Learn about incorporating your business, non-competes, licensing your IP and decision-making processes
Explore topics related to allocating equity, vesting terms, tax implications, IP ownership, compensation and employment agreements
Dive into employee compensation, hiring foreign employees and hiring before securing funding
Find out about board membership and roles, and advisory board setup and compensation
Understand vesting restrictions and terms, options and restricted stock, and tax differences between ISOs and NSOs
Position your company for success with information on how to raise capital and secure funding from banks, VCs, friends and family
Learn about the differences between bank loans, foreign investors, crowdsourcing, crowdfunding, angels and VCs
Explore information related convertible debt, preferred stock term sheets and valuation caps on convertible notes
Expand your understanding of IP ownership, terms of service and privacy policies, open source software and more
Dig deep into information related to if and when to file, to the difference between provisional and utility patents
Explore the best way to obtain a trademark and the difference between a domain name and a trademark
Uncover little-known information related to NDAs and patent filings
Read about copyright protection and how to register a copyright
Get up to speed on how to grant exclusivity to a reseller, OEM or distributer, license agreement terms, and licensing IP from a university or hospital
Time to grow? Learn about taking funds from a strategic investor and international expansion
Explore how to prepare for due diligence, guidance on selling your business and hiring an investment banker
Time to take your company public? Prepare your company properly
You may want the vesting of your shares to accelerate if you are fired or the company is sold. Is that a good idea? Will your investors agree to this?
Equity is often the primary financial motivation for taking risk in a new venture. To be a proper incentive, the reward of equity should be tied to each person’s contribution to the success of the venture. In an ideal world this would mean milestone-based vesting over several years. However, the reality is that few startups can predict what milestones will be most important beyond a few months in advance with any accuracy, and therefore most equity award vesting is time-based. Shares held by founders typically vest over a four- to five-year period on a monthly or quarterly basis . Most non-founder employees vest over a four- to five-year period with a one year cliff (25% vests after the first year) and monthly or quarterly vesting thereafter for the remaining three or four years. The cliff period gives the company time to determine whether the employee is working out before the person gets to keep any of his or her shares. Sometimes founders’ shares do not have a cliff.
A board of directors has the ultimate authority to direct the management of the business and affairs of the company. Legally, the board will authorize the issuance of stock, hire (and fire) senior executives, approve compensation arrangements, including the issuance of stock options, and authorize the company to enter into significant agreements. The board will also be asked to provide advice and approve strategic and operating plans, adopt company budgets and oversee the company’s audit and financial statement functions. Most importantly though, the board’s most critical function is to help management navigate the myriad critical business decisions that will determine the ultimate success or failure of the company.
The shareholders of a corporation are its owners, and they vote their shares to elect the directors. The directors sit as a board, which, typically acting through a majority, oversees the corporation’s management and sets the overall corporate strategy and direction. Directors have fiduciary duties, so they generally must act in the best interests of the corporation and its shareholders. The corporation’s directors elect officers, including a CEO, who conduct the day-to-day business operations. The board must also approve certain significant corporate matters, such as stock issuances and important contracts.
Advisory boards can be useful things—especially in the earliest phases of your startup. They are often luminaries, academics and industry experts, and having people like that who are willing to make themselves available to answer questions, provide you with insights, perspective and feedback or to merely lend some credibility to your venture can be very valuable. Calling it a “board” is a bit of a misnomer, because advisory boards rarely actually meet as a group. The amount of time they contribute is often quite limited, and they aren’t generally tasked with a specific project or deliverable like a consultant would be.
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In the next QuickLaunch University Webinar on May 10, we will explore the fundamental concepts around founder equity and founder agreements.
Partner Mick Bain explores the idea of whether startups should take the B Corp route
Park Square and WilmerHale Release 17th Annual Technology and Life Sciences Compensation and Entrepreneurship Study
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