Do Founders Really Control Their Company With 51% Ownership?

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Founders are often focused on maintaining at least 51% ownership of their companies. With 51%, they will be able to control the Company, and their destiny. At least that’s what they thought. In reality, the 51% control premium is often contracted away in the world of preferred stock venture financings.

In a typical venture financing, venture capital (VC) investors may end up with 25% of the Company, leaving 75% in the hands of the founders. However, the VCs will require that the Company enter into various contracts with them as a condition to the financing that shift control away from the founders and towards to the investors.

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Why Start-Ups Use Convertible Debt Part III: The Virtues of Convertible Debt for a Start-Up

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Over the course of our “Why Start-Ups Use Convertible Debt” series, we’ve discussed the two common paths start-up companies take to structure a financing. In Part I, we discussed common stock financing and in Part II, we discussed a convertible debt financing.  In Part III, we will review the main principles start-up companies must remember when deciding to complete a convertible debt financing.

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Why Start-Ups Use Convertible Debt Part II: How a Convertible Debt Works

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In Part I of our “Why Start-Ups Use Convertible Debt” series, we discussed one of the typical start-up financing structures, the sale of common stock, along with the issues that should be considered when setting a valuation. Based on the issues that arise with the sale of common stock, another financing option that tends to make sense for start-up companies is the sale of convertible debt. Continue reading this entry

Why Start-Ups Use Convertible Debt Part I: Common Stock Financing and the Problem of Setting a Valuation

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Most start-up companies turn to friends, family and/or high net worth individuals as the first source of capital to fund their operations. Banks will not lend to these companies since there are no real assets to collateralize the loans, and most venture capitalists and other institutional investors need to see a further developed company with customers or at least a developed product before they will consider investing. Friends, family and/or high net worth individuals are often more willing to take this early risk.

While there are many ways for a company to structure a financing, the start-up company typically follows one of two paths: 1) the sale of common stock or 2) the sale of convertible debt.

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IoT – It’s All About the Data, Right?

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A few weeks ago, the FTC released a report on the Internet of Things (IoT). IoT refers to “things” such as devices or sensors – other than computers, smartphones, or tablets – that connect, communicate or transmit information with or between each other through the Internet. This year, there are estimated to be over 25 billion connected devices, and by 2020, 50 billion. With the ubiquity of IoT devices raising various concerns, the FTC has provided several recommendations.

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