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TheFunded brings more transparency to raising venture capital

Asymmetry of information plays a major role in negotiations, and it is often said that venture capital investments are made under extreme information asymmetry. On one side of the table, the limited partners don't know much about the company, the VCs know a little (relatively speaking), and companies...

Posted to Tim Marman's Loosely Coupled (Weblog) by Tim on 01-27-2008
More about raising too much venture capital

I recently wrote about the dangers of "taking as much as you can get" in a series A. Shortly after that, Dick Costolo wrote an absolutely amazing post about raising too much money. Nonetheless, I don’t think it makes sense for most entrepreneurs to raise big A rounds, because you don’t want...

Posted to Tim Marman's Loosely Coupled (Weblog) by Tim on 08-24-2007
What's the best state to incorporate in? (Hint: Delaware)

AskTheVC recently addressed the question of what was the best state of incorporation . The short answer is one of 3 preferred states: "Delaware, whatever state the company is in and whatever state(s) the VCs are located in." Obviously, the last is hard to determine if you're going to incorporate...

Posted to Tim Marman's Loosely Coupled (Weblog) by Tim on 07-23-2007
Valuation: Sometimes you *can* take too much money

If you're raising capital for a technical startup, how much should you take? Marc Andreessen says as much as possible , a sentiment echoed by Jason Calacanis . Jeremy Liew expounded on some of the risks of having a valuation that's either too high or too low . Marc and Jason are two guys who...

Posted to Tim Marman's Loosely Coupled (Weblog) by Tim on 07-10-2007
Choosing a corporate entity for your startup

Generally speaking, tax and liability drive the choice of entity. Taxation From a tax perspective, all of the entities except for C-Corps are known as "pass-through" entities, where any income and losses show up on the owners' tax returns. With a C-Corp, taxes are paid by the corporation itself, independent...

Posted to Tim Marman's Loosely Coupled (Weblog) by Tim on 03-06-2007
The Dark Side of Drag-Along/Tag-Along Rights

Michael Arrington talks about the sale of FilmLoop . Due to drag-along rights, ComVentures was able to force an unfavorable sale to another company in its portfolio - leaving the founders with essentially nothing. One day, the founders and employees of FilmLoop had a viable company with $3 million in...

Posted to Tim Marman's Loosely Coupled (Weblog) by Tim on 03-02-2007
Why do VCs only invest in C-Corps?

VCs are typically LLCs or LLPs (pass-through entities) with investors including pension plans, endowments, and other not-for-profit entities. Not-for-profit entities can make money from business or passive investments without paying tax, but must pay tax on unrelated investments. The sale of stock in...

Posted to Tim Marman's Loosely Coupled (Weblog) by Tim on 02-19-2007
How is IP split between separating founders?

AskTheVC addresses the question of what happens to IP rights when the founders go their separate ways . "Bottom line, you have a strong incentive (as does your former partner) to settle this amicably, otherwise, you both are going to be worse off." I thought it was worthwhile to dig into this a little...

Posted to Tim Marman's Loosely Coupled (Weblog) by Tim on 02-12-2007
Equity-Based Compensation

Anthony points to a good overview on equity-based compensation. Motivation issues aside, such plans are also a key means to attract and keep top talent when you might not otherwise have the means (i.e., an early stage startup). The article discusses the three primary forms of equity - Incentive Stock...

Posted to Tim Marman's Loosely Coupled (Weblog) by Tim on 01-30-2007
Understanding the Option Backdating scandals

It is legal to grant an in-money option - there is nothing in corporate law that prevents anyone from backdating an option. So why are all these CEOs and CFOs going to jail? (Well, if you're not Steve Jobs that is , since he gets a free pass ). The companies are issuing Incentive Stock Options (ISOs...

Posted to Tim Marman's Loosely Coupled (Weblog) by Tim on 01-26-2007

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