startup equity: what founders need to know

STARTUP EQUITY: WHAT FOUNDERS

NEED TO KNOW

Peter StoneCounselHopkins & Carley

Glenn McCraeChief Strategy OfficerEarly Growth Financial Services

#StartupEquity

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About Us

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Introduction You're getting ready to raise capital … what do you need

to know? Who are the players? Startups are equity plays Key stakeholders and considerations What’s included in “startup equity” and what’s not

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Getting Ready for the “First Real Round”

Have a capital strategy as part of your business plan How much do you

need? Where are you going

to get it? What milestones are

you going to achieve?

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Sidebar – Anatomy of a Capital Structure

Authorized shares

Issued and outstanding

Fully diluted

Common stock

Preferred stock

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Founder Stock

Starting with 100% Co-Founders Initial capital

contributions To vest or not to vest?

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Seed Stage Investors Profile of seed stage investors

Friends and family More sophisticated angels

Negotiating the deal Legal agreements Convertible notes Cap Transition to next stage – impact on Series A

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Board of Advisors

The role of a Board of AdvisorsStock compensation for AdvisorsSidebar – Advisors v. Directors

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Service Providers

Distinguish role from other early players

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Early Employees

Startup employees are different How employees look at equity:

the naïve and the savvy The employee pool Attracting talent: putting a

package together: options + cash

Legal structures and issues for employee equity

Contractors?

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Transitioning from Seed to Series A

Every decision on equity affects Series A (and beyond) Living with your early shareholders Introducing your new shareholders

Seed Series A

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Thanks and Q&A

Hopkins & Carley, A Law Corporation200 Page Mill Road, Suite 200

Palo Alto, CA 94306T: (650) 804-7600

@HOPKINSCARLEY

Peter F. Stone, Esq., Of Counselpstone@hopkinscarley.com

Glenn McCraegmccrae@earlygrowthfinancialservices.com

2033 Gateway Place, 5th Fl.San Jose, CA 95110T: (415) 320-5753

@EARLYGROWTHFS