple rounds, coupled with convertible securities, can lead to unexpected dilution. His insights offer valuable strategies for founders: ✔️ Right-sizing your funding: Don't stick to arbitrary figures—raise what's needed for real progress. ✔️ Early valuation: Move toward priced rounds swiftly for a clearer future. ✔️ Managing convertible sizes: Balance SAFEs and rounds for a healthier capital structure. ✔️ Understanding the iceberg: Crunch the numbers on future conversions; it's about business performance, not past idiosyncrasies. ✔️ Strategic dilution: Be capital-efficient to retain control and attract investors at later stages. #StartupFinance #UluVentures #EntrepreneurInsights

Raising too much capital too early can hinder a startup's success. Ben Armstrong breaks down the pitfalls of excess #funding: 🔹Dilutionary effect on founders 🔹Lack of focus 🔹Hiring the wrong people 🔹Attracting the wrong investors 🔹Higher expectations 🔹Lower future valuations Read Ben’s article for Startup Daily for alternative strategies to navigate the funding landscape: https://lnkd.in/erpu2bnc

Doug Levin’s article about one of my favorite books and what it means for startup success. Nice summary (but highly recommend reading the whole article): “Mallaby shows how the power law shapes the VC industry in various ways. It creates a high-risk, high-reward culture that encourages VCs to seek out visionary entrepreneurs who can create breakthrough innovations. It also fosters a networked and collaborative ecosystem that relies on referrals, syndication, mentorship, and feedback.” Book: The Power Law: Venture Capital and the Making of the New Future https://a.co/d/1AEJH5o

Startup investors will get screwed by this… but I like it. 🦄🦄🦄🦄 ½ for the new Angel Capital Association note. 4.5 unicorns, a winner! RotCN Part I describes tensions between founders and investors over choice of early stage investment structure, concluding that YC's SAFE note is best to get the job done. Investors who demand vastly more are optimizing for rare edge cases of unethical founders, most of whom will fail anyway, rather than the most brilliant superstars in their portfolio who will start the next Apple or Anthropic. The startup world needs *good* agreements to improve results across an entire portfolio, especially the outperforming companies – not clever ways to rebalance noneconomic terms in favor of companies or investors. If only someone would invent a better document so we won't need to have this discussion. 𝗘𝗻𝘁𝗲𝗿 𝘁𝗵𝗲 𝗔𝗖𝗔 𝗰𝗼𝗻𝘃𝗲𝗿𝘁𝗶𝗯𝗹𝗲 𝗻𝗼𝘁𝗲. Released this Tuesday by an East Coast-centric committee with little representation from the trillion dollar Silicon Valley where I swim, count me as skeptical small fish. But after a thorough reading or three I approve. I’ll dive into details in Part III and beyond. Here is my quick take for now. The good • They caught 90%+ of the bugs common to most existing convertible notes. • It works. Perfect for cap raises of $2-5 million, and usable down to $500K by lawyer-advised lead investors running funds, syndicates, or angel clubs who put in the first and most money in if the company agrees. • It's best in class, way better than any agreement I've seen in the wild and most law firm forms too. The Bad and the Ugly • It’s too damn long – 16 pages, plus a useless 8-page term sheet. • It’s fidgety and confusing, designed by a committee that piled on too many things. Some are unrealistic, others burdensome. • Strong reps and warranties, protective provisions, and ongoing company covenants (like GAAP compliant financials obligation, which I ranted on last week) mean the company needs a lawyer to help with diligence and draw up a schedule of exceptions. • When they see everything the company did wrong, investors will demand corporate cleanup, requiring $10,000 or more in legal costs and 2-4 extra weeks to close after the money is committed (versus $1,000 and 1-2 days for a safe, and $40,000 and 4-8 weeks for a priced round). • Investors will still get screwed like before. It doesn't solve this. 𝗪𝗵𝗮𝘁'𝘀 𝗻𝗲𝘅𝘁 I’m encouraging Gust to stand up an automated version online and promote it to their angel groups and founders as a best practices way to raise money. 𝗠𝗮𝗻𝘆 𝘁𝗵𝗮𝗻𝗸𝘀 … to the ACA task force for making it real: Elizabeth Sigety, Fox Rothschild; Mark Friedman, RTP Capital; Dror Futter, Rimon Law; Sonu Mirchandani, ETSU College of Business and Technology; Clay Rankin, North Coast Ventures; David Sikes, Goodwin Law; Joe Wallin, Carney Law; Ronald Weissman, Band of Angels.

🚀 Exciting Opportunity for Austin Founders! 🌟 As someone deeply invested in the vibrant startup ecosystem of Austin and a former Venture Fellow at an Accelerator, I understand that not every founder is looking to go through traditional incubators/accelerators. Yet, the thirst for knowledge, guidance, and community support remains universal. That's why I'm thrilled to share an alternative: The ScaleUp Speaker Series, kicking off on April 3rd! This series is designed specifically for new founders - those seeking expert insights, actionable advice, and a supportive community without the commitment to an accelerator program. 🔍 Upcoming Topics Include: Navigating Startup Legal Landscapes Effective Fundraising Strategies Scaling Your Business Sustainably Innovating Within Competitive Markets And much more! Each session is crafted to provide you with the tools and knowledge needed to scale your venture to new heights. Plus, it's a fantastic opportunity to connect with fellow founders and industry experts right here in Austin. 📅 Don't miss out! Spots are limited to ensure a quality experience for all attendees. #AustinStartups #ScaleUpSpeakerSeries #StartupCommunity #BusinessGrowth #Innovation #Founders #MoFo #BridgeBank

Why are more startups incorporating vested share repurchase rights into equity incentive programs, and how can this trend impact both the company and its service providers? Find out in this Perkins Coie LLP StartupPercolator blog post. #Startups #EquityCompensation #VestedShares #StartupPercolator 

“More investors have been trying to add a specific clause to funding round documents, dubbed unofficially a ‘portfolio sale clause’… …simply put, this clause enables VCs to sell their shares in the company they’re investing in without giving other investors the right to block it or sell their own shares at the same time. This provision would only apply if the VCs were to liquidate their whole portfolio, not just the individual stake in that one company.” Everyone’s looking for liquidity. Something for entrepreneurs to be aware of, even if this clause is not all that impactful to them. https://lnkd.in/egyrYJhw #vc #venturecapital #startups #entrepreneurs #entrepreneurship #tech #technology #innovation #money #business