Angel Investors, Toolkits
22 September 2011
You may be familiar with the term angel investors but may not be quite sure who they are or exactly how they work. Most often these angels are entrepreneurs; however, they may not be what you consider the “average” entrepreneurs. Meaning, they are quite often what is referred to as “cashed out” entrepreneurs, high net [...]
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Checklists
“Checklists: Check, check and…check”-A series of posts that cover the issues and components of incorporation, financing, licensing, acquisition and other matters in a checklist format. This is how my mind works and hopefully it will be helpful to you.
Hashbrown Series
“Hash Brown: Not just breakfast”- A fictional series of posts that will take you through the various life stages of several startups. This is my best attempt at being creative with somewhat bland topics.
Toolkits
“Toolkits: Be equipped”- A series of posts that shed light on hot topics that concern the startup community: Corporate Finance, Corporate Formation, Intellectual Property, Licensing Transactions, M&A, Angel Investors, Incorporation, Venture Capital Financing, etc.
Day #2 : Let’s Make It Official – Hashbrown Incorporates
Hashbrown Inc., Hashbrown Series
0 Comments 29 March 2013
One of the first decisions a founder of a startup will make is the form of the entity. For technology startups, the decision is usually between a limited liability company (LLC) and a corporation. Hashbrown has decided to incorporate as a corporation. Most technology companies are structured as corporations. Investors of technology companies are more [...]
Day #1 : The Launch of Hashbrown
Hashbrown Inc., Hashbrown Series
0 Comments 19 December 2012
Let’s create our first fictional company to take us through some stages of a startup. Company Name: Hashbrown Founders: Moe with 33 1/3% Curly with 33 1/3% Larry with 33 1/3% Company Vision: To create a food review site that provides more reliable reviews than Yelp. In the next series of posts, I’ll try my best [...]
Angel Investors — Who are they?
Angel Investors, Toolkits
0 Comments 22 September 2011
You may be familiar with the term angel investors but may not be quite sure who they are or exactly how they work. Most often these angels are entrepreneurs; however, they may not be what you consider the “average” entrepreneurs. Meaning, they are quite often what is referred to as “cashed out” entrepreneurs, high net [...]
Issuing Founders’ Stock: Purchase Price
Corporate Formation
31 Comments 22 September 2011
The norm for technology startups is for the founders to purchase the initial common stock at a very low price at $0.01 per share or less. I usually sell the initial common stock at $0.001 per share. Part of the reason why I do this is because I like to issue each founder 1,000,000 shares of [...]
Incorporating a Technology Startup: Getting the EIN
Checklists, Corporate Formation, Incorporation Checklist
0 Comments 21 September 2011
You need an EIN or employer identification number to open a corporate bank account. This is equivalent to a social security number for individuals. The form you will complete is called aForm SS-4. The easiest way to file the form is online at the IRS website. Here are a few tips for completing the form: Item 7b – you [...]
Incorporating a Technology Startup: Checklist of Documents
Checklists, Corporate Formation
2 Comments 20 September 2011
As I begin this series of posts on incorporating your technology startup, here is a quick checklist of the documents required to complete the incorporation of your new company. I will cover the issues and components of each document in detail in the posts to come. Certificate of Incorporation for Delaware or the Articles of Incorporation in California [...]
Liquidation Preference: Capping It
Venture Capital Financing
0 Comments 19 September 2011
The liquidation preference can also have a cap if it is a participating liquidation preference: After preferred liquidation proceeds, preferred participates in liquidation proceeds on the common with a cap on participation at [ ]x. This is a participating liquidation preference but caps the total participation amount so that any amounts in excess of 2X or [...]
Liquidation Preference: Accrued and Unpaid Dividends
Venture Capital Financing
2 Comments 18 September 2011
The term of the liquidation preference will almost always say that it is for the original purchase price (or a multiple of the purchase price) “plus accrued and unpaid dividends.” The addition of the “accrued and unpaid dividends” to the liquidation preference in most cases does not have any impact because venture capital investors do not [...]
Liquidation Preference: Nonparticipating vs. Participating
Venture Capital Financing
6 Comments 17 September 2011
As mentioned in the “Liquidation Preference 101” post, liquidation preferences can either be participating or nonparticipating. A nonparticipating liquidation preference only gives the preferred stock a liquidation preference over the common stock equal to the per share price the investor paid (or some multiple of that per share price). The effect of a nonparticipating liquidation preference is [...]
Valuation Language: Calculating Per Share Price on a Fully-Diluted Basis
Venture Capital Financing
2 Comments 16 September 2011
The price per share of the Series A Preferred Stock that the venture capital investor is willing to pay is equal to the pre-money valuation of the company divided by the total number of shares outstanding. Per share price = pre-money valuation / total number of shares outstanding For example, if TechStartup, Inc. has a [...]
About Sam Wu
Sam is a partner with Innovation Capital Law Group and specializes in startup representation, corporate finance (i.e. angel investment and venture capital financings), mergers and acquisitions and licensing transactions.
Sam is also the Founder of Q Street Startups, a tech-media startup focused on identifying the faces and telling the stories of Southern California's path-disrupting startups, players and the trends they're setting.
Email: swu@icaplaw.com
Phone +1.949.833.1828
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Sam Wu is a partner at Innovation Capital Law Group, LLP