S1 Ep2 – The Cap Table
In this episode, Richard finds out that getting a check from a Venture Capitalist requires much more work than he anticipated — including creating a business plan and dividing the company’s equity among team members.
Being a hot startup. It does attract all kinds of people, some that will help you fulfill your dreams, but also many just attracted by the strass – or worse, your money.
First VC meeting. You must come prepared. You need to have all the fundraising documentation ready before you start meeting investors. There is only one chance to make a good impression, and you should preserve your momentum.
Product vs. Company. This is a Silicon Valley (the place, not the show) classic. Some will tell you to first focus on the product, not the company. Others will tell you that a great Founder knows how to build a company around him or her from the start.
Term sheet. In real life, Richard would have signed at least a term sheet with Peter Gregory before turning down Gavin Belson.
Cap table. It’s the list of the company’s shareholders. VCs want to make sure those who will create the most value going forward are “adequately positioned in the capitalization table” – i.e., have enough shares. Founders generally start with 90% of the company and 10% max (on a “fully diluted basis”) are distributed or reserved for key employees via an option plan.
And by the way, don’t forget to incorporate the company before meeting investors
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