Sample funding templates for Ontario entrepreneurs | Entrepreneur’s Toolkit MaRS Discovery District has developed a set of templates of funding documents for use by Ontario entrepreneurs under Canadian law out of the need for standard legal documents for start-ups. While these documents may simplify the process of seeking funding, MaRS strongly encourages start-ups to seek legal counsel. Context for developing sample funding templates Angels and micro-venture capital firms play an increasingly important role in the funding landscape for many early-stage technology entrepreneurs, particularly those in the web and mobile-application sectors. The startup community in the US responded to this same trend by rallying around a series of “standard”, “open-source”, “vanilla-preferred” investment documents. All of these organizations had the goal of simplifying the fundraising process for investors and for start-ups: NONE sought to replace the need for strong legal advice being given to the respective parties. MaRS’ sample funding templates for entrepreneurs and investors
Seed Financing | startupPerColator Taking the first step to start a business can be difficult, particularly since moving from the idea stage to startup stage in pursuit of perishable market opportunities requires cash. Founders who are unable to personally finance their early stage startup activities quickly discover the need to raise external funding. Seed Capital Seed capital can come from many sources, the most frequent being “angel capital.” Angels are investors who have a penchant for being the first investors in a new startup. Angels, professional angels, “super” angels, and early stage venture capitalists tend to structure their investments of seed capital in one of two forms – either through a loan or the purchase of equity. Loans When raising a modest amount of seed capital, for instance, less than $1 million, founders often favor a “seed loan.” Seed Equity An alternative structure for seed funding involves the creation and issuances of Preferred Stock. Change-in-Control Scenarios
Invest in Startups You Love - Wefunder Why invest in startups? It shouldn't be to make bundles of risk-free money! This isn't real estate or the stock market. Startups are much riskier. Is startup investing appropriate for me? If you can't afford to lose every dollar you invest on Wefunder, the answer is no. You might have a strong belief in the future success of a company. Unlike the stock market, investment outcomes are much more binary (complete failure or wild success) and there's no stock market that'll allow you to easily re-sell your investment stake to someone else, unless the company is acquired or prepares for an IPO. Just how risky are startups? Very! How can I decrease the risk? You are more likely to avoid loss by diversifying your investments, focusing in areas you have expertise in, and investing in startups that you are a passionate user of. How many investments should I make? We recommend making a bunch of small investments each year, rather than one large one. Can I easily re-sell my investment? No. Yes. No. No.
25 Ways to Make Your First Online Sale As an online merchant, making your first sale is as symbolic as it is necessary. Completing the first sale sounds straightforward enough, yet the optimism and reassurance it brings can make it the biggest turning point in the life of your business. However, don’t let the simple concept of a first sale mislead you. Obtaining that first customer can sometimes be a long, arduous battle. To make the battle easier to win, below are 25 sure-fire ways to make your first sale, and then some. 1. The Internet is packed with influential bloggers, journalists, entrepreneurs, and vloggers from a wide range of industries and niches. Many of them have large followings on social media and loyal audiences on their websites. Sending a free sample of your product to such influencers, who are either within your industry or related to it in some way, gives you an opportunity to let them know you appreciate their work with a small gift. 2. 3. 4. In some cases, sponsoring an event can work wonders. 5. 6. 7. 8. 9.
Founders' Agreement Template The Company This agreement governs the partnership between the Founders, doing business as [company name] (the “Company”). The Company will continue perpetually, unless dissolved in accordance with this agreement. The Founders will cause the Company to register its fictitious name in the jurisdiction where it conducts its business, as soon as reasonably practicable after the date hereof. The Company’s principal office address will be set by a majority of Founders, and initially is: [address]. In most jurisdictions, for-profit unincorporated associations are general partnerships for purposes of contractual liability, and are taxed as partnerships. The Founders The following individuals are hereby admitted as partners in the Company (“Founders”) [Founder One][contacts] [Founder Two][contacts] [Founder n][contacts] The Project The Founders have created the Company for the sole purpose of [description of project] (the "Project"). The Project description determines the scope of assigned IP.
Business Basics - Equity: Dividing the Pie Email: email@example.com I'd rather have a small piece of a big pie than a large piece of nothing! (M. Volker) Why Do You Need a Partner? If you are very bright, very tenacious, and financially well endowed, then you can start a company which you own in its entirety and in which you can hire a bright, capable, highly motivated and well-paid management team. How do you deal in New Partners? Valuation is the issue. Unless you are greatly concerned about control issues, each time you dilute you should be increasing your economic value. If you bring in a new VP of Marketing and give her 5% as a signing bonus, how do you know that her contribution will be worth 5%? There is only one way to bring in new partners: carefully and with deliberation. Who Should Get What? What percentage of the company should each partner in a new venture receive? Suppose Bill Gates said he'd serve on your Board or give you some help. Often, company founders give little thought to this question. 1. 2. 3. Summary
Co-Founder Equity Calculator Standardized Legal Documents | Customized Legal Agreements | VentureDocs What is VentureDocs? VentureDocs is a system for automating the first draft of important legal documents for startup companies, investors, crowdfunding portals and attorneys. The various VentureDocs modules allow users to proceed through an intuitive point-and-click menu system for putting in unique information and making choices for the language that will be inserted to create highly-customized legal documents based on the user's particular situation. We believe that there is a great benefit to standardizing legal documents in this space. But let us clarify, we do not believe that the same documents should be used for every company in every circumstance. The terms of the founders' arrangements with their companies, and the terms of the investors' investment in startup companies, can and should be tailored as appropriate for each given situation. VentureDocs provides a mass customization approach. About the Documents How do you know you're getting quality documents?
Wiki Equity agreements are used to legally detail how equity will be divided amongst founders, key employees, advisors and investors in a startup company. The details of equity agreements will specifically determine who gets what payoff should the company be acquired or go public. Additionally, since equity often takes a role in determining voting rights and other key decision making, these aspects and how they relate to the equity division are described in equity agreements. Thus, it is very important for entrepreneurs and people looking to work at startups to understand equity agreements in detail, so that they can know where they stand on potential payoff and decision making in their company. Concepts and Terms used in Equity Agreements: Shares: Equity is divided up in a startup company via shares. Shares can either be issued as restricted stock or stock options. There are often different types or classes of shares in the equity structure of a startup. Vesting: Dilution: Dividends:
Swapping start-up equity for professional services What happens when you gives shares to another business? Back in the halcyon days of the dotcom boom, a nice little trend evolved that cut through the airy, overinflated fads of the day. Start-ups reluctant or unable to sell great slabs of their equity to drooling VCs instead gave shares to businesses who could actually help them grow, in return for that company's services. What usually happened was some creative spark with a big idea for a website gave shares to a development business. This idea of swapping equity for professional services outlived the dotcom boom, expanded to all types of B2B businesses, and is still going strong in the US today. Over on this side of the Atlantic, though, we seem to be a little slower on the uptake. So we figured it was time to introduce you to the equity-for-trade model and how to make it work for you. Why and when it works For you, particularly if you're cash-poor, the set-up is something of a financial golden ticket. The risks Why and when it works
How to Divide Equity to Startup Founders, Advisors, and Employees Since returning from MIT back in June I’ve been focusing on the growth of the company. It has been pretty much on mind non-stop for months now. The part that I’d like to zero in on is when you’ve got a high growth company what are some of the best practices out there to distribute equity to the founders, advisors, and employees? Equity for Founders The Founders’ Pie Calculator by Frank Demmler, an Associate Teaching Professor of Entrepreneurship at the Donald H. The idea behind the calculator is to come up with a weight for each of these five elements and then assign a value to each founder on a scale of 0-to-10. Equity for Board of Directors and Advisory Board When figuring out how to provide equity to advisors, you can use this chart as a guideline. Equity for Employees It’s important to figure out how much equity you give to your employees. By Nevi on VentureHacks.com Number of shares = Meaningless. All this information that I’ve gathered up here seems rather logical.
The Equity Equation July 2007 An investor wants to give you money for a certain percentage of your startup. Should you take it? These are some of the hardest questions founders face. 1/(1 - n) Whenever you're trading stock in your company for anything, whether it's money or an employee or a deal with another company, the test for whether to do it is the same. For example, if an investor wants to buy half your company, how much does that investment have to improve your average outcome for you to break even? In the general case, if n is the fraction of the company you're giving up, the deal is a good one if it makes the company worth more than 1/(1 - n). For example, suppose Y Combinator offers to fund you in return for 6% of your company. One of the things the equity equation shows us is that, financially at least, taking money from a top VC firm can be a really good deal. The reason Sequoia is such a good deal is that the percentage of the company they take is artificially low. Let's run through an example.
How Funding Works - Splitting The Equity With Investors - Infographic A hypothetical startup will get about $15,000 from family and friends, about $200,000 from an angel investor three months later, and about $2 Million from a VC another six months later. If all goes well. See how funding works in this infographic: First, let’s figure out why we are talking about funding as something you need to do. If you know the basics of how funding works, skim to the end. Every time you get funding, you give up a piece of your company. Splitting the Pie The basic idea behind equity is the splitting of a pie. When Google went public, Larry and Sergey had about 15% of the pie, each. Funding Stages Let’s look at how a hypothetical startup would get funding. Idea stage At first it is just you. Co-Founder Stage As you start to transform your idea into a physical prototype you realize that it is taking you longer (it almost always does.) Soon you realize that the two of you have been eating Ramen noodles three times a day. Registering the Company The Angel Round Is dilution bad?