Company Valuation and Dilution — the Minimum You Should Know to Raise Capital and Issue Stock

How should company stock be allocated among founders, employee stock options, and financial investors?   What happens to everyone’s share of the company when new stock is issued?  How do you know how much of the company should be offered to new financial investors?  These are the fundamental questions regarding valuation and dilution that we will be addressing at our next  workshop on April 22nd  hosted by ExtraSlice Smart Space.  Carter Mackley will review basic capitalization table mathematics, dilution, and pre-money valuation metrics.  He will show how to use the Startup Valuation and Dilution spreadsheet (download here)  to analyze the dilutive impact to founders of alternative fundraising scenarios.

When:

Where:

ExtraSlice – The Place for Tech

3600 136th Place Southeast, #300

Bellevue, WA 98006

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Attendance is free of charge.

Seed and Angel Round Legal Documents Primer.

What is the difference between common stock, participating preferred stock, non-participating preferred stock, bridge notes, and convertible notes with valuation caps?

Next Monday (May 4, 2015) Carter will be covering this topic at a workshop sponsored by ExtraSlice, an incubator in Bellevue.  Carter will review the basic startup financing agreements and cover what Founders need to understand to raise funds from friends and family, angel investors, or venture capital firms. He will give a brief overview of the fundraising process, then focus on the contractual and supporting legal documentation involved when you sell stock or other types of equity to investors. The overview will cover preparation of the Term Sheet, the Cap Table and the Purchase Agreement. Carter will also cover the federal and state securities laws that regulate these types of private placements and what it takes to comply. Lastly, hewill give a brief update on what is happening with crowd funding

When: Monday, May 4, 2015 from 6:30 PM to 9:30 PM (PDT)

Where: extraSlice Inc, 2375 130 Ave NE, Bellevue, WA 98005

Seating is limited.  Please RSVP to carter.mackley at mackleylaw.com.

Seattle Angel Conference Workshop: Washington’s new crowdfunding law—Is it right for your startup?

WHEN:  January 6, 2015 @ 6:00 pm – 8:00 pm
WHERE:
SURF Incubator, Suite 700
999 3rd Avenue
Seattle, WA 98104 USA
Hosted by Seattle Angel Conference COST:  $10

Register here.

ESHB 2023, the Washington Jobs Act of 2014, has been effective since November.  Is this new fundraising mechanism right for your Company?  Carter Mackley will review the new law and compare it with other fundraising methods such as SCOR offerings, Circleup.com, and presenting to local angel groups.  Carter will review the forms for filing a 2023 Offering or a SKOR offering in Washington and tell you how to initiate a crowdfunding offering.  You can read more about the Washington Jobs Act here.

Startup Legal Documents Redux

Save the date! Tuesday, July 29, 2014 from 6:00 PM to 9:00 PM (PDT)

Impact Hub, Kirkland Washington

If you missed last month’s startup legal documents webinar you have a second chance.  Carter has been asked to repeat the lecture for Seattle Angel Conference.  This will be a live lecture so space will be limited.  Registration information at this link.  

This will be a nuts and bolts discussion for recent founders or potential founders.  Our discussion will cover:

  • Articles of Incorporation and Bylaws (with brief discussion of when an LLC might be preferred to c-corporation or s-corporation)
  • Stock Ledger, Capitalization Table, Stock Certificates, and their related function.
  • Shareholder Agreement (including discussion of voting agreements, rights of first refusal, co-sale agreements, drag-along, and other provisions often recommended for startups)
  • Founder Restricted Stock, Stock Option Plans, warrants, and other methods for granting equity
  • Founder and Employee Intellectual Property Agreements and Confidentiality Agreements
  • Non-disclosure Agreements (used for potential business partners and investors)
  • Consulting/Independent Contractor Agreements
  • Convertible Notes and other seed round financing instruments such as Y Combinator SAFE (simple agreement for equity) 

Startup Up Legal Documentation Webinar

Save the date! June 19, 2014, 5:00-6:00 pm.

What legal documentation do you need to start a company?  On Thursday, June 19, 2014, Carter will host a webinar reviewing the legal documentation that every startup needs to limit its liability to creditors, allocate ownership among founders, offer stock options to employees, protect intellectual property, and prepare to raise working capital.  During the webinar, Carter will show the documents, explain their function, and take questions.  This will be a nuts and bolts discussion for recent founders or potential founders.  Our discussion will cover:

  • Articles of Incorporation and Bylaws (with brief discussion of when an LLC might be preferred to c-corporation or s-corporation)
  • Stock Ledger, Capitalization Table, Stock Certificates, and their related function.
  • Shareholder Agreement (including discussion of voting agreements, rights of first refusal, co-sale agreements, drag-along, and other provisions often recommended for startups)
  • Founder Restricted Stock, Stock Option Plans, warrants, and other methods for granting equity
  • Founder and Employee Intellectual Property Agreements and Confidentiality Agreements
  • Non-disclosure Agreements (used for potential business partners and investors)
  • Consulting/Independent Contractor Agreements
  • Convertible Notes and other seed round financing instruments such as Y Combinator SAFE (simple agreement for equity) 

Registration fee is $5.00.  Webinar log-in information will be emailed to participants.  Feel free to email questions in advance.

REGISTER FOR JUNE 19th SEMINAR: 

[EVR_SINGLE event_id=”9″]

Keiretsu Forum Academy – Top Legal Pitfalls

On May 20, 2014 Carter will be presenting on Top Legal Pitfalls at the Keiretsu Forum Academy in Seattle.  The Building a Fundable Company program is four days and covers all the bases of creating a business that meets the requirements of angel investors.  

Register for the Forum Academy here or contact
Bryan Brewer, Keiretsu Forum Academy Executive Director 
(206) 527-3168, bryan@keiretsuforum.com

Seed and Angel Round Legal Documents Primer – Nov. 11th

What is the difference between common stock, participating preferred stock, non-participating preferred stock, bridge notes, and convertible notes with valuation caps?  

We will be explaining these startup financing instruments and more at our next Startup Law Talk Workshop at East Side Incubator on November 11th.

Founders need to understand these documents to raise funds from friends and family, angel investors, or venture capital firms.   We will give a brief overview of the fundraising process, then focus on the contractual and supporting legal documentation involved when you sell stock or other types of equity to investors.  Our overview will cover preparation of the Term Sheet, the Cap Table and the Purchase Agreement.  We will also cover the federal and state securities laws that regulate these types of private placements and what it takes to comply.  Lastly, we will give a brief update on what is happening with the JOBS Act and crowd funding.

East Side Incubator is located at 2711 152nd Ave NE – Building 6, Redmond, WA.

Networking Starts at 5:30.  Lecture and Discussion from 6:00 to 7:30.

Workshop is free, but register through Meetup.com.  

Collaborating before you incorporate – risks and benefits

At our Startup Law Talk workshop on September 9, 2013 we discussed the issued raised when founders work together on their startup before actually incorporating a legal entity. 

Before a tech startup is officially incorporated there is almost always an exploratory phase where one or more founders are writing code, producing business plans, and validating concepts and markets.  When more than one person is involved, the ownership status of code and other IP created during this phase is often ambiguous and misunderstandings are frequent.  Well-advised founders will have sorted out these issues with appropriate legal documentation upon formation of the company, but it doesn’t always make sense to form a company before certain fundamental questions about the proposed business are vetted.

The  following issues were covered:

  • When does it make sense to incorporate?  (How long should the exploratory period last?)
  • Ownership status of code, business plans, and other IP created by founders, volunteers, and others before incorporation.
  • What happens if the founders part ways before a company is formed.
  • We will present attendees with a basic partnership agreement that can be used as a preliminary step before incorporating and discuss the ramifications of using it.

 

East Side Incubator is located at 2711 152nd Ave NE – Building 6, Redmond, WA.

Hiring Your First Employee – Basics that every founder should know.

Employees are essential to growing a healthy business, but poor human resource management or failure to comply with regulatory requirements can be one of the most significant expenses dragging your startup down.

At our August 12th workshop, Janelle Milodragovich, formerly with the Foster Pepper employment law group, presented on employment law basics for startups.

Janelle covered the following topics, which every founder should be familiar with:

• Independent contractor v. employee 
• At-will employment 
• Employment agreements (including intellectual property provisions) 
• Payroll laws and best practices 
• Performance management 
• Termination procedures 

 

 

Invest Visa/Entrepreneur Visa Chart (Startup Visa, EB6, X-visa)

The newly proposed Invest Visa, formerly known as the Startup Visa, creates two new visa categories: X-visa and EB6 visa.  Here is a visual aid to understanding it better. In my opinion, this is an important and commendable addition to the bill.  See today’s Wall Street Journal article on the topic. http://blogs.wsj.com/venturecapital/2013/06/05/why-vcs-and-foreign-founders-want-the-entrepreneur-visa/

Here is a chart I created to help summarize the provisions. So many people have asked me about this that the chart should give a good easy overview of the new visas.  I still believe some amendments are necessary.  More to come on that in the next few weeks, stay tuned! We would love to hear from you if you have thoughts about the Invest Visa.  In addition, if you want to support these provisions, then please email me at tahmina@watsonimmigrationlaw.com.  We would love to hear from you.

Invest Visa Flowchart created by Tahmina Watson

Invest Visa Flowchart created by Tahmina Watson