Financing Options for Startups by Nicole Moss
-
Upload
platform-houston -
Category
Documents
-
view
403 -
download
0
Transcript of Financing Options for Startups by Nicole Moss
Disclaimer
The information presented herein and the surrounding discussion are provided for educational or informational purposes only. The information presented herein is not necessarily applicable to any particular situation herein or discussed in the course of this presentation. By providing this information and engaging in discussion, no legal advice is provided hereby and no attorney client relationship or privilege is being established. Every business and every issue is unique and legal questions or issues should be directed to your attorney.
Sources of Funds for Startups
• Founding Team• Friends & Family•Angels• Super Angels•Accelerators, etc.• Seed Funds•VC Funds
•Banks•Mezzanine Funds •Private Lenders•Crowdfunding•Grants
Promissory Notes
•Principal• Interest•Repayment Structure•Prepayment•Default•Personal Guarantee (maybe)
Shareholders
Company
Assets
Super-Simple Org Chart
Shareholders
Company
Assets
Personal Guarantee
Debt document secured by guarantee or collateral or both
Collateral
Super-Simple Org Chart
Loans
• Same as P-Notes PLUS•Covenants•Reps & Warranties•Bringdowns•Diligence• Secured with Assets/Collateral,
Guarantees•UCC Filings
SBA Loans
• Same as Regular Loans PLUS•More Paper• Longer Payment Schedule•No/Lite Prepayment Penalties• Lighter Covenants•Non-recourse (maybe)
Shareholders
Company
Assets
Super-Simple Org Chart
Shareholder #1 – 50%
Company
Assets
Simple Org Chart
Shareholder #2 – 30%Shareholder #3 – 20%
Shareholder #1 – 50%
Company
Assets
Org Chart
Shareholder #2 – 30%Shareholder #3 – 20%
Liquidity Event: $1000
Distribution: $1000
Waterfall: - outstanding debt - shareholders pro rata
Common Stock
• For cash, in-kind, in lieu of compensation• = a Security• Governed by:• Federal & State Securities Laws• State Corporate Laws• Certificate of Formation (public)• Bylaws• Other Agreements – Shareholders’,
Investors’ Rights…
Preferred Stock
• Like Common PLUS• Liquidation Preference•Convertible• Superior Voting Rights/Protection•Anti-dilution – ROFR, Participation
Shareholder #1 – 25%
Company
Assets
Org Chart
Shareholder #2 – 15%Shareholder #3 – 10%
Liquidity Event: $1000
Distribution: $1000
Waterfall: - outstanding debt - Preferred shareholders pro rata - Common shareholders pro rata
Preferred #1 – 50%
Warrants & Options
•Not an Equity, but still a Security• Exercise Threshold• Strike Price•Warrants -> Transactions•Options -> Compensation