the creative idea, abundant capital, a cluster of people around you. If you think that I can support you startup, it can only say that you are wrong. On the basis of the three magic weapon, you should understand the related terms in the field of venture capital, let them be your stepping stone on the path to success. Today cloud network editor jun to compile a dry, hunting for entrepreneurs in the glossary guidelines for dinner.
phased Investment ( Investment tranches ) : after you know the Investment scale and valuation, then you will encounter the term Investment part. To cover up the negative effects of investment, an investor can invest is divided into several parts, to every department of investment need to startup satisfy some conditions, including user to what degree, income, product. Only achieved these conditions, the other part of the investment will be released.
in the seed and A round of funding, we tend not to decompose the investment too much broken pieces, because it is difficult to create A landmark in the early results. In a seed, we tend to think of investment integration, occasionally is divided into two parts. But generally the same in A round. If it is a larger investment, we may have to add an additional part.
stock option plan: in a seed, we usually use 10% to 15% of the company’s equity within the company on the stock option plan.
create SOP (note: cloud network editor king hunting SOP standard operating procedure, will be a event standard operating procedures and requirements in a uniform format description, used to guide and standardize the daily work.) The timing is very important: if the investment terms shown on the listing plan should be created before the deal was closed, then shareholders will be extracted from the original shareholders. If the SOP is founded after trading, then investors shares will be diluted.
in some ways it is quite difficult, but it is also important, because some investors, especially those non standard or the occasional angel investors) may use the board to wrest control of the company.
in order to enhance the role of investors in startup component, we usually will be the latest in A round of funding, members of the board of directors to nominate A representative our own interests. However, very few of us in the seed round of startups to nominate directors, because we believe that in the early stage, still make entrepreneurial teams of managers to manage their own team.
our directors usually meet every month. Beware of investors want to control the board of directors in A round of funding or seek with management the same number of board seats.
the board of directors is not always a company within a given jurisdiction is supported by the legislative framework of the legal institution, it can be a new institutions supported by the investment agreement document.
need deal with some collective decision by the board of directors of the transaction, for example, the cost is more than XX euros, recruiting talents, sell the company’s stock, etc., and the unanimous or the minority is subordinate to the majority.
: the founder of the limit in the case of without the consent of the investors sell stock behavior. Obviously, none of the investors are willing to invest a company, and the founder of the company are free to sell their shares and leave at any time.
follow right/jointly sell rights: based on lock-up type of logic, and the right to follow the terms of the described an investor shall have the right to the company founders to sell their holdings of stocks follow the sale of his own stocks.
, for example, if the founders decided to sell a 10% stake to a third party, the investors shall have the right under the condition of equal to founder to sell all of its shares. If buyers do not want to buy a stake in investors, he can’t buy founder of the company.
right of first refusal: this is the right of lock-up and rights at the same level. Right of first refusal, any shareholder before selling shares to a third party, he must be under the condition of the same priority sold to existing shareholders. If existing shareholders don’t want to buy, he can continue to sell.
pre-emption rights/proportional allocation: this clause for shareholders shall have the right to participate in the financing of the future.
this is usually consists of a proportional distribution: assuming that the investor owns a 20% stake in the company, the company needs additional investment of 5 million euros. Proportional allocation allows investors under the condition of the same as the other investors to invest 5 million * 20%=1 million.
in our seed investment, we sometimes more than once to exercise a proportional distribution in order to make sure we can deploy more money to those who really promising company.
anti-dilution: this one concept is very complex, some investors to use it to protect their risk of marginalized. Anti-dilution provisions describes how each shareholder in the fall into the pit “fall” : that is the future investment valuation of the investment amount is lower than the current round.
there are two basic concepts: stake and weighted average anti-dilution protection. And stake protect essentially means that only the founder shares will be diluted (i.e., investors would not be diluted), and the weighted average method is assumes that investors and entrepreneurs will be diluted.
I strongly do not recommend you to invite the lawyer to help you review the investment agreement. Of course, if you can invite to the already processed hundreds of similar deals in silicon valley lawyer that was very good.
most of the local lawyers don’t know about venture capital, but want to participate as much as possible, to get more income. So it will soon be like production line; Unfortunately, we must stay away from those startups invite their acquaintances lawyer review the investment agreement, because it can cause everything is a mess.
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