Corporation, Entity Formation

What is Par Value and How Much Should it Be?

02 February 2010

Par Value of Stocks

Par value is the minimum price that a share can be sold for. This is typically the price founders pay for their shares, although sometimes I recommend issuing founder shares at a multiple of par value (i.e. Par Value x 10) in order to avoid problems down the road if the company needs to execute a forward stock split and the value of the shares hasn’t increased much. This avoids the situation where a forward stock split would require the new share price to be below par value, something not allowed.

Entity Formation

How Many Shares Should My Startup Authorize at Incorporation?

02 February 2010

The Answer

It depends. The number of authorized shares only matters if you plan on issuing stock options to employees, raising outside money from investors, or taking your company public. If you plan on any of these, you need to pay attention to the capital structure of your company from the beginning because if setup correctly, it can save you significant time, effort, and legal fees in the long run. If you do not plan on issuing stock options, raising money from investors, or taking the company public, you can pick any number you want (but pay attention to possible tax and filing fee consequences) and divvy them up between the co-founders accordingly. Otherwise, we recommend authorizing somewhere in the neighborhood of 10M shares, with 8M to 9M set aside for the founders and if necessary, the rest set aside for an option pool.

Debt and Bridge Financing, Securities Law

Cost of Convertible Note Legal Fees

18 January 2010

Shouldn’t the money you raise go towards building your company and not to your lawyer? We agree, because we believe it is our duty to preserve and protect your company and the money you raise, not waste it with unnecessary legal maneuverings. We’ve done these deals before and don’t have to reinvent the wheel every time someone gets funded. We know what provisions are boilerplate and what provisions need to be negotiated, so we can focus on what is truly important and not waste your time and money.

Securities Law, Series A

Cost of Series A Legal Fees

18 January 2010

Shouldn’t the money you raise go towards building your company and not to your lawyer? We agree, because we believe it is our duty to preserve and protect your company and the money you raise, not waste it with unnecessary legal maneuverings. With the existence of so many good model documents such as the NVCA model documents, The Funded model documents, and TechStars model documents, the lawyers don’t have to reinvent the wheel every time someone gets funded, so long as the startup and the investor agree to start with a set of model documents. We know what provisions are boilerplate and what provisions need to be negotiated, so we can focus on what is truly important and not waste your time and money.

Securities Law

Austin Area Venture Capital Funding Sources

15 January 2010

• Adams Capital Management
• Advantage Capital Partners
• ARCH Venture Partners
• Austin Ventures
• Blue Sage Capital
• Centennial Ventures
• Centerpoint Ventures
• Covera Ventures
• DFJ Mercury
• Duchossois Technology Partners
• Emergent Technologies
• Enhanced Capital Partners
• G-51
• Gefinor Ventures
• Guggenheim Venture Partners
• Origin Partners
• Path 4
• PTV Sciences
• S3 Ventures
• Sante Ventures
• Sentient Ventures
• Sevin Rosen Funds