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Blog Archives

Convertible Debt is Bad For Angels

A couple of years ago, Paul Graham (Y Combinator) tweeted “Convertible notes have won. Every investment so far in this YC batch (and there have been a lot) has been done on a convertible note.”

The truth is convertible debt has not won.  Many sophisticated angel investors and angel groups refuse to invest in convertible debt in seed/startup deals.  Why? 

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Convertible Debt: Worst Form Of Seed Financing — Except For All The Others

How to finance a new seed-stage startup?  Equity?  Convertible debt?  Convertible equity?

As of August 2010, Paul Graham famously proclaimed, “Convertible notes have won. Every investment so far in this YC batch (and there have been a lot) has been done on a convertible note.”  Yet in my little corner of Wonksville, Founder Institute CEO Adeo Ressi and Yoichiro “Yokum”

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Sideways Startups: An Investor’s Dilemma

Editor’s Note: For a great tip on unloading private stock, read this post about how you can donate it.

One-half of angel-funded companies fail, which is why a winning Investment Strategy for Angels includes diversification. That is, to invest in several companies (rather than a few) each with the potential for home-run returns.  Amidst all the talk of failures and exits, we forget

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Sideways Startups: Donating Private Stock

Typically, Americans give cash when it comes to charitable contributions. However, for investors and founders, it may be helpful to think outside the box when it comes to giving.

Donations of private stock enable investors, founders and employees to support charitable causes and contribute to the community while receiving simultaneous benefits in the form of substantial cash savings from

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Amount of Startup Equity Depends on Contribution

One of the first tough decisions that startup founders have to make is how to allocate or split the equity among co-founders. The easy answer of splitting it equally among all co-founders, since there is minimal value at that point, is usually the worst possible answer, and often results in a later startup failure due to an obvious inequity.

Another

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Forget Crowdfunding: Why JOBS Matters

Posted by on April 6th, 2012

Most all the talk about the JOBS bill is about crowdfunding, seeding, and the ability to advertise private placements.  In my mind, other provisions are the really big news for young companies.

Those are the expansion of the size limits for “Reg A” offerings, and the newly created “regulatory on-ramp.”  Together, these have re-opened a door to capital that’s been

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The Great Crowdfunding Train Wreck of 2013

The verb “to disrupt” in all its forms is rightly popular in the startup world.  To many entrepreneurs, few things are as personally satisfying (or as lucrative) as disrupting an entrenched, complacent, monopolistic, inefficient or stagnant market in ways that often empower consumers and producers alike.  Consumer Internet and mobile technology businesses continue to be rife with opportunities for disruption.

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Heart-Attack Tax Season for Delaware Startups

It’s that time of year again:  Tax season.  In addition to the headache of personal income taxes, entrepreneurs have to deal with business taxes.  Around this time each year, as sure as the sunrise, I get calls and messages from irate founders of new startups who received franchise tax bills from the State of Delaware for an insane amount like

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The #1 Angel Investing Mistake

The list of angel investing mistakes is an awfully long one, equally as long as the list for liquid investments, plus a bunch more.  On the too-aggressive side: believing the hockey stick, ignoring the management holes, and overestimating product acceptance.  On the too-conservative side: my favorite startup myth, thinking that .

You Have Competition – Ellen Weber” href=”http://videos.gust.com/video/You-have-competition;search%3Atag%3A%22know-thy-market%22″>because competitors exist,

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Rookie Cookies: Owning the Batter But Not the Chips

I’ve gotten on my soapbox before about the importance of forming a business entity as soon as there’s a new product or business worth protecting.  The most common messes encountered in my startup law practice involve founding teams that somehow never got the formation done right, including the contributions and assignments of intellectual property to the new company and the

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