Cap Table Learning Session

A basic overview of the concepts around cap tables, including some background on funding.

Transcript

1. FULL STACK • http://fullstack.ca • @FullStackDotCa Cap Table Learning Session Vancouver, January 2015 Boris Mann, Managing Partner, Full Stack Boris Mann • @bmann
2. FULL STACK • http://fullstack.ca • @FullStackDotCa What is a cap table? • aka “capitalization table” • Record of all the major shareholders of a company, percentage ownership, and what people paid for various shares over time Boris Mann • @bmann
3. FULL STACK • http://fullstack.ca • @FullStackDotCa When do I need a cap table? • You’ll have one as soon as you incorporate a business • It’s the official share ownership of your company • Your lawyer keeps an official version, you’ll want to have an easily updatable one for doing “what if” scenarios related to investment Boris Mann • @bmann
4. FULL STACK • http://fullstack.ca • @FullStackDotCa How do I split equity with cofounders? • http://foundrs.com/ is an interesting tool to walk through • Also: reverse vesting for founders • Founders shares are granted immediately, reverse vesting clauses in the Shareholders Agreement describe how founders keep / give back those shares over time • vs. when your company is valued, you give out options, which are granted (vest) over time Boris Mann • @bmann
5. FULL STACK • http://fullstack.ca • @FullStackDotCa Love your Cap Table • Equity is like sh*t – keep it piled in one place and it stinks, spread it around and good things grow • Reward advisors, early employees • Use your cap table to plan where you need to get to in terms of team, traction & timing • 20% - 30% dilution at each stage Boris Mann • @bmann
6. FULL STACK • http://fullstack.ca • @FullStackDotCa Cap Table Spreadsheets • Simplified Company Formation http://bit.ly/ captableformation • Multiple round “Ed Levinson” http://bit.ly/ edlevcaptable Boris Mann • @bmann
7. FULL STACK • http://fullstack.ca • @FullStackDotCa Early Stage Funding • Seed 1: < $500K • Working code & customers • Seed 2: > $500K to $1.x M • Paying customers or significant traction • Series A: $1M++ • At least one known, repeatable sales channel / distribution model Boris Mann • @bmann Day job F&F $30K prototype Cofounder Accelerators Futurpreneur Consulting
8. FULL STACK • http://fullstack.ca • @FullStackDotCa Funding Mechanics • Equity, Common Shares • If you can agree on valuation – do it! Aligns early investors & founders • Convertible Note • 20% discount, 8% interest, $3M cap, 18 - 24month term • Debt or Equity (e.g. Y-Combinator SAFE) • Pref Shares • Usually required by any “institutional” investors, including many Seed VCs • Liquidation Preferences, eg 1x means that that class of shares get their investment out first, and 1x their investment Boris Mann • @bmann
9. FULL STACK • http://fullstack.ca • @FullStackDotCa I was told there would be no math… • $300K Seed 1 Round (Common Equity) • $25K / month burn x 12 months (or 6 months at $40K) • 25% dilution target == $900K Pre / $1.2M post • $800K Seed 2 Round (Convertible Note) • $60K / month burn x 12 months • $1.5M Series A (Pref Shares) • $120K / month burn x 12 months • 25% dilution target == 7.7M pre / $9.2M post Boris Mann • @bmann
10. FULL STACK • http://fullstack.ca • @FullStackDotCa Thank you! http://speakerdeck.com/bmann @bmann Boris Mann • @bmann
11. FULL STACK • http://fullstack.ca • @FullStackDotCa fullstack.ca/tools • Cap Table & Valuation Presentation • Link to some Excel spreadsheets + LaBarge Weinstein presentation • http://captable.io is the tool I currently use & recommend • Budgie • use of proceeds, budget planning, simple SaaS user model • http://app.budgetsheet.co Boris Mann • @bmann
12. FULL STACK • http://fullstack.ca • @FullStackDotCa What Investors Want • Investment Deck • Team / Market / Solution (+ Proprietary Tech or Distribution) • Use of Proceeds (aka Budget for 12 months) • Hiring plan, sales & marketing “hypotheses” • User Model • Bottom up growth model • Cap Table • including scenario for next round Boris Mann • @bmann
13. FULL STACK • http://fullstack.ca • @FullStackDotCa Liquidation Pref Example • 50% of a company for $5M, for $10M post money • Sells for $20M • Pref shares get $5M out • then 1x of $5M (for $10M) • Remaining is $10M, of which pref shares get 50%, or $5M ($15M total) Boris Mann • @bmann