Archives / June, 2007

Do Venture Capitalists Still Invest In "Old Folks?"

Q:  I and a couple of other 40-somethings have a great idea for a new Web 2.0 start-up.  Our problem is that none of us can afford to give up our day jobs to bootstrap a start-up. In fact, our Web 2.0 idea would be a direct competitor to our current employers so we cannot,…

Why Don’t Venture Capitalists Invest In Real Estate?

Q: Why don’t VCs invest in real estate? I have a great idea but I can’t get past the sentence where I mention it’s a real estate deal. A: (Jason). We don’t invest in real estate because we don’t know what we are doing in that market. Okay, that was a little glib, but it’s…

Selling a Company: To Auction or Not Auction

Question: I’m part of a small company that has been bootstrapped and grown organically over the last 4 years. We are at the point now where large competitors are very interested in us. We are seriously considering an exit. I have two questions: 1. What do you feel about auctions versus dealing with one party?…

Options, Options, and More Options

Dick Costolo (aka Ask the Wizard) has two excellent posts up titled Options Acceleration and Employee Options and Grant Size.  If you are granting options or receiving an option grant, these are both excellent posts to read.

Merger and Acquisition Due Diligence – The Seriousness of the Acquirer

Part 2 of David Shanberg’s article on M&A Due Diligence.  Part 1 addressed what to expect from the due diligence process. This time David addresses “How To Be Protect Your Confidential Information While Still Moving the Process Forward.” Potential acquirers are typically trustworthy and sincere in their intent when conducting due diligence, with making an acquisition the…

How Do You Negotiate a Carve Out With Investors?

Q:   We are in the midst of negotiating a carve out with an investor on the East Coast.  Two stumbling blocks have occurred.  The first issue is what is an appropriate option pool size and does it vary from East to West coasts?  The investor tends to believe that there are a significant differences in…

What Is the Standard Number of Shares to Create in a New Company?

Q: This may seem rather fundamental and elementary, but I cannot seem to receive a solid answer from anyone. When filing the articles of incorporation (charter) papers for a C-Corporation, is there a strategic amount of shares to issue at a certain price per share upon incorporating, or is this irrelevant in the beginning? I…

How Can You Replace the CEO of a Struggling Angel-Funded Company?

Question: I own shares in a company in a 5 year old private company. The company to date has raised its capital through a series of convertible notes and warrants. The company has failed to gain traction over the past few years and the CEO needs to be replaced. Do any of the debt and…

What are Supra Pro-Rata Rights?

Q: Can you explain what supra pro-rata is? It seems to be showing up in some VC term sheets now. What’s the impact on the entrepreneur? How hard should one try to negotiate it out? If a VC insists on this term, should the entrepreneur walk away? A:  (Jason)  First of all, for those of…