What is the purpose of Section 409A? Internal Code Section 409A attempts to limit and regulate the use of “deferred compensation”—that is, the legally binding right to receive compensation in a future year, after it is no longer subject to a substantial risk of being forfeited by […]
Holders of stock options must exercise their vested options within a certain predefined time period after they cease providing services to the company. This time period is known as the “post-termination exercise period” (PTEP). What is the standard PTEP? The standard PTEP is three months. This means […]
Normally, a stock option can be exercised only with respect to the vested portion. “Early exercise” stock options allow a service provider (employee, contractor, etc.) to exercise a stock option with respect to some or all of the unvested portion. The early exercised shares are shares of […]
Historically, in the world of venture-backed startups, investors and entrepreneurs worked from the shared understanding that, once an employee provided “sweat equity” through their services, such employee was entitled to enjoy the future benefits of that equity. As a result, stock plans and award agreements typically did […]
We are going to touch on the basics of what you need to increase the likelihood of a successful fundraising round. Keep in mind that you are competing against every other investment opportunity that comes across an investor’s desk. Investors are tight on time and resources, so […]
Below are a few guiding principles to keep in mind when creating a pitch deck for investors. Please note that these considerations are not meant to be comprehensive and are only intended to provide general, high-level guidance with respect to the antifraud provisions of U.S. securities laws, […]
You may be wondering how investors come up with valuations as well as the number of shares to be included in a financing round. Much of this is determined by the market rate as well as incentives and “venture math.” As you can imagine, it is important […]
One of the many misconceptions when creating a company is that the terms “startup” and “small business” are easily interchangeable. They are not. In the venture capital industry, a startup has many more requirements and expectations of being a hypergrowth endeavor that can generate at least 10x […]
In our Emerging Companies & Venture Capital group, we often work with founders and early- stage companies that are in the process of raising their first round of financing. On occasion, this takes the form of a “friends and family” round, consisting of a group of supportive […]
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 […]
