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FUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform. UNDERSTANDING STARTUP INVESTMENTS Often, startup founders, employees, and investors will own equity in a startup. Initially, founders own 100% their startup’s equity, though they eventually give away the majority of their equity over time to co-founders, investors, and employees. Venture investors choose to invest in startup companies (private companies) because they stand to NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, is NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted inWHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Startup equity, for example, is regarded as a high-risk, high-reward, highly illiquid asset class. This means that investing in startup equity is very risky, because many startups fail to return investors’ money, and startup equity is relatively more difficult to sell before the company IPO's. However, this increased risk andilliquidity is
SAFE PRIMER
SAFE Primer and Numerical Examples. *Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or future performance. NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 timesFUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform. UNDERSTANDING STARTUP INVESTMENTS Often, startup founders, employees, and investors will own equity in a startup. Initially, founders own 100% their startup’s equity, though they eventually give away the majority of their equity over time to co-founders, investors, and employees. Venture investors choose to invest in startup companies (private companies) because they stand to NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, is NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted inWHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Startup equity, for example, is regarded as a high-risk, high-reward, highly illiquid asset class. This means that investing in startup equity is very risky, because many startups fail to return investors’ money, and startup equity is relatively more difficult to sell before the company IPO's. However, this increased risk andilliquidity is
SAFE PRIMER
SAFE Primer and Numerical Examples. *Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or future performance. NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 timesREFER A COMPANY
Refer a Top Startup to FundersClub. 1. You refer a company. Be the first to refer a startup that matches our investment criteria. 2. We review the company. Follow the status of your referral as we conduct due diligence. 3. You invest and receive carry. UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Equity crowdfunding is the use of crowdfunding to raise money for startups and to invest in startups, often via online platforms, known as Title III investing. Although “equity crowdfunding” is sometimes used as a generic term to reference all online startup investing platforms (including online VC), it specifically refers toonline startup
WHAT ARE ANTI-DILUTION RIGHTS? At a high level, shares that have anti-dilution rights provide protection to investors in the event that the company raises additional financing at a lower valuation than in a previous financing. Most, but not all, equity financings led by venture capital investors have anti-dilution rights for the preferred stock investors. For more reading, see Brad Feld’s post [“Term Sheet - Anti WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
CLICOH | FUNDERSCLUB Fulfillment solutions for Ecommerce in Latin America. *Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or futureperformance.
SAFE PRIMER
SAFE Primer and Numerical Examples. *Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or future performance. VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Startups turn age-old industries on their heads, solve big problems with the click of a button, and cash in big – if they’re successful. As do the lucky investors who took a risky bet on a fledgling company that landed on an idea that worked. FJ LABS (FABRICE GRINDA AND JOSÉ MARÍN) FJ Labs is a seed and early stage firm founded by Fabrice Grinda and Jose Marin. Fabrice and Jose have made 178 investments. 5.5x avg. return on 31 profitable exits (exits with >1.0x return). Fabrice Grinda: entrepreneur with $300M in exits; OLX.com, Zingy.com, Aucland; Angel investor in 150+ startups; McKinsey; Princeton BA (Summa cum Laude); Fluent in English, French, Spanish, and Mandarin WHY DO STARTUPS RAISE INVESTMENT CAPITAL USING SAFES SAFEs solve a number of issues that convertible notes have for startup companies. Because SAFEs are not debt instruments, they remove the threat of insolvency that a convertible note can cause and they remove the need for founders to go back to investors to request maturity date extensions (this also saves investors from having to deal with extension paperwork).FUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform. UNDERSTANDING STARTUP INVESTMENTS Often, startup founders, employees, and investors will own equity in a startup. Initially, founders own 100% their startup’s equity, though they eventually give away the majority of their equity over time to co-founders, investors, and employees. Venture investors choose to invest in startup companies (private companies) because they stand to NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, is NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted inWHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Startup equity, for example, is regarded as a high-risk, high-reward, highly illiquid asset class. This means that investing in startup equity is very risky, because many startups fail to return investors’ money, and startup equity is relatively more difficult to sell before the company IPO's. However, this increased risk andilliquidity is
SAFE PRIMER
SAFE Primer and Numerical Examples. *Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or future performance. NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 timesFUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform. UNDERSTANDING STARTUP INVESTMENTS Often, startup founders, employees, and investors will own equity in a startup. Initially, founders own 100% their startup’s equity, though they eventually give away the majority of their equity over time to co-founders, investors, and employees. Venture investors choose to invest in startup companies (private companies) because they stand to NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, is NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted inWHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Startup equity, for example, is regarded as a high-risk, high-reward, highly illiquid asset class. This means that investing in startup equity is very risky, because many startups fail to return investors’ money, and startup equity is relatively more difficult to sell before the company IPO's. However, this increased risk andilliquidity is
SAFE PRIMER
SAFE Primer and Numerical Examples. *Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or future performance. NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 timesREFER A COMPANY
Refer a Top Startup to FundersClub. 1. You refer a company. Be the first to refer a startup that matches our investment criteria. 2. We review the company. Follow the status of your referral as we conduct due diligence. 3. You invest and receive carry. UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Equity crowdfunding is the use of crowdfunding to raise money for startups and to invest in startups, often via online platforms, known as Title III investing. Although “equity crowdfunding” is sometimes used as a generic term to reference all online startup investing platforms (including online VC), it specifically refers toonline startup
WHAT ARE ANTI-DILUTION RIGHTS? At a high level, shares that have anti-dilution rights provide protection to investors in the event that the company raises additional financing at a lower valuation than in a previous financing. Most, but not all, equity financings led by venture capital investors have anti-dilution rights for the preferred stock investors. For more reading, see Brad Feld’s post [“Term Sheet - Anti WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
CLICOH | FUNDERSCLUB Fulfillment solutions for Ecommerce in Latin America. *Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or futureperformance.
SAFE PRIMER
SAFE Primer and Numerical Examples. *Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or future performance. VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Startups turn age-old industries on their heads, solve big problems with the click of a button, and cash in big – if they’re successful. As do the lucky investors who took a risky bet on a fledgling company that landed on an idea that worked. FJ LABS (FABRICE GRINDA AND JOSÉ MARÍN) FJ Labs is a seed and early stage firm founded by Fabrice Grinda and Jose Marin. Fabrice and Jose have made 178 investments. 5.5x avg. return on 31 profitable exits (exits with >1.0x return). Fabrice Grinda: entrepreneur with $300M in exits; OLX.com, Zingy.com, Aucland; Angel investor in 150+ startups; McKinsey; Princeton BA (Summa cum Laude); Fluent in English, French, Spanish, and Mandarin WHY DO STARTUPS RAISE INVESTMENT CAPITAL USING SAFES SAFEs solve a number of issues that convertible notes have for startup companies. Because SAFEs are not debt instruments, they remove the threat of insolvency that a convertible note can cause and they remove the need for founders to go back to investors to request maturity date extensions (this also saves investors from having to deal with extension paperwork).FUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform. NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, is UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 WHAT ARE SOME KEY ASPECTS OF A STARTUP TO CONSIDER WHEN First, consider that 75-90% of startups fail, so most startups you encounter will ultimately not prove to be profitable investments on a one-off basis. This is why FundersClub emphasizes curation and screening, only listing the top 2% of the startups it encounters for investment. Even after careful screening, across a diversified portfolio of high-promise startup opportunities, only a small WHAT ARE THE DIFFERENT TYPES OF FINANCING STRUCTURES USED Generally speaking there are two types of financing methods for startup investors to invest in startup: an equity financing and a non-equity financing. Non-equity financings may be done through convertible notes (e.g. using 500 Startups’s KISS documents or other documents) or through convertible securities (e.g. using Y Combinator’s SAFE documents). NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 times AN INVESTIGATION INTO THE RELATIONSHIP BETWEEN SEO AND When many of Expedia’s results dropped in Google’s search results, in January 2014, its stock price sank 4%. A connection between SEO performance and stock price makes sense logically because more and more tech companies acquire the biggest share of their users from organic search. In this way, SEO rankings can be a leading indicatorof a
FUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform. NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, is UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 WHAT ARE SOME KEY ASPECTS OF A STARTUP TO CONSIDER WHEN First, consider that 75-90% of startups fail, so most startups you encounter will ultimately not prove to be profitable investments on a one-off basis. This is why FundersClub emphasizes curation and screening, only listing the top 2% of the startups it encounters for investment. Even after careful screening, across a diversified portfolio of high-promise startup opportunities, only a small WHAT ARE THE DIFFERENT TYPES OF FINANCING STRUCTURES USED Generally speaking there are two types of financing methods for startup investors to invest in startup: an equity financing and a non-equity financing. Non-equity financings may be done through convertible notes (e.g. using 500 Startups’s KISS documents or other documents) or through convertible securities (e.g. using Y Combinator’s SAFE documents). NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 times AN INVESTIGATION INTO THE RELATIONSHIP BETWEEN SEO AND When many of Expedia’s results dropped in Google’s search results, in January 2014, its stock price sank 4%. A connection between SEO performance and stock price makes sense logically because more and more tech companies acquire the biggest share of their users from organic search. In this way, SEO rankings can be a leading indicatorof a
UNDERSTANDING STARTUP INVESTMENTS Often, startup founders, employees, and investors will own equity in a startup. Initially, founders own 100% their startup’s equity, though they eventually give away the majority of their equity over time to co-founders, investors, and employees. Venture investors choose to invest in startup companies (private companies) because they stand toCHENGHUNG CHEN
Chenghung is the Founder & CEO of Corniche Capital Holdings, an investment firm with over 45 portfolios. He was a Principal at Abu Dhabi Investment Council, one of the largest SWFs, where he had a catch-all mandate to invest and manage global direct/fund investments in all sectors and asset classes across the capital structure – he was the lead for over 20 deals. VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Typically, an angel investor will invest between $25,000 to $100,000 in each startup investment deal, though smaller and larger check sizes (like Thiel’s) do occur. In 2015, all US angel investors pumped about $24.6 billion into 71,110 startups, according to a survey of US angel investments by the Center for Venture Research at the UniversityWHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. WHAT ARE SOME KEY ASPECTS OF A STARTUP TO CONSIDER WHEN First, consider that 75-90% of startups fail, so most startups you encounter will ultimately not prove to be profitable investments on a one-off basis. This is why FundersClub emphasizes curation and screening, only listing the top 2% of the startups it encounters for investment. Even after careful screening, across a diversified portfolio of high-promise startup opportunities, only a small VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Startup accelerators and incubators are organizations that support fledgling startups and help founding teams get off the ground, hone their product/service, pick up traction, and raise investment capital. WHAT ARE ANTI-DILUTION RIGHTS? At a high level, shares that have anti-dilution rights provide protection to investors in the event that the company raises additional financing at a lower valuation than in a previous financing. Most, but not all, equity financings led by venture capital investors have anti-dilution rights for the preferred stock investors. For more reading, see Brad Feld’s post [“Term Sheet - Anti CLICOH | FUNDERSCLUB Fulfillment solutions for Ecommerce in Latin America. *Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or futureperformance.
LANDON THORNE
Founder/Chairman, Thorne Capital Partners. Experienced, skilled, dynamic entrepreneur with extensive connections across a spectrum of domestic and foreign political, financial, industrial and defense leadership. Career areas of focus include, mergers and acquisitions, commercial real estate, healthcare, natural resources andinternational
WHAT HAPPENS TO A CONVERTIBLE NOTE IF A COMPANY IS If a company is acquired or merges before a convertible note converts, the specifics of what a noteholder receives will depend on the specifics of their convertible note terms. The most company friendly terms call for the note to be repaid with interest to the investor. Most convertible notes call for the note to be converted to common shares in the company at a pre-set price just before theFUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform. NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, is UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 WHAT ARE SOME KEY ASPECTS OF A STARTUP TO CONSIDER WHEN First, consider that 75-90% of startups fail, so most startups you encounter will ultimately not prove to be profitable investments on a one-off basis. This is why FundersClub emphasizes curation and screening, only listing the top 2% of the startups it encounters for investment. Even after careful screening, across a diversified portfolio of high-promise startup opportunities, only a small WHAT ARE THE DIFFERENT TYPES OF FINANCING STRUCTURES USED Generally speaking there are two types of financing methods for startup investors to invest in startup: an equity financing and a non-equity financing. Non-equity financings may be done through convertible notes (e.g. using 500 Startups’s KISS documents or other documents) or through convertible securities (e.g. using Y Combinator’s SAFE documents). NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 times AN INVESTIGATION INTO THE RELATIONSHIP BETWEEN SEO AND When many of Expedia’s results dropped in Google’s search results, in January 2014, its stock price sank 4%. A connection between SEO performance and stock price makes sense logically because more and more tech companies acquire the biggest share of their users from organic search. In this way, SEO rankings can be a leading indicatorof a
FUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform. NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, is UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 WHAT ARE SOME KEY ASPECTS OF A STARTUP TO CONSIDER WHEN First, consider that 75-90% of startups fail, so most startups you encounter will ultimately not prove to be profitable investments on a one-off basis. This is why FundersClub emphasizes curation and screening, only listing the top 2% of the startups it encounters for investment. Even after careful screening, across a diversified portfolio of high-promise startup opportunities, only a small WHAT ARE THE DIFFERENT TYPES OF FINANCING STRUCTURES USED Generally speaking there are two types of financing methods for startup investors to invest in startup: an equity financing and a non-equity financing. Non-equity financings may be done through convertible notes (e.g. using 500 Startups’s KISS documents or other documents) or through convertible securities (e.g. using Y Combinator’s SAFE documents). NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 times AN INVESTIGATION INTO THE RELATIONSHIP BETWEEN SEO AND When many of Expedia’s results dropped in Google’s search results, in January 2014, its stock price sank 4%. A connection between SEO performance and stock price makes sense logically because more and more tech companies acquire the biggest share of their users from organic search. In this way, SEO rankings can be a leading indicatorof a
UNDERSTANDING STARTUP INVESTMENTS Often, startup founders, employees, and investors will own equity in a startup. Initially, founders own 100% their startup’s equity, though they eventually give away the majority of their equity over time to co-founders, investors, and employees. Venture investors choose to invest in startup companies (private companies) because they stand toCHENGHUNG CHEN
Chenghung is the Founder & CEO of Corniche Capital Holdings, an investment firm with over 45 portfolios. He was a Principal at Abu Dhabi Investment Council, one of the largest SWFs, where he had a catch-all mandate to invest and manage global direct/fund investments in all sectors and asset classes across the capital structure – he was the lead for over 20 deals. VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Typically, an angel investor will invest between $25,000 to $100,000 in each startup investment deal, though smaller and larger check sizes (like Thiel’s) do occur. In 2015, all US angel investors pumped about $24.6 billion into 71,110 startups, according to a survey of US angel investments by the Center for Venture Research at the UniversityWHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. WHAT ARE SOME KEY ASPECTS OF A STARTUP TO CONSIDER WHEN First, consider that 75-90% of startups fail, so most startups you encounter will ultimately not prove to be profitable investments on a one-off basis. This is why FundersClub emphasizes curation and screening, only listing the top 2% of the startups it encounters for investment. Even after careful screening, across a diversified portfolio of high-promise startup opportunities, only a small VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Startup equity, for example, is regarded as a high-risk, high-reward, highly illiquid asset class. This means that investing in startup equity is very risky, because many startups fail to return investors’ money, and startup equity is relatively more difficult to sell before the company IPO's. However, this increased risk andilliquidity is
VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Startup accelerators and incubators are organizations that support fledgling startups and help founding teams get off the ground, hone their product/service, pick up traction, and raise investment capital. CLICOH | FUNDERSCLUB Fulfillment solutions for Ecommerce in Latin America. *Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or futureperformance.
LANDON THORNE
Founder/Chairman, Thorne Capital Partners. Experienced, skilled, dynamic entrepreneur with extensive connections across a spectrum of domestic and foreign political, financial, industrial and defense leadership. Career areas of focus include, mergers and acquisitions, commercial real estate, healthcare, natural resources andinternational
WHAT IS A DISCOUNT IN A CONVERTIBLE NOTE? A discount in a note sets a percentage reduction at which the convertible note will convert relative to the next qualified priced round. Effectively this permits an investor to convert the principal amount of their loan (plus any accrued interest) into shares of stock at a discount to the purchase price paid by investors in that round. Discounts range from 0% to as high as 35% with 20% beingFUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform. NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, isWHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 WHAT ARE THE DIFFERENT TYPES OF FINANCING STRUCTURES USED Generally speaking there are two types of financing methods for startup investors to invest in startup: an equity financing and a non-equity financing. Non-equity financings may be done through convertible notes (e.g. using 500 Startups’s KISS documents or other documents) or through convertible securities (e.g. using Y Combinator’s SAFE documents). WHAT ARE TECH STARTUPS? A tech startup is a company whose purpose is to bring technology products or services to market. These companies deliver new technology products or services or deliver existing technology products or services in new ways. According to Wikipedia a startup company is: “A startup company or startup is a business in the form of a company, a partnership or temporary organization designed to NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 times WHAT DOES THE MATURITY DATE INDICATE ON A CONVERTIBLE NOTE The maturity date of a note indicates the date when the note is due to be repaid to the investor along with any accrued interest, if it has not yet converted to equity. In practice, in most situations, startup investors will not call for a note to be repaid at the maturity date, and will instead amend the note to extend the note’s maturity date, typically for a period of another year.FUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform. NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, isWHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 WHAT ARE THE DIFFERENT TYPES OF FINANCING STRUCTURES USED Generally speaking there are two types of financing methods for startup investors to invest in startup: an equity financing and a non-equity financing. Non-equity financings may be done through convertible notes (e.g. using 500 Startups’s KISS documents or other documents) or through convertible securities (e.g. using Y Combinator’s SAFE documents). WHAT ARE TECH STARTUPS? A tech startup is a company whose purpose is to bring technology products or services to market. These companies deliver new technology products or services or deliver existing technology products or services in new ways. According to Wikipedia a startup company is: “A startup company or startup is a business in the form of a company, a partnership or temporary organization designed to NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 times WHAT DOES THE MATURITY DATE INDICATE ON A CONVERTIBLE NOTE The maturity date of a note indicates the date when the note is due to be repaid to the investor along with any accrued interest, if it has not yet converted to equity. In practice, in most situations, startup investors will not call for a note to be repaid at the maturity date, and will instead amend the note to extend the note’s maturity date, typically for a period of another year. VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Chapters. • Chapter 1: The Risks and Rewards of Startup Investing. • Chapter 2: Understanding Venture Capital. • Chapter 3: Startup Incubators vs. Startup Accelerators. • Chapter 4: Angel Investors. • Chapter 5: Online VC & Equity Crowdfunding. • Chapter 6: Who Can Invest in Startups: Accredited Investor Qualifications. Next chapter WHAT IS COMMON EQUITY OR COMMON STOCK? Common equity, also referred to as common stock, is typically the stock held by founders and employees (usually employees have options to purchase common stock). This equity normally has fewer rights associated with it than preferred equity. Common stock has the lowest priority in the event of a situation where proceeds must be distributed between shareholders such as a bankruptcy proceeding UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Equity crowdfunding is the use of crowdfunding to raise money for startups and to invest in startups, often via online platforms, known as Title III investing. Although “equity crowdfunding” is sometimes used as a generic term to reference all online startup investing platforms (including online VC), it specifically refers toonline startup
ARE STARTUP ACCELERATORS AND INCUBATORS VENTURE CAPITAL Quite frequently, yes. Most accelerators and incubators will offer a modest amount of capital (e.g. $20,000-$150,000) in exchange for equity in the given company. This money typically comes from an in-house venture fund managed by the accelerator or incubator. However, because incubators and accelerators are typically investing at fairly low valuations (often in idea-stage teams with no NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 times CLICOH | FUNDERSCLUB Fulfillment solutions for Ecommerce in Latin America. *Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or futureperformance.
WHAT ARE ANTI-DILUTION RIGHTS? At a high level, shares that have anti-dilution rights provide protection to investors in the event that the company raises additional financing at a lower valuation than in a previous financing. Most, but not all, equity financings led by venture capital investors have anti-dilution rights for the preferred stock investors. For more reading, see Brad Feld’s post [“Term Sheet - Anti VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Startup accelerators and incubators are organizations that support fledgling startups and help founding teams get off the ground, hone their product/service, pick up traction, and raise investment capital. WHAT ARE TECH STARTUPS? A tech startup is a company whose purpose is to bring technology products or services to market. These companies deliver new technology products or services or deliver existing technology products or services in new ways. According to Wikipedia a startup company is: “A startup company or startup is a business in the form of a company, a partnership or temporary organization designed toFUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform. NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, isWHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 WHAT ARE THE DIFFERENT TYPES OF FINANCING STRUCTURES USED Generally speaking there are two types of financing methods for startup investors to invest in startup: an equity financing and a non-equity financing. Non-equity financings may be done through convertible notes (e.g. using 500 Startups’s KISS documents or other documents) or through convertible securities (e.g. using Y Combinator’s SAFE documents). WHAT ARE TECH STARTUPS? A tech startup is a company whose purpose is to bring technology products or services to market. These companies deliver new technology products or services or deliver existing technology products or services in new ways. According to Wikipedia a startup company is: “A startup company or startup is a business in the form of a company, a partnership or temporary organization designed to NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 times WHAT DOES THE MATURITY DATE INDICATE ON A CONVERTIBLE NOTE The maturity date of a note indicates the date when the note is due to be repaid to the investor along with any accrued interest, if it has not yet converted to equity. In practice, in most situations, startup investors will not call for a note to be repaid at the maturity date, and will instead amend the note to extend the note’s maturity date, typically for a period of another year.FUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform. NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, isWHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 WHAT ARE THE DIFFERENT TYPES OF FINANCING STRUCTURES USED Generally speaking there are two types of financing methods for startup investors to invest in startup: an equity financing and a non-equity financing. Non-equity financings may be done through convertible notes (e.g. using 500 Startups’s KISS documents or other documents) or through convertible securities (e.g. using Y Combinator’s SAFE documents). WHAT ARE TECH STARTUPS? A tech startup is a company whose purpose is to bring technology products or services to market. These companies deliver new technology products or services or deliver existing technology products or services in new ways. According to Wikipedia a startup company is: “A startup company or startup is a business in the form of a company, a partnership or temporary organization designed to NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 times WHAT DOES THE MATURITY DATE INDICATE ON A CONVERTIBLE NOTE The maturity date of a note indicates the date when the note is due to be repaid to the investor along with any accrued interest, if it has not yet converted to equity. In practice, in most situations, startup investors will not call for a note to be repaid at the maturity date, and will instead amend the note to extend the note’s maturity date, typically for a period of another year. UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Chapters. • Chapter 1: The Risks and Rewards of Startup Investing. • Chapter 2: Understanding Venture Capital. • Chapter 3: Startup Incubators vs. Startup Accelerators. • Chapter 4: Angel Investors. • Chapter 5: Online VC & Equity Crowdfunding. • Chapter 6: Who Can Invest in Startups: Accredited Investor Qualifications. Next chapter VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Equity crowdfunding is the use of crowdfunding to raise money for startups and to invest in startups, often via online platforms, known as Title III investing. Although “equity crowdfunding” is sometimes used as a generic term to reference all online startup investing platforms (including online VC), it specifically refers toonline startup
ARE STARTUP ACCELERATORS AND INCUBATORS VENTURE CAPITAL Quite frequently, yes. Most accelerators and incubators will offer a modest amount of capital (e.g. $20,000-$150,000) in exchange for equity in the given company. This money typically comes from an in-house venture fund managed by the accelerator or incubator. However, because incubators and accelerators are typically investing at fairly low valuations (often in idea-stage teams with no VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Startup equity, for example, is regarded as a high-risk, high-reward, highly illiquid asset class. This means that investing in startup equity is very risky, because many startups fail to return investors’ money, and startup equity is relatively more difficult to sell before the company IPO's. However, this increased risk andilliquidity is
CLICOH | FUNDERSCLUB Fulfillment solutions for Ecommerce in Latin America. *Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or futureperformance.
WHAT ARE ANTI-DILUTION RIGHTS? At a high level, shares that have anti-dilution rights provide protection to investors in the event that the company raises additional financing at a lower valuation than in a previous financing. Most, but not all, equity financings led by venture capital investors have anti-dilution rights for the preferred stock investors. For more reading, see Brad Feld’s post [“Term Sheet - Anti WHAT ARE TECH STARTUPS? A tech startup is a company whose purpose is to bring technology products or services to market. These companies deliver new technology products or services or deliver existing technology products or services in new ways. According to Wikipedia a startup company is: “A startup company or startup is a business in the form of a company, a partnership or temporary organization designed to HOW DOES A SAFE COMPARE TO A CONVERTIBLE NOTE? A convertible note is debt, while a SAFE is a convertible security that is not debt. As a result, a convertible note includes an interest rate and maturity rate, while a SAFE does not. A SAFE is simpler and shorter than most convertible notes. Both SAFEs and convertible notes convert into equity in a future priced equity round; a convertible note may have more complexity to when/if/how it WHAT HAPPENS TO A CONVERTIBLE NOTE IF A COMPANY IS If a company is acquired or merges before a convertible note converts, the specifics of what a noteholder receives will depend on the specifics of their convertible note terms. The most company friendly terms call for the note to be repaid with interest to the investor. Most convertible notes call for the note to be converted to common shares in the company at a pre-set price just before theFUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform. NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, isWHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 WHAT ARE THE DIFFERENT TYPES OF FINANCING STRUCTURES USED Generally speaking there are two types of financing methods for startup investors to invest in startup: an equity financing and a non-equity financing. Non-equity financings may be done through convertible notes (e.g. using 500 Startups’s KISS documents or other documents) or through convertible securities (e.g. using Y Combinator’s SAFE documents). WHAT ARE TECH STARTUPS? A tech startup is a company whose purpose is to bring technology products or services to market. These companies deliver new technology products or services or deliver existing technology products or services in new ways. According to Wikipedia a startup company is: “A startup company or startup is a business in the form of a company, a partnership or temporary organization designed to NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 times WHAT DOES THE MATURITY DATE INDICATE ON A CONVERTIBLE NOTE The maturity date of a note indicates the date when the note is due to be repaid to the investor along with any accrued interest, if it has not yet converted to equity. In practice, in most situations, startup investors will not call for a note to be repaid at the maturity date, and will instead amend the note to extend the note’s maturity date, typically for a period of another year.FUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform. NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, isWHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 WHAT ARE THE DIFFERENT TYPES OF FINANCING STRUCTURES USED Generally speaking there are two types of financing methods for startup investors to invest in startup: an equity financing and a non-equity financing. Non-equity financings may be done through convertible notes (e.g. using 500 Startups’s KISS documents or other documents) or through convertible securities (e.g. using Y Combinator’s SAFE documents). WHAT ARE TECH STARTUPS? A tech startup is a company whose purpose is to bring technology products or services to market. These companies deliver new technology products or services or deliver existing technology products or services in new ways. According to Wikipedia a startup company is: “A startup company or startup is a business in the form of a company, a partnership or temporary organization designed to NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 times WHAT DOES THE MATURITY DATE INDICATE ON A CONVERTIBLE NOTE The maturity date of a note indicates the date when the note is due to be repaid to the investor along with any accrued interest, if it has not yet converted to equity. In practice, in most situations, startup investors will not call for a note to be repaid at the maturity date, and will instead amend the note to extend the note’s maturity date, typically for a period of another year. UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Chapters. • Chapter 1: The Risks and Rewards of Startup Investing. • Chapter 2: Understanding Venture Capital. • Chapter 3: Startup Incubators vs. Startup Accelerators. • Chapter 4: Angel Investors. • Chapter 5: Online VC & Equity Crowdfunding. • Chapter 6: Who Can Invest in Startups: Accredited Investor Qualifications. Next chapter VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Equity crowdfunding is the use of crowdfunding to raise money for startups and to invest in startups, often via online platforms, known as Title III investing. Although “equity crowdfunding” is sometimes used as a generic term to reference all online startup investing platforms (including online VC), it specifically refers toonline startup
VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Startup equity, for example, is regarded as a high-risk, high-reward, highly illiquid asset class. This means that investing in startup equity is very risky, because many startups fail to return investors’ money, and startup equity is relatively more difficult to sell before the company IPO's. However, this increased risk andilliquidity is
ARE STARTUP ACCELERATORS AND INCUBATORS VENTURE CAPITAL Quite frequently, yes. Most accelerators and incubators will offer a modest amount of capital (e.g. $20,000-$150,000) in exchange for equity in the given company. This money typically comes from an in-house venture fund managed by the accelerator or incubator. However, because incubators and accelerators are typically investing at fairly low valuations (often in idea-stage teams with no CLICOH | FUNDERSCLUB Fulfillment solutions for Ecommerce in Latin America. *Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or futureperformance.
WHAT ARE ANTI-DILUTION RIGHTS? At a high level, shares that have anti-dilution rights provide protection to investors in the event that the company raises additional financing at a lower valuation than in a previous financing. Most, but not all, equity financings led by venture capital investors have anti-dilution rights for the preferred stock investors. For more reading, see Brad Feld’s post [“Term Sheet - Anti WHAT ARE TECH STARTUPS? A tech startup is a company whose purpose is to bring technology products or services to market. These companies deliver new technology products or services or deliver existing technology products or services in new ways. According to Wikipedia a startup company is: “A startup company or startup is a business in the form of a company, a partnership or temporary organization designed to HOW DOES A SAFE COMPARE TO A CONVERTIBLE NOTE? A convertible note is debt, while a SAFE is a convertible security that is not debt. As a result, a convertible note includes an interest rate and maturity rate, while a SAFE does not. A SAFE is simpler and shorter than most convertible notes. Both SAFEs and convertible notes convert into equity in a future priced equity round; a convertible note may have more complexity to when/if/how it WHAT HAPPENS TO A CONVERTIBLE NOTE IF A COMPANY IS If a company is acquired or merges before a convertible note converts, the specifics of what a noteholder receives will depend on the specifics of their convertible note terms. The most company friendly terms call for the note to be repaid with interest to the investor. Most convertible notes call for the note to be converted to common shares in the company at a pre-set price just before theFUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform. NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, is NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 WHAT ARE SOME KEY ASPECTS OF A STARTUP TO CONSIDER WHEN First, consider that 75-90% of startups fail, so most startups you encounter will ultimately not prove to be profitable investments on a one-off basis. This is why FundersClub emphasizes curation and screening, only listing the top 2% of the startups it encounters for investment. Even after careful screening, across a diversified portfolio of high-promise startup opportunities, only a small WHAT ARE THE DIFFERENT TYPES OF FINANCING STRUCTURES USED Generally speaking there are two types of financing methods for startup investors to invest in startup: an equity financing and a non-equity financing. Non-equity financings may be done through convertible notes (e.g. using 500 Startups’s KISS documents or other documents) or through convertible securities (e.g. using Y Combinator’s SAFE documents). NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 times AN INVESTIGATION INTO THE RELATIONSHIP BETWEEN SEO AND When many of Expedia’s results dropped in Google’s search results, in January 2014, its stock price sank 4%. A connection between SEO performance and stock price makes sense logically because more and more tech companies acquire the biggest share of their users from organic search. In this way, SEO rankings can be a leading indicatorof a
FUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform. NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, is NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 WHAT ARE SOME KEY ASPECTS OF A STARTUP TO CONSIDER WHEN First, consider that 75-90% of startups fail, so most startups you encounter will ultimately not prove to be profitable investments on a one-off basis. This is why FundersClub emphasizes curation and screening, only listing the top 2% of the startups it encounters for investment. Even after careful screening, across a diversified portfolio of high-promise startup opportunities, only a small WHAT ARE THE DIFFERENT TYPES OF FINANCING STRUCTURES USED Generally speaking there are two types of financing methods for startup investors to invest in startup: an equity financing and a non-equity financing. Non-equity financings may be done through convertible notes (e.g. using 500 Startups’s KISS documents or other documents) or through convertible securities (e.g. using Y Combinator’s SAFE documents). NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 times AN INVESTIGATION INTO THE RELATIONSHIP BETWEEN SEO AND When many of Expedia’s results dropped in Google’s search results, in January 2014, its stock price sank 4%. A connection between SEO performance and stock price makes sense logically because more and more tech companies acquire the biggest share of their users from organic search. In this way, SEO rankings can be a leading indicatorof a
UNDERSTANDING STARTUP INVESTMENTS Often, startup founders, employees, and investors will own equity in a startup. Initially, founders own 100% their startup’s equity, though they eventually give away the majority of their equity over time to co-founders, investors, and employees. Venture investors choose to invest in startup companies (private companies) because they stand toWHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. WHAT ARE SOME KEY ASPECTS OF A STARTUP TO CONSIDER WHEN First, consider that 75-90% of startups fail, so most startups you encounter will ultimately not prove to be profitable investments on a one-off basis. This is why FundersClub emphasizes curation and screening, only listing the top 2% of the startups it encounters for investment. Even after careful screening, across a diversified portfolio of high-promise startup opportunities, only a smallCHENGHUNG CHEN
Chenghung is the Founder & CEO of Corniche Capital Holdings, an investment firm with over 45 portfolios. He was a Principal at Abu Dhabi Investment Council, one of the largest SWFs, where he had a catch-all mandate to invest and manage global direct/fund investments in all sectors and asset classes across the capital structure – he was the lead for over 20 deals. TAXES AND STARTUP INVESTING Tax benefits of startup investing and Reporting FundersClub investments in your tax returns VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Typically, an angel investor will invest between $25,000 to $100,000 in each startup investment deal, though smaller and larger check sizes (like Thiel’s) do occur. In 2015, all US angel investors pumped about $24.6 billion into 71,110 startups, according to a survey of US angel investments by the Center for Venture Research at the University VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Startup accelerators and incubators are organizations that support fledgling startups and help founding teams get off the ground, hone their product/service, pick up traction, and raise investment capital. CLICOH | FUNDERSCLUB Fulfillment solutions for Ecommerce in Latin America. *Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or futureperformance.
LANDON THORNE
Founder/Chairman, Thorne Capital Partners. Experienced, skilled, dynamic entrepreneur with extensive connections across a spectrum of domestic and foreign political, financial, industrial and defense leadership. Career areas of focus include, mergers and acquisitions, commercial real estate, healthcare, natural resources andinternational
WHAT ARE ANTI-DILUTION RIGHTS? At a high level, shares that have anti-dilution rights provide protection to investors in the event that the company raises additional financing at a lower valuation than in a previous financing. Most, but not all, equity financings led by venture capital investors have anti-dilution rights for the preferred stock investors. For more reading, see Brad Feld’s post [“Term Sheet - AntiFUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform.LOGIN | FUNDERSCLUB
*Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or futureperformance.
WHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. UNDERSTANDING STARTUP INVESTMENTS Often, startup founders, employees, and investors will own equity in a startup. Initially, founders own 100% their startup’s equity, though they eventually give away the majority of their equity over time to co-founders, investors, and employees. Venture investors choose to invest in startup companies (private companies) because they stand to NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, is NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Equity crowdfunding is the use of crowdfunding to raise money for startups and to invest in startups, often via online platforms, known as Title III investing. Although “equity crowdfunding” is sometimes used as a generic term to reference all online startup investing platforms (including online VC), it specifically refers toonline startup
WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 timesFUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform.LOGIN | FUNDERSCLUB
*Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or futureperformance.
WHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. UNDERSTANDING STARTUP INVESTMENTS Often, startup founders, employees, and investors will own equity in a startup. Initially, founders own 100% their startup’s equity, though they eventually give away the majority of their equity over time to co-founders, investors, and employees. Venture investors choose to invest in startup companies (private companies) because they stand to NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, is NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Equity crowdfunding is the use of crowdfunding to raise money for startups and to invest in startups, often via online platforms, known as Title III investing. Although “equity crowdfunding” is sometimes used as a generic term to reference all online startup investing platforms (including online VC), it specifically refers toonline startup
WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 timesLOGIN | FUNDERSCLUB
*Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or futureperformance.
UNDERSTANDING STARTUP INVESTMENTS Often, startup founders, employees, and investors will own equity in a startup. Initially, founders own 100% their startup’s equity, though they eventually give away the majority of their equity over time to co-founders, investors, and employees. Venture investors choose to invest in startup companies (private companies) because they stand toALEX MITTAL
Co-Founder and CEO of FundersClub. Prior to starting FundersClub, Mr. Mittal was the founding CEO of Innova Dynamics, a VC-backed touchscreen hardware company (acquired by TPK Holding, TPE:3673). Previously, he was the founding CTO of an enterprise software company. He holds degrees in economics and engineering from the Wharton Schooland Penn
WHAT IS A DISCOUNT IN A CONVERTIBLE NOTE? A discount in a note sets a percentage reduction at which the convertible note will convert relative to the next qualified priced round. Effectively this permits an investor to convert the principal amount of their loan (plus any accrued interest) into shares of stock at a discount to the purchase price paid by investors in that round. Discounts range from 0% to as high as 35% with 20% being VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Startup accelerators and incubators are organizations that support fledgling startups and help founding teams get off the ground, hone their product/service, pick up traction, and raise investment capital.FUNDERSCLUB HELP
How to Make an Investment. ★ Why was my payment transferred to FundersClub even though I am on the waitlist? How do I start investing with FundersClub? Are these investments risky? Who can invest in FundersClub venture funds? When I invest on FundersClub, what do I own? What returns can I expect? See all 22 articles. NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 WHAT ARE THE DIFFERENT TYPES OF FINANCING STRUCTURES USED Generally speaking there are two types of financing methods for startup investors to invest in startup: an equity financing and a non-equity financing. Non-equity financings may be done through convertible notes (e.g. using 500 Startups’s KISS documents or other documents) or through convertible securities (e.g. using Y Combinator’s SAFE documents). HARDEST PART OF AI IS CLEANING UP YOUR DATA Hardest Part Of AI Is Cleaning Up Your Data - Tips From Experts. As more tools become available to create AI models, it has become easier for companies to harness the power of machine learning for their applications. What once required deep domain expertise to execute has been made easier by libraries and frameworks, such as Google'sTensorFlow
NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH 10% WARRANT Let’s do a numerical example ignoring any accrued interest, and assuming no valuation cap or discount in the convertible note: 1. You invest $25k in a startup’s seed round using a convertible note with 10% warrant coverage for shares of the next round at the price of the next round 2. At the Series A, the startup raises money from a venture capital firm that pays $5.00 per share of SeriesFUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform.LOGIN | FUNDERSCLUB
*Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or futureperformance.
WHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. UNDERSTANDING STARTUP INVESTMENTS Often, startup founders, employees, and investors will own equity in a startup. Initially, founders own 100% their startup’s equity, though they eventually give away the majority of their equity over time to co-founders, investors, and employees. Venture investors choose to invest in startup companies (private companies) because they stand to NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, is NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Equity crowdfunding is the use of crowdfunding to raise money for startups and to invest in startups, often via online platforms, known as Title III investing. Although “equity crowdfunding” is sometimes used as a generic term to reference all online startup investing platforms (including online VC), it specifically refers toonline startup
WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 timesFUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform.LOGIN | FUNDERSCLUB
*Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or futureperformance.
WHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. UNDERSTANDING STARTUP INVESTMENTS Often, startup founders, employees, and investors will own equity in a startup. Initially, founders own 100% their startup’s equity, though they eventually give away the majority of their equity over time to co-founders, investors, and employees. Venture investors choose to invest in startup companies (private companies) because they stand to NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, is NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Equity crowdfunding is the use of crowdfunding to raise money for startups and to invest in startups, often via online platforms, known as Title III investing. Although “equity crowdfunding” is sometimes used as a generic term to reference all online startup investing platforms (including online VC), it specifically refers toonline startup
WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 timesLOGIN | FUNDERSCLUB
*Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or futureperformance.
UNDERSTANDING STARTUP INVESTMENTS Often, startup founders, employees, and investors will own equity in a startup. Initially, founders own 100% their startup’s equity, though they eventually give away the majority of their equity over time to co-founders, investors, and employees. Venture investors choose to invest in startup companies (private companies) because they stand toALEX MITTAL
Co-Founder and CEO of FundersClub. Prior to starting FundersClub, Mr. Mittal was the founding CEO of Innova Dynamics, a VC-backed touchscreen hardware company (acquired by TPK Holding, TPE:3673). Previously, he was the founding CTO of an enterprise software company. He holds degrees in economics and engineering from the Wharton Schooland Penn
WHAT IS A DISCOUNT IN A CONVERTIBLE NOTE? A discount in a note sets a percentage reduction at which the convertible note will convert relative to the next qualified priced round. Effectively this permits an investor to convert the principal amount of their loan (plus any accrued interest) into shares of stock at a discount to the purchase price paid by investors in that round. Discounts range from 0% to as high as 35% with 20% being VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Startup accelerators and incubators are organizations that support fledgling startups and help founding teams get off the ground, hone their product/service, pick up traction, and raise investment capital.FUNDERSCLUB HELP
How to Make an Investment. ★ Why was my payment transferred to FundersClub even though I am on the waitlist? How do I start investing with FundersClub? Are these investments risky? Who can invest in FundersClub venture funds? When I invest on FundersClub, what do I own? What returns can I expect? See all 22 articles. NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 WHAT ARE THE DIFFERENT TYPES OF FINANCING STRUCTURES USED Generally speaking there are two types of financing methods for startup investors to invest in startup: an equity financing and a non-equity financing. Non-equity financings may be done through convertible notes (e.g. using 500 Startups’s KISS documents or other documents) or through convertible securities (e.g. using Y Combinator’s SAFE documents). HARDEST PART OF AI IS CLEANING UP YOUR DATA Hardest Part Of AI Is Cleaning Up Your Data - Tips From Experts. As more tools become available to create AI models, it has become easier for companies to harness the power of machine learning for their applications. What once required deep domain expertise to execute has been made easier by libraries and frameworks, such as Google'sTensorFlow
NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH 10% WARRANT Let’s do a numerical example ignoring any accrued interest, and assuming no valuation cap or discount in the convertible note: 1. You invest $25k in a startup’s seed round using a convertible note with 10% warrant coverage for shares of the next round at the price of the next round 2. At the Series A, the startup raises money from a venture capital firm that pays $5.00 per share of SeriesFUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform.LOGIN | FUNDERSCLUB
*Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or futureperformance.
WHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. UNDERSTANDING STARTUP INVESTMENTS Often, startup founders, employees, and investors will own equity in a startup. Initially, founders own 100% their startup’s equity, though they eventually give away the majority of their equity over time to co-founders, investors, and employees. Venture investors choose to invest in startup companies (private companies) because they stand to NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, is NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Equity crowdfunding is the use of crowdfunding to raise money for startups and to invest in startups, often via online platforms, known as Title III investing. Although “equity crowdfunding” is sometimes used as a generic term to reference all online startup investing platforms (including online VC), it specifically refers toonline startup
WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 timesFUNDERSCLUB
Start investing today. FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform.LOGIN | FUNDERSCLUB
*Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or futureperformance.
WHAT IS A SAFE?
A SAFE or safe stands for a “simple agreement for future equity”. This document was authored by Y Combinator lawyer Carolynn Levy and open sourced. It was created and published as a simple replacement for convertible notes. In practice a SAFE enables a startup company and an investor to accomplish the same general goal as a convertible note, though a SAFE is not a debt instrument. UNDERSTANDING STARTUP INVESTMENTS Often, startup founders, employees, and investors will own equity in a startup. Initially, founders own 100% their startup’s equity, though they eventually give away the majority of their equity over time to co-founders, investors, and employees. Venture investors choose to invest in startup companies (private companies) because they stand to NUMERICAL EXAMPLE: SAFE, CAP, NO DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $5,000,000. The company negotiates with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in connection with the financing, is NUMERICAL EXAMPLE: SAFE, CAP AND DISCOUNT Investor has purchased a safe for $100,000. The Valuation Cap is $8,000,000 and the Discount Rate is 85%. The company has negotiated with investors to sell $1,000,000 worth of Series A Preferred Stock at a $10,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing, including a 1,000,000 share option pool to be adopted in UNDERSTANDING STARTUP INVESTMENTS Ashton Kutcher and investment partner, Guy Oseary, invested $500,000 in Airbnb’s Series C round for an estimated .25% equity stake. At the time, Airbnb had a $200 million valuation. Airbnb is currently valued at $30 billion, as of August 2016, making Kutcher and Oseary’s shares currently worth an estimated $75 million, assumingno share
VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Equity crowdfunding is the use of crowdfunding to raise money for startups and to invest in startups, often via online platforms, known as Title III investing. Although “equity crowdfunding” is sometimes used as a generic term to reference all online startup investing platforms (including online VC), it specifically refers toonline startup
WHAT ARE SOME BASICS TO KNOW ABOUT STARTUP INVESTING An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events, and thus receivingback
NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH $5M CAP, 20% Let’s do numerical example ignoring any accrued interest: 1. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5.00 IF we apply the discount, the price per share would be $4.00/share ($5.00 timesLOGIN | FUNDERSCLUB
*Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or futureperformance.
UNDERSTANDING STARTUP INVESTMENTS Often, startup founders, employees, and investors will own equity in a startup. Initially, founders own 100% their startup’s equity, though they eventually give away the majority of their equity over time to co-founders, investors, and employees. Venture investors choose to invest in startup companies (private companies) because they stand toALEX MITTAL
Co-Founder and CEO of FundersClub. Prior to starting FundersClub, Mr. Mittal was the founding CEO of Innova Dynamics, a VC-backed touchscreen hardware company (acquired by TPK Holding, TPE:3673). Previously, he was the founding CTO of an enterprise software company. He holds degrees in economics and engineering from the Wharton Schooland Penn
WHAT IS A DISCOUNT IN A CONVERTIBLE NOTE? A discount in a note sets a percentage reduction at which the convertible note will convert relative to the next qualified priced round. Effectively this permits an investor to convert the principal amount of their loan (plus any accrued interest) into shares of stock at a discount to the purchase price paid by investors in that round. Discounts range from 0% to as high as 35% with 20% being VC 101: THE ANGEL INVESTOR'S GUIDE TO STARTUP INVESTING Startup accelerators and incubators are organizations that support fledgling startups and help founding teams get off the ground, hone their product/service, pick up traction, and raise investment capital.FUNDERSCLUB HELP
How to Make an Investment. ★ Why was my payment transferred to FundersClub even though I am on the waitlist? How do I start investing with FundersClub? Are these investments risky? Who can invest in FundersClub venture funds? When I invest on FundersClub, what do I own? What returns can I expect? See all 22 articles. NUMERICAL EXAMPLE: SAFE, DISCOUNT, NO CAP Investor has purchased a safe for $20,000. The Discount Rate is 80%. The company has negotiated with investors to sell $400,000 worth of Series AA Preferred Stock at a $2,000,000 pre-money valuation. The company’s fully-diluted outstanding capital stock immediately prior to the financing is 10,500,000 shares. The company will issue and sell 2,105,263 shares of Series AA Preferred at $0.19 WHAT ARE THE DIFFERENT TYPES OF FINANCING STRUCTURES USED Generally speaking there are two types of financing methods for startup investors to invest in startup: an equity financing and a non-equity financing. Non-equity financings may be done through convertible notes (e.g. using 500 Startups’s KISS documents or other documents) or through convertible securities (e.g. using Y Combinator’s SAFE documents). HARDEST PART OF AI IS CLEANING UP YOUR DATA Hardest Part Of AI Is Cleaning Up Your Data - Tips From Experts. As more tools become available to create AI models, it has become easier for companies to harness the power of machine learning for their applications. What once required deep domain expertise to execute has been made easier by libraries and frameworks, such as Google'sTensorFlow
NUMERICAL EXAMPLE: $25K CONVERTIBLE NOTE WITH 10% WARRANT Let’s do a numerical example ignoring any accrued interest, and assuming no valuation cap or discount in the convertible note: 1. You invest $25k in a startup’s seed round using a convertible note with 10% warrant coverage for shares of the next round at the price of the next round 2. At the Series A, the startup raises money from a venture capital firm that pays $5.00 per share of Series__
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INSTACART
On-demand grocery delivery. First funded Seed round in 2013. Raised $650M to date from Sequoia Capital, Andreessen Horowitz, Kleiner Perkins, and Khosla Ventures.*
COINBASE
Buy and sell digital currency. First funded Seed round in 2012. Raised $205M to date from IVP, Greylock, Andreessen Horowitz, USV, DFJ Growth, NYSE, and USAA.*
FLEXPORT
Freight forwarder for the Internet age. First funded Seed round in 2014. Raised $204M to date from DST Global, Founders Fund, First Round Capital, and A-Grade.*
EMBARK TRUCKS
Self-driving truck technology. First funded Seed round in 2016. Raised >$100M to date from Sequoia Capital, Data Collective, and TigerGlobal.
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GITLAB
Complete DevOps platform, delivered as a single application. First funded Seed round in 2015. Raised >$400M to date from ICONIQ Capital, Khosla Ventures, and Goldman Sachs. INVEST IN THE WORLD’S MOST PROMISING STARTUPS Diversify your investment portfolio with insider access to highly vetted startups from Silicon Valley and beyond in just minutes. Join FundersClub for Free You must be an accredited member to invest330+
Startups
Funded
$149M+
Invested on
FundersClub
$30B+
Portfolio
Valuation
ONLINE VENTURE CAPITAL FundersClub became the first online VC firm in March 2012. We are proud to have invested in the top 1-2% of the companies we review, representing the world's most promising startups. Our portfolio companies have gone on to raise $6B+ of follow on capital from other leading venture capital firms. They are currently valued at more than $30B. Learn about FundersClubJOIN OUR COMMUNITY
The FundersClub community represents a diverse set of highly accomplished business and technology leaders. We invest in each other, and our community makes us all stronger. Learn about startup investing, stay current with tech trends, meet like-minded individuals, find your dream startup job, and learn as part of our connected community of movers and shakers. Learn about community START INVESTING TODAY FundersClub is focused on discovering, funding, and supporting the world’s most promising startups. Fewer than 2% of the startups we review are made available for investment on FundersClub. Gain access to, review, and invest in the best startups via our web and mobile-enabled startup investing platform. After investing, keep up to date with news, updates and portfolio analysis features. Easily diversify your portfolio with low minimums. Learn about how it works*
> “Software is eating the world; FundersClub > is eating venture capital.” Matt Weinberger, Sr. Tech Reporter, > Business Insider*
> “FundersClub tops a recent ranking of > venture firms with the most momentum..." Laura Baverman, > Entrepreneurs Columnist, USA TODAY INVEST ALONGSIDE TOP INVESTORS RAISE WITH FUNDERSCLUB We leverage software and a powerful, global network to provide you with an unfair advantage on your startup journey.Apply to Fundraise
NOT READY TO FUNDRAISE? The free FundersClub Catalyst tools, apps, and content are available to all founders. Do more with less and reach your next milestone. View FundersClub Catalyst "FundersClub is not just an investor, they’ve been a great partner for us… They understand what founders are going through, making them truly founder-friendly."Laura Behrens Wu
Portfolio Company FounderCEO, Shippo
"I am thrilled with what FundersClub is doing for entrepreneurship and venture capital."Tim Draper
Venture Capitalist
Founder, DFJ
"They invested in Instacart very very early before it was clear to most of the investment community that we could be a sizable business."Apoorva Mehta
Portfolio Company FounderCEO, Instacart
"As someone who spends over 30 hours a month on planes/trains, I know how hard it is to stay connected and get access to the strongest startups. What FundersClub provides for everyone, is insider access."Josh Kopelman
Venture Capitalist
Founder, First Round Capital "FundersClub’s great client support team and continual system improvement make for an exceptional user experience and an excellent platform that works as well for the experienced investor as for thenovice"
Landon Thorne
FundersClub Member
Founder, Midas Advisory Group "FundersClub gives me access to the top startups, many of which I would have no other way to invest in. Their high level of professional curation and screening consistently delivers strong performing investment opportunities."Jonathan Chizick
FundersClub Member
Angel Investor
"Coinbase might not be here without FundersClub--they did half our seed round during a time when fundraising was tough. This was before Union Square, Andreessen, and DFJ. Working with FC was a big win for us in the early days and they had a lot of foresight vs the rest ofthe market."
Brian Armstrong
Portfolio Company FounderCEO, Coinbase
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By using this website, you accept our Terms of Use and Privacy Policy . FundersClub & Lion Design are registered trademarks of FundersClub Inc. *Past performance is no guarantee of future results. Any historical returns or unrealized returns may not reflect actual returns or future performance. All securities involve risk and may result in loss, and startup investing is particularly risky and may result in total loss. We do not provide investment advice to investors. Full Disclosure Copyright 2021 FundersClub, Inc. National Venture CapitalAssociation NVCA
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