Archive for the ‘Capital Structure’ Category

How well do angel investments perform?

goodcounsel represents a wide range of startups, many of which have raised capital from angel investors. How do these investments perform? It is difficult for us to generalize from our limited view of the landscape. We don’t have a large enough sample size (or the expertise, to be frank) to make broad judgments. Fortunately, there are organizations who compile […]

Options done right

In a legal and business career that spans more years than I care to admit, I’ve worn many hats (some of them at the same time): entrepreneur, company founder, early employee, investor, and attorney. Understanding an issue from multiple directions means that, perhaps unusually among lawyers, we typically counsel our startup company clients to implement […]

Delusions about dilution

With some regularity, clients tell me that they want to issue employee equity that represents a fixed percentage of the company, not subject to dilution. What startup company founders should realize is that giving out equity containing an “anti-dilution” feature is an extraordinary and unusual benefit, one that should be agreed to only in exceptional circumstances.

Convertible debt — hold the debt

We do a lot of convertible notes at goodcounsel, so we try to keep with the state of the art. A year or so ago, some West Coast incubators teamed up with the Wilson Sonsini law firm to create a type of convertible equity for seed, financings intended to replace convertible debt. Convertible debt minus […]

Calculating founder equity

Co-founders are always struggling to determine the “right” equity split. In my view, it is a question with no “right” answer. Like much else in business, it’s about negotiation and bargaining power, and also about relationships, entrepreneurial style, and other factors. Still, entrepreneurs often being software geeks, it was inevitable that someone would try to […]

Using LLC “profits interests” for employee incentive equity

In goodnews, goodcounsel’s highly occasional newsletter, I explained how early-stage companies that are set up as LLC’s can use “profits interests” instead of conventional options as a tax-advantaged way to offer employees incentive equity. There are some associated downsides and hassles, however. Read the article here. All newsletters can be found here.

Should I raise money with convertible notes or equity?

After “should I form a corporation or a LLC?” this is probably the question I get asked most often. I thought I’d to try to offer a quick, simple overview, with a few links for those with an interest in the gory detail. Here goes. This is general information, not legal advice, capisce? (Duh.) For the […]