Igor Bogicevic - All things you didn’t want to know


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Presentation held by Igor Bogicevic on topic "All things you didn’t want to know" at Startup Academy course in Belgrade. More details at startapakademija.com.

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Igor Bogicevic - All things you didn’t want to know

  1. 1. All Things You Didn’t Want to Know Igor Bogicevic, Seven Bridges Genomics, CTO/Founder igor.bogicevic@sbgenomics.com
  2. 2. Opening a Company• Youre not building a company, youre building product and business...• ... however you still need a legal framework to operate on market• Ill be covering US entities, or to be exact 2 entities - LLC and C Corp• LLC is much simpler and cheaper to setup, simple from tax standpoint, great for a small business• ... however it doesnt really allow for shareholders and classes of stock• If youre looking for "smart" (sophisticated angels and VCs) investment you will have to switch to C Corp (Delaware)• This also means you will need to have a board of directors and keep your finances in order
  3. 3. Structuring a company• I cant stress this enough...• DO IT BY THE BOOK• DO IT BY THE BOOK• Use template charter and bylaws• Hire a good lawyer, there are founder friendly firms
  4. 4. Stock Options and Classes• Several classes of stock options• Investors - Preferred stock options• Founders, Employees - Common stock options• Liquidation preference• Dividends - interest on investment• Minority shareholder rights• Again, hire a good lawyer
  5. 5. Mechanic of an Investment• Negotiations starts with the term sheet• Learn how to make a cap table - its simple at the beginning• Common way to structure investment is through trading stock options or convertible debt (or both)• Convertible debt became very popular recently (much simpler and cheaper)• Convertible debt can be with, or without cap• Investment is a long term partnership, both sides should happy and have the same incentive• Either do stock (+ part in convertible debt without or with cap), or convertible debt with cap• Its super important to align the interests, try to amortize dilution for minor shareholders (employees)• Investors dont invest in your idea, they invest in product and team• Yet again, hire a good lawyer
  6. 6. Vesting• Share options are good incentive for hiring talent• ... actually the only one if you dont have much money in the bank• Create employee share option pool that will last for 2 years• Vesting is a good mechanism to give employees incentive to stay with the company• Industry standard terms are 4 years vesting period, 1 year cliff and then 1/48 of vested stock each month• Do a founder vesting, smart investors will ask it anyways• Dont be defensive, but be smart - do accelerated vesting upon job termination• Again, align interests - you want stable team delivering a great product, structure option pool around that• Use template documents for stock options
  7. 7. Mechanics of Exit• Happy, happy, joy, joy• You can either IPO, or you can get acquired by other company• This is so-called "liquidity event"• Thats when you pay taxes• First step of acquisition is LOI (letter of intent)• Its still doesnt mean youre acquired, it only means the start of negotiations• Acquihires have become popular recently - not really success, especially for investors, minor-medium success for founders• Just in case you thought Ill forget to say, hire a good lawyer