1 / 16

Parceling Out Equity

Parceling Out Equity. 128 ICG June 9, 2005 Peter Miller Richard Lucash Principal Partner Genomic Healthcare Strategies Eckert Seamans peterm@genomichealthcarestrategies.com rlucash@eckertseamans.com

deion
Télécharger la présentation

Parceling Out Equity

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Parceling Out Equity 128 ICG June 9, 2005 Peter Miller Richard Lucash Principal Partner Genomic Healthcare Strategies Eckert Seamans peterm@genomichealthcarestrategies.com rlucash@eckertseamans.com This document is for illustrative purposes only. It is not legal advice and the numbers should not be applied without consulting with appropriate professional advisors.

  2. Basics: What’s equity? • A company has owners • Ownership is expressed in shares of stock • Your % ownership = your shares divided by the number of outstanding shares (20 shares of 100 = 20%) • A stock option is a contract to allow the holder to buy a share of stock as a set price

  3. Founders and others • A common path for a company: • The founding team (2-4 people) start the company • They may raise some friends & family investment; possibly angel investment • If they are successful but the business requires more resources, they may raise a first venture capital round, called an A round

  4. Common allocations

  5. Who decides? • It’s negotiated • Among founders it’s frequently an awkward topic • Better to have the discussion than not • It’s important • But it’s also better not to have overwhelming victories and humiliating defeats

  6. How do you resolve disagreements? • Award equity over time • Based on performance • Based on activity • Based on role • There are lots of mechanisms • Talk with your attorney

  7. Not so fast… • But it’s not usually that simple • There are a number of problems which can get in the way of harmony • If you’re lucky, you won’t have all of these

  8. Typical problems • Kindergarten report card: “Johnny doesn’t share” • The old team from the last company stills thinks that everyone is a peer • The thesis adviser emerges • The business plan competition team emerges

  9. Typical problems (2) • Some full time, some part time • Vesting? We don’t need no stinking vesting! • Founders walk away

  10. Investment & growth • If you put a good team together and have some success, you’ll probably need additional capital to grow • Once you have investors less pliant and family and friends, you’ll have more constraints • Staff who enter later don’t get the same amount of equity

  11. After investment

  12. And how about you? • Suppose, pre-A round: • CEO 38% • 2 other founders 28% each • Various others total of 6% • And you take in $500K at a pre-money valuation of $1 million • Post money: • CEO 26% • 2 other founders 18% each • Various others total of 4.67% • Investors 33.33%

  13. A note on percents • Each case is different • I did a small survey of knowledgeable colleagues who varied widely in their estimates • Don’t use these number to win arguments – work it out for your own particular situation • Key point – don’t ignore the issue

  14. Peter Miller Background • MIT undergrad and Sloan School • Experienced and successful entrepreneur in professional services and software • Long-time adviser, strategist, mentor, board member for growing companies • Occasional angel investor; one-time investment banker • Now working in life science areas with Genomic Healthcare Strategies • Past board chairman, MIT Enterprise Forum Inc • Co-Director, MIT Venture Mentoring Service • peterm@genomichealthcarestrategies.com

  15. Sell Sell Vest Vest Sell Vest Options & Restricted Stock Non-ISO $1,500 paper gain NO TAX YET $2,000 gain TAX – Ordinary Income $2,500 gain TAX – Capital Gain 100 shares at $10/share 100 shares at $25/share 100 shares at $30/share 100 shares at $55/share Grant Exercise $1,000 investment ISO $1,500 paper gain NO TAX YET $2,000 paper gain NO TAX YET $4,500 gain TAX – Capital Gain Must be FMV 100 shares at $10/share 100 shares at $25/share 100 shares at $30/share 100 shares at $55/share Grant Exercise 2 years 1 year Restricted Stock $2,500 gain TAX – Ordinary Income $1,000 gain TAX – Ordinary Income $1,500 paper gain NO TAX YET $3,000 gain TAX – Capital Gain $4,500 gain TAX – Capital Gain Timing the Tax 83(b) Election 100 shares at $10/share 100 shares at $25/share 100 shares at $55/share Grant

  16. Related Items • Assignment of the technology • Get from all contributors • Releases • Employee invention/confidentiality/noncompete

More Related