Financing a Small Business Mashed Report

Venture Investors Seek "Ninja Assassin" Entrepreneurs

What does it take to make it as a technology entrepreneur?A great idea and the skills of a "Ninja assassin," according to venture capitalists.The passion and focus associated with the Japanese discipline goes a long way in impressing would-be investors."What I'm looking for is what I call a Ninja assassin -- a creative, fearless, nimble, focused entrepreneur," said Ann Miura-Ko,...

By Mashed Report Staff | Contributor

Should founders stock be subject to vesting before a venture financing?

Generally yes. Even though the founders stock is issued and outstanding, the company can have the right to repurchase the shares. The right of the company to repurchase the shares will lapse over time or upon certain events, similar to vesting of options. There are two primary reasons for subjecting...

By Yoichiro (“Yokum”) Taku | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati

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What should the vesting terms of founder stock be before a venture financing?

I think that founders stock before a venture financing should be subject to the same general vesting terms as one would expect after a venture financing. A typical vesting schedule is four year vesting with a one year cliff. This means that 25% of the shares will vest one year...

By Yoichiro (“Yokum”) Taku | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati

What is Series FF stock?

I've been asked by a few people about the Series FF stock that has been advocated by the Founders Fund. Matt Marshall of Venture Beat reported on this invention in December 2006. See here for an Inc.com report in March 2007. Michael Martin blogs about economic incentives associated with the...

By Yoichiro (“Yokum”) Taku | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati

What is an 83(b) election?

Failing to make a timely 83(b) election with the IRS is something that could lead to disastrous tax consequences for a startup company founder or employee.Founders typically purchase stock pursuant to restricted stock purchase agreements that allow the company to repurchase "unvested" stock upon termination of employment. Similarly, employees may...

By Yoichiro (“Yokum”) Taku | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati

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What is qualified small business stock?

Under Internal Revenue Code Section 1202 , a taxpayer (other than a corporation) that recognizes gain from the sale or exchange of "qualified small business stock" held for more than five years may exclude 50% of such gain from gross income for regular income tax purposes. The amount of gain...

By Yoichiro (“Yokum”) Taku | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati

Should founders pay for their stock in cash or contribute intellectual property?

If a founder owns intellectual property that he or she plans on contributing to a company, the founder may want to pay for founder stock by assigning the intellectual property rather than paying cash. Even though founders typically purchase stock for $0.01 or $0.001 per share, the aggregate purchase price...

By Yoichiro (“Yokum”) Taku | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati

What is Class F common stock?

Extremely founder-friendly provisions in the certificate of incorporation for companies. These provisions include a special class of super-voting common stock, called "Class F" common stock, which is named for "Founders." * Voting. The COI includes Class A common stock, which has one vote per share, and Class F common stock,...

By Yoichiro (“Yokum”) Taku | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati

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How many shares should be authorized in the certificate of incorporation?

I usually advise companies to authorize around 10 to 15 million shares of common stock. Around 8 or 9 million shares are issued to founders with a 1 million to 2 million share option pool, for a fully-diluted base of around 10 million shares. The remaining authorized but unissued shares...

By Yoichiro (“Yokum”) Taku | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati

How do you calculate Delaware franchise taxes?

A corporation's Delaware Annual Franchise Tax Report is prepared by Delaware calculating the corporation's annual tax obligation using the "authorized shares" method, reflecting a very large annual franchise tax obligation for most corporations. However, use of the optional "assumed par value capital" method of tax calculation will typically result in...

By Yoichiro (“Yokum”) Taku | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati

What inspection and information rights does a stockholder have?

Most states allow stockholders to demand access to a corporation's books and records, and a stockholder list, as long as the stockholder has a proper purpose and meets certain procedural requirements.Delaware General Corporation Law Section 220(b) provides that "Any stockholder, in person or by attorney or other agent, shall, upon...

By Yoichiro (“Yokum”) Taku | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati

What is par value?

Par value is the minimum price per share that shares must be issued for in order to be fully paid. I typically recommend that par value be set at $0.001 or $0.0001 per share. Thus, if a founder purchases 8,000,000 shares of common stock, the minimum price that the founder...

By Yoichiro (“Yokum”) Taku | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati

What does fully-diluted capitalization mean?

"Fully-diluted" capitalization typically includes (1) all outstanding common stock, (2) all outstanding preferred stock (on a converted to common basis), (3) outstanding warrants (on an as exercised and as converted to common basis), (4) outstanding options, (5) options reserved for future grant, and (6) any other convertible securities on an...

By Yoichiro (“Yokum”) Taku | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati

Financing a Small Business the Smart Way

Are you a small business owner? If you are, you'll know that running a small business is one of the most difficult things you'll ever do in your life. You're the company's spokesperson, owner, founder, advertiser and investor. You are its inspiration. It is your livelihood and your passion. And...

By Mashed Report Staff | Contributor

A Shortcut For Financing Small Business.

In today's world, traditional bank loans are not the only medium of financing a small business loan. It is imperative to consider all the options available before you make your choice.What are the overlooked options?Currently, many unconventional sources of finance are coming up as well, e.g. contract financing, which is...

By Mashed Report Staff | Contributor