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Welcome to Phase Two of a four-part Splitting Equity Series. If you missed it, start your journey here: Introduction - Early Startup Equity — Getting it Right before continuing on if you haven’t already, and go in order from there.

Phase One - Startup Equity - Avoiding Early Mistakes

Phase Two - Part 1 - How Startup Equity Works

• Part 2 - Startup Stock Options

• Part 3 - Startup Stock Vesting

• Part 4 - Startup Stock Valuation ( ←YOU ARE HERE 😀)

Phase Three - How to Split Equity

Phase Four - Equity Management

Let's continue!

Early-stage startups use a Stock Valuation to determine their fair market value. This will determine everything from how much a venture capital firm might receive for their investment to how we distribute employee stock options.

T...

What is a term sheet?

In the context of startups, term sheet is the first formal — but non-binding — document between a startup founder and an investor. A term sheet lays out the terms and conditions for investment. It’s used to negotiate the final terms, which are then written up in a contract.

A good term sheet aligns the interests of the investors and the founders, because that’s better for everyone involved (and the company) in the long run. A bad term sheet pits investors and founders against each other.

Let’s take a look at the elements of a good term sheet — and some elements every founder should be sure to avoid.

What is included in a term sheet?

While each term sheet is going to be different, depending on the specifics of the star...

I grew up with zero choices. As a broke kid with a single mom, I never really understood what people were talking about when they said they could "choose" how life worked for them. I just got used to being stuck with zero choices and dealing with the outcomes.

"Oh, you want to pay me 'ones of dollars' to mow your lawn? OK! I guess that’s what I have to do, because I need money."

Later on in life, I got to live this all over again as a broke startup Founder. No one presented me with an abundance of choices, I just took what I could get because I was constantly leveraged. Unfortunately, that runs a bit counter to the popular narrative we're hearing in startup culture, where we somehow have all the choices in the world and we're simply not ma...

Our "How it Works" slide is where we begin explaining the mechanics of our solution in a pitch deck presentation. It's notably different than the Solution Slide of a pitch deck which sometimes confuses startup founders. We'll explain how the best pitch decks walk venture capitalists and angel investors step-by-step through their products.

How Potential Investors view the How it Works Slide

When raising money from potential investors, a successful pitch deck focuses on the needs of the audience first (read: investors). Every word in our pitch deck should be tailored to the 2 unique selling point goals they have.

Investor: "Do I understand how it works?"

In our solution slide, we explained what the product does. Now we have to begin convincing in...

The Funding Slide in our investor pitch deck summarizes our investment opportunity, including our use of funds, investment amount, and what we want to accomplish in our next stage. Potential investors, from angel investors, to venture capitalists, will zero in on this part of the slide deck to determine their initial investment.

Typically this is the final slide of an investor pitch deck, where we transition from pitching investors to making the big ask.

What do Potential Investors want to know?

Our investor deck should cover three critical factors when we get our "ask slide":

"How much capital? What Round of capital?"

Many investors, from venture capitalists to angel investors, align their investments based on the amount of capital a startup co...

Marketing for a crowdfunding campaign isn’t exactly the same as traditional marketing.

Let’s say that marketing is cake. Traditional marketing is a standard cake you’d whip up from a box or simple recipe. Crowdfunding marketing campaigns, however, are their own kind of cake. They’re like a souffle. A souffle — when done right — delivers a kind of magical combination of lightness and richness. When done wrong, it just falls into a heap.

Souffles and crowdfunding can yield incredible results. But in both cases, you have to take a more nuanced approach to reach that outcome.

Baking Up Crowdfunding Success

A crowdfunding marketing campaign is different from traditional advertising efforts, and it needs to hit a specific sweet spot. The tone ca...

Founder: The person who started the company. It is someone who has an idea and creates a business around that idea. They are the “Founding Father” or "Founding Mother" of the company, as the company would have never existed without them creating it. They are often focused on vision and big picture of the start up. They are generally the business owner, or at least one of them.

CEO: The head of the company, responsible for overseeing all aspects of it and making sure everything runs smoothly. The Chief Executive Officer runs it as a business, sets the long term plans and drives towards success. They also communicate directly to the board of directors. A Professional CEO will have the distinction of having risen through the ranks, and brings ...

What are Microloans?

Microloans are small loans that businesses that can't access traditional loans or other finance options. It could be because they don't have any — or great — credit. It could be because their businesses aren't very established yet or they're locked out of the traditional financing options for a variety of reasons. They're usually short-term loans, with low-interest rates.

Microloans started in Bangladesh with economist Muhammad Yunus in the early 1980s. It was primarily to help people in developing countries who didn't have access to traditional small business loans. Access to a microloan program gave them funding to start businesses and raise themselves out of poverty. There are now a huge range of microlending options w...

Like doing any deal, getting good angel investment deal structures is all about creating a win-win situation. Once you get an angel investor interested in your deal and agree on basic terms, you will need to discuss the best way to structure the investment.

This is a critical juncture in every startup’s evolution, as the provisions you agree on here will be carried with you for the life of the angel investment deal.

How to get angel investor Agreements with win-win deal structures

1. Be Cautiously Optimistic

At this stage, many entrepreneurs get so excited that they forget to dot the i’s and cross the t’s on their deal.

Make sure you thoroughly review any term sheet with a lawyer to make sure you completely understand the deal structure an...

What if our current startup success can't be repeated?

As Founders, we're ridiculous optimists, and for all of our "vision" we're pretty damned short-sighted. In our minds, if things are going this good now, it stands to reason that they will go even better in the future. It has to, right? We'll be better connected, more experienced, and way more prepared than we were for our current startups!

But that's not how startups work. The startup game isn't chess, where the conditions are similar and we're just more experienced. It's more like blackjack, where we know a little bit more, but the variability changes on every hand.

Don't Know What You Got, Til It's Gone

(If you sang this last headline in a Cinderella power-ballad, you are my people). ...