What Is Shadow Preferred Stock?

“Shadow preferred stock” refers to a series of preferred stock that is created when a SAFE or convertible note converts into stock at a price per share that is less than the price per share for the stock issued in a new equity financing. Shadow preferred stock…

A Crash Course on SAFEs

Here are some important things to keep in mind if you are considering raising capital in a SAFE round. What’s the Difference Between a SAFE Financing and a “Priced Round?” When raising capital, one of the main considerations is whether to (a) use a convertible security, like…

Structured Negotiation Yields Improved Financing Terms

The purpose of negotiation is to obtain improved transaction terms. Although negotiation is commonly thought of as a series of discussions in which each party advocates for its position, the best results often derive from a structured process that forces multiple parties to compete for the deal.…

Top Five Differences Between Convertible Notes and Safes for Founders

SAFEs and convertible debt financings broadly accomplish the same goals for early-stage (and even later-stage) emerging companies. The legal and negotiation costs of these instruments are typically an order of magnitude less than a traditional “equity” financing (Series Seed, Series A-Z, etc.), and for the most part…

Term Sheets – Potential Traps for the Unwary

During its life cycle, a typical company enters into several key transactions. These can include debt and equity financings, an exclusive license of the company’s proprietary technology or an acquisition of the company by a strategic buyer. Before signing the “definitive agreement” for a key transaction, however,…

Board Advice: Adding Advisors Versus Adding Directors

Our company clients often come to us at an early stage in their growth process with some variation of the following question: “We were introduced to an amazing resource who can help our team grow the business in a material way.  We’re considering putting the person on…

How To Treat Founder Expenses Prior to Initial Fundraising?

So you’ve been hammering away, putting your life savings into your new startup (plus maxing out your credit cards) and now you have investors willing to put money into your company. How should the money you contribute before investors be treated? And how do you to get…

Taking the Haircut

It’s a proud day when you receive your first round of funding.  Each subsequent round helps build your dream, but at a cost.  As commitments are made, do you take the time to think about how much company you now own?  BothSidesofTheTable.com put together this infographic on…

Writing an Executive Summary

Key to any early stage fundraising effort is a well-crafted Executive Summary, or Exec Summary. This succinct document describes your new venture and preemptively addresses fundamental questions that prospective investors will have. I have read hundreds of executive summaries over the years. And, the few good ones…