1/8 Yesterday I tweeted about a story of founders who had given up too much equity too early which may impact their future funding. Today I want to talk about how this can happen when taking on a lot of Note agreements.
#vc #startups #founders #founders
#vc #startups #founders #founders
2/8 It& #39;s common for startup founders to use SAFE or KISS or Convertible Notes for their earliest funding. it is also more and more common for founders to do multiple rounds of note agreements
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#vc #startups #founders #founders
3/8 A secret here is Notes don& #39;t have to be a part of a round as each note is its own agreement, so technically each note could have different terms or different cap. This can lead to a lot of flexibility that& #39;s both good and bad
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#vc #startups #founders #founders
4/8 Something founders sometimes mismanage is setting a fair valuation cap, but then taking on multiple notes over 12-18 months or longer without raising their cap or not raising it enough
#vc #startups #founders #founders
#vc #startups #founders #founders
5/8 This can easily lead to a situation where the founders have given up way more equity than they thought or had planned to.
#vc #startups #founders #founders
#vc #startups #founders #founders
6/8 This is a result of founders not always understanding or calculating their ownership relative to their investors and their many notes. that 50K check here, 25K check there, and equity to an accelerator starts to add up quick
#vc #startups #founders #founders
#vc #startups #founders #founders