what you need to know about founders equity

presents

What You Need to Know About Founders EquityMick Bain Janene Asgeirsson

What You Need to Know About Founder’s Equity

Mick BainJanene Asgeirsson

WilmerHale 3

Automatically Splitting the “Pie”

• Taking the easy road – “equal shares”

• Consideration of past and future contributions

• Emphasis on future roll with the company

• Investor expectations

• Saving some for later (it is only me now, but I want to add other founder(s) later)

• Founders’ agreements

• Founders’ shares v. stock options

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Promising a Set Ownership Percentage

• Ownership % today ≠ ownership % tomorrow

• Understanding dilution

• Anti-dilution protections and when are they appropriate

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Over-Complicating the Cap Table

• What is normal?

• What should I avoid?

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Waiting Too Long to Issue Equity

• Tax implications (you must pay fair value for the shares you receive)

• How to determine value in the beginning

• Risks associated with waiting too long

• Bringing in a founder at a later time

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Over-Reaching on Vesting & Acceleration

• What is vesting?

• What is acceleration?

• What founders’ typically want

• What investors’ always expect

• Typical vesting terms (for founders? for everyone else?) – keep it simple and make it the same!

• Vesting and acceleration in the event you sell your company

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Missing the Deadline for 83(b) Elections

• What is an 83(b) election?

• Strict 30 day deadline from date of purchase – no extensions

• Penalty for failing to file

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Failing to Comply with Securities Laws

• The basics of securities law compliance (registration or exemption)

• Regulation D, Rule 506

• Accredited v. non-accredited investors

• Consequences of non-compliance

• Crowdsourcing

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Questions?

Contact:Mick Bain – 781-966-2027; Michael.Bain@wilmerhale.com

Janene Ásgeirsson – 617-526-6645;Janene.Asgeirsson@wilmerhale.com

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