Choosing the right lawyer for your startup can be overwhelming, given the important role that relationship will play in the evolution of your company. However, finding the right fit at the earliest stages can save you lots of pain (and cost) down the road. Accordingly, I thought it would be helpful to share my observations on how to optimize the selection process and ensure a strong long-term relationship with your lawyer.

While all of the below considerations are obviously important, in my experience, individual founders put different weight on each
Continue Reading How to Choose Your Startup Lawyer

Although entrepreneurs and venture investors typically drive the negotiation of the term sheet for a venture financing, once the term sheet is executed, the commercial parties (especially those who have not been through the process many times) often feel sidelined in the ensuing process to close and uncomfortable with their lack of visibility into and control over the timeline. Accordingly, I thought it would be helpful to provide a high-level overview of a standard venture financing timeline.
Continue Reading How Long Should it Take to Close my Venture Financing?

By Tyler Hollenbeck and Cisco Palao-Ricketts

Although there a number of web resources regarding the distinctions between “incentive stock options” (ISOs), which can only be granted to employees, and “non-statutory options” (NSOs)[1], which can be granted to employees, directors and consultants, these resources are often heavy with tax jargon that is difficult to understand.  To help entrepreneurs focus on what should be most important to them, we have put together the below quick reference guide[2].


A.  NSOs

  • At date

Continue Reading Understanding the differences between an ISO vs. NSO

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Tyler Hollenbeck

In an earlier post we defined the term “pre-money valuation” and explained how this valuation is used to calculate the price per share at which stock is sold in a VC financing.  Actually determining this “pre-money” or “pre-investment” valuation, though, is often one of the most fundamental terms for founders and investors to negotiate, as it effectively sets the relative percentage ownership levels of the two groups (assuming a fixed investment amount).

Despite this fundamental character, “calculating” an appropriate valuation (or even a range

Continue Reading Understanding VC Financings – Valuation

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Tyler Hollenbeck

In my earlier post regarding considerations when creating your option plan, I briefly referenced the tax advantages, from the recipients’ perspective, of “incentive stock options” (ISOs), which can only be granted to employees, relative to so-called “nonqualified options” (NQOs), which can be granted to employees or consultants.  Although there a number of web resources regarding the distinctions between ISOs and NQOs, these resources are often heavy with tax jargon and thus poorly understood.  Accordingly, we have put together the below quick reference guide, which is intended only as a high-level summary of the current US federal tax consequences.Continue Reading Incentive Stock Option Plans – ISOs vs. NQOs

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Tyler Hollenbeck

At formation, founders often ask us for recommendations regarding terms and structure of their companies’ incentive stock option plans.  When making these recommendations to new companies, I generally advise that founders choose relatively “standard” and “straight-forward” terms, which have the dual benefit of keeping legal costs in check at formation and signaling to potential investors going forward that the company’s “house is in order.”  Although individual circumstances may dictate deviation, below are the high-level recommendations that I typically give regarding equity incentive plan structure:Continue Reading Incentive Stock Option Plans – considerations when creating your first plan

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Tyler Hollenbeck

Although valuation is obviously the most critical variable in an exit event, the structure of the transaction can also have significant (and often surprising) effects on the consideration ultimately received by the sellers’ shareholders. Moreover, the buyer’s interests will generally be directly adverse to those of the seller with respect to deal structure. This is particularly true in deciding between an asset sale and a stock sale, where parties often adjust other elements of the deal (including valuation) in order to accommodate one side’s preferred structure. Accordingly, understanding the following three basic drivers of the asset versus stock sale question can significantly improve a founder’s negotiating position vis-à-vis potential purchasers.Continue Reading Selling your Startup: Asset vs. Stock Sale

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Michael Hutchings
( and
Tyler Hollenbeck (


Although signing and closing of merger agreements occasionally occur simultaneously in mergers between private companies, most acquisition transactions, particularly those involving public companies, include a pre-closing period following execution of the merger agreement. During that period, certain conditions must be satisfied in order to consummate the merger.

In such transactions, one of the most powerful and heavily negotiated closing conditions is the requirement that the target’s representations and warranties be accurate as of a certain date or dates. In both private and public company acquisitions, this closing condition generally requires that the target’s representations be accurate both when made and when “brought down” to the date of closing.

This so-called bring-down condition plays a vital role in allocating risk between the parties during the pre-closing period. However, the extent to which this risk is placed solely on the target depends largely on the use of materiality qualifications in the bring-down condition. Subtle, semantic variations in the materiality qualifier can result in substantive shifts in risk allocation. It is important for companies considering acquisition transactions to thoroughly understand the common variants of such materiality qualifiers, as well as their frequency in comparable transactions.Continue Reading Understanding the bring-down condition in public company mergers