To encourage you to invest by the closing date, discounts or warrants are sometimes included to sweeten the deal. “If granted, it is almost always one or the other, but not both,” asserts Dan Rosen, chair of the Seattle Alliance of Angels. [1] “It is, of course, cleaner to just lower the price per share, [...]
Experienced angel investors usually allow the company to have a first/initial closing and start using the funds, provided it has raised a certain minimum amount in that first closing — an amount that’s meaningful enough to move the company to the next major milestone (e.g., finish and launch product). Additional closings are sometimes allowed if they [...]
* This is not legal advice. Consult with your lawyer. Antoine Brand asks – What is a private placement memorandum? Should Angel Investors be concerned if the company doesn’t have one? Since many an entrepreneur has asked the same question, why don’t we look at both sides of the table and examine the role it [...]
This is Part 4 of an 8-part series on royalty or revenue-based investment. Please visit Part 1 for links to the entire series. “Startup funding is hooked on exits,” says Thomas Thurston, president of Growth Science International. Thurston is right. Equity investors are “exit junkies.” Exits are how they make money. But in the aftermath [...]
It’s no secret that investors fight head over heels for sizzling deals and promising entrepreneurs to increase odds of success and potential returns. But when demand for quality deals exceeds supply, you better come up with exclusive, creative, or effective ways to lure the Steve Jobses of tomorrow. How to compete for hot deals? Are [...]
This is Part 3 of our quest to answer a reader’s question on dilution. The reader writes – How do you prevent being washed out as you keep pro-rata and the numbers get increasingly bigger? Suppose you invest $200k for 25%. The venture then raises $5m, so to keep pro rata you do $1.25m of [...]
A reader recently asked about dilution and we decided to answer it in 3 parts. Part 1 looks at dilution in an up round; this part examines dilution in a down round; and Part 3 goes over some of the measures you can take to minimize the impact and likelihood of dilution. Here’s the question: [...]
A month ago just before Christmas, Rob Delman of Golden Seeds (aka the “Golden Dude”) played Santa and dropped a gift packed with pitch preparation tips (for angels) down our chimney. We loved it and so did you. It’s a given – we’re very greedy when it comes to angel investing tips and insights. So [...]
In Part 1, we answered Judd Aston’s question on liquidation preference by illustrating how it protects investors’ downside. What isn’t as obvious is that it also prevents the founders from selling early at investors’ expense. Before you click away thinking that you got a lawyer and you don’t need to understand the terms, check out [...]
Judd Aston writes – I was asking my lawyer about liquidation preference and he bombarded me with legal jargon. Fifteen minutes later I still had not a clue what he had told me. So my question is what is liquidation preference? Some examples would be great. Bravo. You obviously understand the benefits and convenience of [...]
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