Early-stage venture capital financing guide for entrepreneurs

Early-stage venture capital financing guide for entrepreneurs

The goal for this guide is for entrepreneurs to be able to use it as a tool to help them navigate the early-stage fundraising process, from initial outreach to investors through the signing of a term sheet. There are more detailed writings on venture financing, but hopefully this guide is simple, concise and practical.

I wrote every bit of information into a question and answer format designed to walk you through what I know in a reasonably logical fashion. It does not need to be read in order or end-to-end, as it is designed to be easily searchable and referenceable.

Enjoy! Please reach out to me with any questions or feedback (mbacior1391@gmail.com).

Disclaimer: I am not a venture capitalist. I am not an entrepreneur. I’ve worked in a startup and I am currently a consultant for a large firm. I do my best to make recommendations to entrepreneurs in this guide but everything I say should be taken with this information in mind. Also, the views expressed here are my own and do not represent my employer.

Here is the basic outline:

  1. Venture Capitalists

  2. Engaging Venture Capitalists

  3. Venture Capital Financing (Part 1 - Financials)

  4. Venture Capital Financing (Part 2 - Power and Control)

  5. The Bottom Line

  6. Other, Less Important Terms

  7. Additional Notes

1. Venture Capitalists

What do venture capitalists do?

Venture capitalists are investors. Like all investors, they deploy capital in hopes that their investments will grow over time and deliver a return that exceeds their initial investment (and meets their targeted percentage rate of return). Investors are in the business of evaluating risk and return.

Specifically, venture capitalists deploy capital by investing money (in exchange for equity) into ventures (companies) with high-growth potential, betting on that growth to drive an increase in the value of the equity they have received.

Investors eventually hope to “cash in” on the increase in the value of that equity through liquidation events (see part 3 of this guide).

Who are venture capitalists? Where do they come from?

Investors possess a set of skills and/or resources that enable them to invest in early-stage companies as a means of generating return on the capital invested. Like all investors, venture capitalists are in the business of evaluating risk and return, so their skill set likely corresponds to that business in some way(s).  

Many venture capitalists are either successful entrepreneurs (or early-stage operators) or former bankers/financiers. They usually possess elite educational backgrounds. There are also some venture capitalists who come from nontraditional backgrounds, usually with some sort of deep, specific expertise.

According to a recent study, an estimated 40% of VC’s studied (either undergraduate or advanced courses) at Harvard or Stanford.

How are venture capital firms structured?

Typically, venture capital is separated between the management company (franchise) and the funds it raises (or LP entities). The funds have their own timelines, investment goals, and management philosophies that separate them from other funds held within the same, overarching management firm.

For example, Sequoia Capital is a famous venture capital firm (management company) based in the Bay Area. Their investments have culminated in 68 IPO’s and 203 acquisitions.

At the fund level, Sequoia’s Venture XI Fund was started in 2003 and raised $387 million. Sequoia’s India IV fund started in 2014 and raised about $700 million. Both of these funds were managed by members of the greater management firm, Sequoia Capital.

What roles exist within a venture capital firm?

The particular structures may vary from firm to firm, but the general structure of roles is fairly consistent.

  1. General partners (GP’s) run the firm while also investing a small percentage alongside investors. (LP’s want investors to have some “skin in the game” alongside them.)

  2. Venture partners engage in deal sourcing (finding companies to invest in and facilitating the investments) and the management of particular funds.

  3. Principals work under partners to help source deals and manage funds.

  4. Associates work under principals and engage in much of the coordination, analysis and groundwork that goes into deal sourcing and fund management.

How do venture capitalists raise money?

VC’s raise money from numerous entities, including: large corporations, banks, professional (institutional investors), other venture funds, charities, government/corporate pension funds, high net-worth individuals, endowments and insurance companies.

The more credibility a venture investor possesses, the easier it will be for the investor to raise money.

How are the arrangements between venture capital firms and their investors structured?

Typically, the arrangements between venture capitalists and their investors are based on complex contracts called an LPA or limited partnership agreement.

Why do LPA’s matter?

Because it’s important to remember that all venture capitalists have bosses, their investors. Ultimately, VC’s are beholden (in varying degrees) to the desires of their investors.

How do venture capitalists get paid?

In part, venture capitalists’ incomes are based on fund management fees. The management fee is a percentage (typically between 1.5% and 2.5%) of the total amount of money committed to a fund (otherwise known as the total amount raised). These fees pay for the venture capital firms’ entire operations, including firm staff, real estate costs, travel, etc.

How do venture capitalists get paid? (Continued)

The bulk of VC hauls stem from something called “carry”. Carry is the profit that VC’s receive after returning money to their investors. The profits of the fund are distributed to the Limited Partners (LP) and General Partners (GP). The LP’s are the investors, and the GP is the management team of the fund.

The carry is typically split 80% LP and 20% GP. It is important to remember that the profits are paid out only after the initial capital contribution is returned. GP’s are usually distributed payouts subject to a vesting period, typically 4 years.

What is the “life” of a fund?

The life of a fund is the targeted duration of a singular fund raised by a venture capital firm (ex: 5 years, 10 years, 15 years).

Why do fund timelines matter?

The age of the fund can have critical impacts on an entrepreneur. VC’s who are managing “older” funds that are nearing their end-dates may feel pressure to deliver liquidity to their investors before the close of the fund.

Deliver liquidity?

They may have incentives to push for liquidation events (mergers, IPO’s, acquisitions, etc.) that will enable them to pay out investors.

What are corporate venture capitalists?

Corporate venture capitalists (CVC’s) are venture capitalists that operate within the confines of a large corporation (ex: Comcast Ventures, Salesforce Ventures, etc).

How are CVC’s different than typical VC’s?

In many ways, they are not. The critical differences lie in motivation for investment; while “normal” VC’s are motivated primarily by return, CVC’s may also desire insight into a portfolio company’s technology, go to market approach, or competitive impact upon the CVC’s core business.

Why do these differences between CVC’s and VC’s matter?

These additional “motivations” for investment possessed by CVC’s may actually drive up the price (valuation) of a potential investment for a CVC. Simultaneously, CVC’s may also seek more control than typical VC’s.

Why should an entrepreneur take on venture capital investment?

  1. The entrepreneur does not want to/is not ready to take on a loan from a bank

  2. The entrepreneur wants to grow his/her venture to be very large, very fast

  3. The entrepreneur is interested in exiting (via a sale, IPO) within 10 years

  4. The entrepreneur wants to give people with knowledge/resources a stake in his/her business

  5. All of the above

Why should an entrepreneur not take on venture capital investment?

  1. The entrepreneur wants to maintain total control of his/her company

  2. The entrepreneur is not comfortable with the idea of his/her equity being diluted

  3. The entrepreneur is not interested in exiting (via sale, IPO) within 10 years

  4. The entrepreneur is already very cash flow positive and does not require an additional capital infusion to grow at the rate he or she desires

  5. Any of the above

2. Engaging Venture Capitalists

What do entrepreneurs need to prepare in order to interact with potential investors?

Entrepreneurs should prepare:

  1. Executive summary (1-2 page description of the product, team, and business)

  2. Short description of the business (a few paragraphs that you can use to describe your business in an email)

  3. Slide presentation (10 to 20 slides providing a substantial overview of your business)

  4. Business plan (a document describing the plans for bringing the business to life - this can be done in many ways so consult Google first)

  5. Financial projections (focus on both revenue and cost)

  6. Due diligence documents (any documentations relevant to legal due diligence such as contracts, partnership agreements, board meeting notes, etc.)

How should entrepreneurs contact VC’s?

Cold engagement can work, but the vast majority of the time a warm introduction is going to be better. Scan your network to see if you can get someone to introduce you. Ideally, the introduction should be at least somewhat organic and not totally out of left field.

Many VC’s most prefer the “double opt-in” introduction, where a mutual contact asks the VC for permission before actually connecting them with the entrepreneur.

“But I don’t know any VC’s. I don’t know even know anyone who knows any VC’s!”

This is the reality of venture financing outside of certain circles. While this definitely makes things more difficult, reaching investors is easier than it has ever been thanks to the magic of the internet; LinkedIn, Twitter, etc. can all be great tools for reaching investors (or people who have their ear).

Networking is a topic worthy of its own writings but I’ll say this: make it easier on yourself. Have things that you can point to (a running demo, product reviews, a marketing campaign, sales figures, etc.) ready so that when the time comes you are not scrambling to prepare for your introduction to an investor. If you don’t have those things ready, maybe it’s a bit too soon to seek venture financing.

Should entrepreneurs engage with multiple VC’s simultaneously?

Yes, if possible. Be courteous and professional, but engaging multiple interested VC’s in your funding round is the fastest way of driving the “price” of the funding round (valuation) up.

How many venture firms should entrepreneurs engage with in preparation for a funding round?

This is a really hard question. The total number is very dependent on how much interest you can generate from VC’s. In theory, more VC’s is better (for negotiation purposes), but having eight strong prospects is probably better than having twenty middling prospects.

Do different venture capitalist firms coordinate with each other if they want to invest into the same company?

Yes, this often happens.The VC community is tight-knit and employees of different firms often communicate with one another about interesting new companies. More interestingly, many VC’s also have “go-to” investing partners, which are other firms who they consistently enter into deals with.

What is a lead investor?

The lead investor contributes the largest amount of cash in a fundraising round. The lead investor should be the most engaged investor of all investors who participate in a fundraising round.

The lead investor will typically occupy any board seats allocated based on the funding round and work closely with the leadership of the company after the deal.

3. Venture Capital Financing (Financials)

What is valuation? Why does it matter in cases of venture investing?

Valuation is the monetary value assigned to a company at the time of investment.

Valuation is important in venture financing because a higher valuation means that a venture investor will have to pay more money to get the same equity percentage in the business.

How is valuation determined?

Valuation is complicated and vague for early-stage companies.

Valuation will be driven by a complex combination of projected revenue, economic conditions, intellectual property value, founder/team credentials, market growth trajectory, and VC interest in the deal (the more interest from VC’s, the higher the valuation).

Valuation is often mistakenly thought of as the fixed, underlying value of a business; for early-stage companies, valuation is more accurately described as the “price” for investors to acquire a stake in a company at a given percentage.

Who determines valuation?

Valuation is the outcome of a negotiation. VC’s and entrepreneurs will both come to the table with ideas of valuation and ultimately hammer out a number alongside the other terms of the deal.

What is the difference between pre-money and post-money valuation?

  1. Pre-money valuation is the agreed-upon value of a company before a round of venture financing.

  2. Post-money valuation is the agreed-upon value of a company after a round of venture financing.


Let’s say that that the agreed upon value of a company after negotiations but before any funds are received is $5M.

The company raised a $1M funding round from a single investor.

The pre-money valuation is $5M, and the post-money valuation is $6M.

Why does the distinction between pre-money and post-money valuation matter?

If the investors want a 20% stake in the aforementioned company at its pre-money valuation ($5M), they will have to pay $1M.

If the investors want a 20% stake in the company at its post-money valuation ($6M), the investor will have to pay $1.2M.

Essentially, if an investor is able to negotiate a percentage stake at a pre-money valuation, this is better for the investor; if the entrepreneur is able to negotiate a VC’s percentage stake at a post-money valuation, this is better for the entrepreneur.

What is a term sheet?

A term sheet provides an overview of the deal structure in a venture financing round.

What is the difference between common stock and preferred stock?

These are different classifications of stock, meant to segregate the varying degrees of claim that each set of shareholders have upon the company’s assets.

Preferred stockholders generally have greater claim upon the assets in a liquidation event than common shareholders.

The specific terms can vary, but generally, preferred shareholders will be investors and common shareholders will be founders/employees.

How is ownership of a company assigned to founders?

When a company is created, “shares” of stock are allocated to the founders that correspond to the agreed-upon ownership percentages.


Two founders start a company and agree to a 50% equity stake for each founder.

The founders “issue” 100,000 shares of common stock in the company to themselves, valued at $1 each.

Each founder is assigned 50,000 shares of common stock, corresponding to 50% ownership of the company.

How is ownership of a company transferred to investors or employees?

To give ownership of the company to new investors or employees, the company will issue new shares of stock.


The two founders from the example above raise a venture round and agree that the investors will obtain 10% equity ownership of the company at a pre-money valuation of $100,000.

The company issues 11,111 new shares to give to investors, resulting in 50,000 shares allocated to each founder (~45% ownership of the company for each founder) and 11,111 shares allocated to the investor (~10% ownership of the company for the investor).

There are 111,111 total outstanding shares, now valued at $.90 each, maintaining a $100,000 valuation for the company.

What is dilution?

As in the latter example above, when a company issues new shares (for purposes of giving them to investors, buying another company, giving out more stock options, etc.), the percentage of company ownership represented by the other outstanding shares of stock is immediately decreased.

Is dilution bad for those whose shares are “diluted”?

It depends on the overall impact of dilution upon the value of a company. In theory, the actions made possible by dilution (new funding, new employees, etc.) should enable the company to increase its valuation over time.

So while diluted shareholders’ slice of the pie has decreased, they hope that the pie will grow much larger.

Do everyone’s shares get diluted equally when new shares are issued?

Not necessarily, there are complex ways around equal dilution in the case of the issuance of new shares.


Mark Zuckerberg famously reduced the ownership percentage of his Facebook co-founder Eduardo Saverin via targeted dilution.

First, Zuckerberg created a new company under Delaware law that acquired the old company (which was a Florida LLC). The differing stock structure of the new company reduced Eduardo’s shares significantly.

Then, as the company’s sole director, Zuckerberg issued 9 million new shares of common stock, which were given to existing shareholders with the exception of Saverin. This further diluted Saverin’s ownership percentage.

What are option pools?

Option pools refer to a portion of company equity (stock) that remains unassigned so that it can be issued to new employees in the form of stock options.

Why do option pools matter to early-stage companies?

Option pools are an integral part of attracting talent for an early-stage company as they allow founders to issue equity in the company to new employees.

How do option pools play into a funding round?

Option pools must be agreed upon by the entrepreneur and investor during a funding round. The specifics of the option pool will be negotiated between the investor and entrepreneur.

Should an option pool be allocated pre-money or post-money?

For an entrepreneur, a pre-money option allocation essentially lowers the valuation of the company (this is bad for the entrepreneur). All else equal, entrepreneurs should try to negotiate for post-money option allocations.

In negotiations, an option pool may be used as a tactic for VC’s to lower the “price” of the funding round (valuation) or for entrepreneurs to raise the price of the funding round.

Example 1:

An investor is investing $1M into a company at a pre-money valuation of $10M. The company currently maintain an option pool consisting of 10% of its total equity.

The VC wants a 20% option pool. The entrepreneur agrees.

If the extra 10% comes out of the pre-money valuation, the result will be an effective valuation of $9M (lowering the price of the funding round).

Example 2:

An investor is investing $1M into a company at a pre-money valuation of $10M.

The company currently maintain an option pool consisting of 10% of its total equity.

The VC wants a 20% option pool. The entrepreneur agrees.

If the extra 10% comes out of the post-money valuation ($11M), the result will be an effective valuation of $10M.

What is a typical percentage of equity allocated to an option pool?

Between 10% and 20%.

How can an entrepreneur prepare for option pool negotiations?

Come prepared with a realistic plan for who you want to hire between now and the next anticipated funding round, and how much the hires will cost (in both monetary and equity terms).

The amount of equity allocated to the option pool should not be significantly greater than the amount of equity required for the planned hiring budget.

What is a warrant?

Warrants represent the right for an investor to purchase a certain number of shares at a predetermined price for a defined number of years.

Why do warrants matter?

Warrants allow investors access to the same “price” for purchasing equity for a period of time extending beyond the specific fundraising round.

If the company rises in value after the funding round, the investors can purchase equity at a price lower than the market rate.

How should an entrepreneur handle warrants?

Entrepreneurs should probably try to avoid warrants, if possible.

Like other terms, they can be used by either side in a negotiation (ex: maybe an entrepreneur would be willing to tolerate warrants if the VC will raise the valuation of the company)

What is a liquidation event?

A liquidation event may be the merger, private sale, or IPO (initial public offering) of a company.

The equity of the company, previously illiquid (non-monetary) is becoming liquid (monetary).

Are liquidation proceeds to VC’s in a liquidation event based on equity percentage?

Yes and no. During the negotiations of funding round, VC’s and entrepreneurs determine something called liquidation preference, which dictates what happens in a liquidation event.

What is liquidation preference?

Liquidation preference refers to whether or not proceeds of a liquidation event are returned to a particular class of stock ahead of other classes of stock.

Liquidation preference should be thought about in terms of both “preference” and “participation”.

What is a “multiple” in the context of a liquidation event?

The multiple determines how much investors must be paid back based on their preferred shares before common shareholders receive any proceeds from the liquidation event.


A single VC invests $10M into a company for a 20% equity stake, and a multiple of 2x in the case of liquidation is agreed upon.

The company sells for $50M.

The first $20M of the sale will go to the VC based on this multiple of 2x before any of the proceeds are delivered to the common shareholders.

What is full participation?

Full participation means that a class of stock will receive its liquidation preference (based on the predefined multiple) AND share in the rest of the liquidation proceeds based on its ownership stake in the company and conversion ratio, on an uncapped basis.


A single VC invests $10M into a company for a 20% equity stake, and a multiple of 2x in the case of liquidation is agreed upon.

The company sells for $50M.

The first $20M of the sale will go to the VC based on this multiple before any of the proceeds are delivered to the common shareholders.

The VC will then receive 20% of the remaining $30M ($6M).

The VC will take home $26M of the $50M.

What is capped participation?

Capped participation means that a class of stock will receive its liquidation preference (based on the predefined multiple) AND share in the liquidation proceeds until a predefined multiple is reached.

Essentially, capped participation halts the liquidation proceeds to an investor at a certain multiple of the value of their investment.


A single VC invests $10M into a company for a 20% equity stake, and a multiple of 2x in the case of liquidation is agreed upon.

Additionally, the VC agrees to a 2.5x cap on its investment.

The company sells for $50M.

The first $20M of the sale will go to the VC based on this multiple before any of the proceeds are delivered to the common shareholders.

The VC will then receive 20% of the remaining $30M until it reaches 2.5x return on its initial $10M investment (including the proceeds based on its liquidation preference).

The VC will take home $25M of the $50M.

What is non-participation?

If a VC’s shares are non-participating, the VC will receive its liquidation preference (based on the predefined multiple) but can’t participate in the proceeds in of the liquidation event beyond its predefined multiple.

If a VC decides to utilize this preference for all of their preferred shares, they won’t “participate” in the revenue received from the liquidation event beyond the value owed to them based on the multiple.

Example 1:

A single VC invests $10M into a company for a 20% equity stake, and a multiple of 2x in the case of liquidation is agreed upon.

The VC receives non-participating shares.

The company sells for $50M.

The first $20M of the sale will go to the VC based on this multiple before any of the proceeds are delivered to the common shareholders.

The VC will then receive 0% of the remaining $30M based on its non-participation in the liquidation event.

The VC will take home $20M of the $50M.


It’s important to keep in mind that preferred shareholders can generally convert their shares into common shares at any point in time. This protects non-participating investors from missing out on big returns if the proceeds of a liquidation event greatly exceed the proceeds due to an investor based on their liquidation preference and multiple.

Example 2:

A single VC invests $10M into a company for a 20% equity stake, and a multiple of 2x in the case of liquidation is agreed upon.

The VC receives non-participating shares.

The company sells for $500M.

The VC will decide to convert his/her preferred shares into common shares, which will enable the VC to take home 20% of the sale proceeds.

The VC will take home $100M.

Why does liquidation preference matter to VC’s?

Liquidation preference protects VC’s in the case of a liquidation event at a value lower than the valuation when the VC’s invested.

Additionally, liquidation preference and participation allow VC’s access to bigger payouts in  many liquidation events.

Why does liquidation preference and participation matter to entrepreneurs?

The payouts to founders and employees in a liquidation event can vary drastically based on whether or not the VC’s can utilize liquidation preference and participation.


The VC made an investment of $1M that entitled them to liquidation preference with a 10x multiple in a liquidation event.

A company, once high-flying, is now closing its doors and selling remaining assets for $10M.

The VC will collect all $10M of the proceeds in that liquidation event (leaving $0 for the entrepreneurs).

What happens to founder/employee equity options in the case of a liquidation event?

First, let’s talk about vesting schedules.

Standard vesting schedules are designed to incentivize employees to stick around and build a company instead of hopping from company to company accumulating equity. Simultaneously, vesting schedules protect founders from giving away too many shares to employees not committed to or involved in the long-term future of the company.

Typical vesting schedules are as such: after one year, you have vested (and now, in essence, own) 25% of your allocated stock. From there on, you vest 1/48th of the remaining 75% of your stock options each month over a three year period.

Thus, after four years, you now have ownership over 100% of your allocated stock (which really means you have the ability to purchase it at the established excise price within the established time window but for simplicity’s sake you own it).

What happens to founder/employee equity options in the case of a liquidation event? (Continued)

Accelerated vesting is a common provision built into many financing rounds to account for liquidation events that come before all vesting schedules can fully play out.

Single trigger accelerated vesting means that in the case of liquidation, all employee options will fully vest.

Double trigger accelerated vesting means that in the case of liquidation, employees must be fired for all stock option to fully vest.

In most cases, double-trigger vesting is utilized. Many VC’s want to see founders and teams incentivized to stick around after a potential acquisition, and thus prefer that some equity remain unvested for a period of time.  

Double-trigger vesting is also often the cause of the “resting and vesting” phenomenon. Where acquired founders/employees stick around post-acquisition in order for their options to vest but don’t put much effort into working for their new employer.

4. Venture Financing (Power & Control)

How are board seats structured during an early funding round?

VC’s and entrepreneurs typically agree on a particular size for the board of directors during an early-stage funding round (often three or five people).

VC’s may desire a seat for themselves or a member of their team on the board. Other times, they may desire an observer, who will not vote in board matters but will actively sit in on meetings to observe, learn, or potentially steer discussion.

This is all negotiated during the fundraising round.

Who should be on a board of directors?

Ideally, the board of directors strikes a balance between entrepreneurs, investors, and independent outsiders (with relevant expertise/experience). If a three person board is agreed upon, this should be fairly straightforward. As a company matures and the size of its board grows, you will typically see a great deal of independent board members filling the seats.

Why is a board important?

The board represents a form of governance for the company. The board creates a system of checks-and-balances on the company leaders.

For VC’s, a board position is a chance to make their voice heard (and power felt) in critical company matters.

For entrepreneurs, a board aims to ensure that the company is not run as a dictatorship and that company leaders cannot operate with unchecked power.

What are protective provisions?

Protective provisions are a set of measures (largely standardized) meant to protect investors in the case of events that threaten the value of their preferred or common shares.

Essentially, investors want to be protected against things like: unauthorized creation of new stock, unauthorized issue of new classes of stock with better preferences than the investors, unauthorized repurchase of common stock, unauthorized sale of the company, unauthorized lending or borrowing, unauthorized bankruptcy, etc.

What is a drag-along agreement?

Drag-along agreements allow the majority shareholders (typically investors in most relevant applications of this term) to force (or drag along) minority shareholders to consent to a liquidation event such as a sale of the company.

5. The Bottom Line

Which terms really matter in a venture capital financing?

The most important terms are ownership percentage, valuation, the stock option pool, liquidation preferences, the board seats, and voting rights. Most other terms possess minimal value relative to these core terms.

How should founders negotiate with venture capitalists in financing rounds?

Make an effort to understand the deal being offered to you inside and out, but never lose sight of what actually matters most.

Furthermore, understand that every term is ultimately negotiable, even when not presented as such.

Also, be professional and easy to work with.

6. Other, Less Important Terms

What is a Proprietary Information and Inventions Agreement?

This clause helps the VC and the company to ensure that all intellectual property owned by the company is properly protected and well-handled in the eyes of the law.

VC’s want to be sure there is clear ownership of all IP to help avoid snags down the road. This is generally beneficial to all parties.

What is a Co-Sale Agreement?

These provisions enable investors to choose whether or not to sell shares in a proportional manner when founders sell shares of their own.

Co-Sale agreements can be a small hassle for entrepreneurs as it means that all selling of shares by founders must be run by the VC’s.

What is a No-Shop Clause?

No-Shop Clauses are a term that investors include in order to encourage founders to move from the “shopping” phase of looking for venture financing into the “let’s make a deal” phase.

7. Additional Notes

Do entrepreneurs need a lawyer?

Yes, you will need legal representation to engage in a funding round. An early stage financing should not cost more than $25,000 in legal fees (and hopefully more like $10,000-$15,000). Ideally, your lawyer should agree to a “cap” for the fees involved in the process.

Lawyers should scrutinize every inch of the deal without inadvertently destroying it. Even terms suggested as relatively “standard’ should be reviewed in detail as deviations from these standards are fairly common.

Lawyers play a really important role in the fundraising process. They can often make or break a deal based on their competency or working styles. Take their participation seriously.

What is a letter of intent?

An LOI (or letter of intent) is the first formal step from a company that plans to try and buy another company. The LOI states the potential acquirers interest in purchasing the acquiree.

Where should companies incorporate?

Companies should generally incorporate in Delaware. Delaware has favorable corporate laws, and many lawyers are used to dealing with Delaware standards based on the number of companies incorporated there. Many times, investment bankers will insist on a company being incorporated in Delaware before an IPO.

Should companies be structured as a C Corp, S Corp or an LLC?

C Corp is generally best for companies seeking to raise venture investment. Many VC’s actually require that their portfolio companies be structured as C Corps.

The top ten books I read this year, ranked (part 4)

The top ten books I read this year, ranked (part 4)