Category: Venture Capital

Crowdfunding – Prepare your Company to Crowdfund

Accredited Investors, Angel Investors, Crowdfunding, Financing Your Business, Investors, LLCs, Private Placements, Securities, Stock, Venture Capital

As I’ve discussed earlier, the SEC is now preparing regulations to allow for Crowdfunding pursuant to the recently passed JOBS Act.  These should be done by 2013 (emphasis on should be done by then – we’ll see when they actually come out).  As you may have heard, it will allow for true equity sales over the World Wide Web.  Companies will soon be able to sell shares of their corporation (or LLC) through online portals to regular persons that are not accredited investors (i.e. not millionaires or otherwise sophisticated).

There are a couple of things to discuss, the first is whether this is something your company actually would want to do.  The second item is, if it is something you want to do, then what can you do to prepare your company to do a Crowdfunding raise in 2013 (or whenever the SEC finishes the regulations).

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How do I Value my Company?: Startup Valuation

Angel Investors, Financing Your Business, Investors, Private Placements, Securities, Stock, Uncategorized, Venture Capital

One of the most important issues when raising money from investors is the valuation of the company. This will drive all of the other financial terms of the deal: how many shares will be sold, at what price per share, and how much equity the investor will own in the company after the transaction.

In essence, for early stage (pre-revenue) startups, the company’s valuation is whatever the market deems it to be.  I’m not being glib, that’s actually how it works.  For example, say that I have a flat screen TV that I want to sell, if someone offers me $800, and then someone else offers me $900.  I’m selling it for the $900 and that’s the TV’s market value.  If an investor values you at $1M, then that’s your market value.  Now he could be undervaluing you, but probably not by a large amount, and if the investment goes forward at that valuation then it’s the de facto market price.  Now that doesn’t mean that there is no room to negotiate.  That’s why it’s always said that early stage company valuation is an art and not a science.

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Convertible Debt Financing 101

Angel Investors, Financing Your Business, Investors, Securities, Stock, Uncategorized, Venture Capital

One way that a startup can take seed or angel investments is by doing a convertible debt financing, sometimes called a bridge loan or bridge financing.  It is essentially a loan the company receives which allows the investor to later convert the amount due into a certain number of preferred shares upon the company’s next round of equity financing.

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The basics of Startup Funding

Accredited Investors, Angel Investors, Crowdfunding, Financing Your Business, Investors, Private Placements, Securities, Stock, Venture Capital

So you’ve got a great business idea, and a team ready to bring it to market (or at least a plan to begin getting it there), but the one thing you don’t have, like a lot of new companies is the capital to begin.  This post will walk through the traditional process for a startup to seek and receive funding. Read more