Thinner Slices of an Extra-Large Pizza: Mathematical vs. Economic Dilution of Startup Equity

slice of pizzaBack from a hiatus, it’s time to venture forward once more.  I appreciated hearing from those who asked about upcoming posts.  Thanks in particular to the reader who reminded me that Part II of “Bored” of Directors Can Become Clash of Titans is still in the queue.

Let’s get right down to business: Dilution of founders’ and other early shareholders’ equity in startups is frequently a subject of intense interest and debate.  Expert commentators including David S. Rose have written plenty on the subject; in fact, while I was editing this piece, David published a new post here at Gust: How does equity dilution work for startups?  David’s earlier answer to a Quora question, together with an overview by Rincon Ventures’ Jim Andelman, prompted my renewed interest in the subject.

Read more

Antone Johnson , Founding Principal, Bottom Line Law Group
April 11th, 2014

How does equity dilution work for startups?

Equity dilution works when the same pie is divided among more people. The Founder of a company starts by owning all the shares representing ownership of the company. Over time, other people receive pieces of equity in exchange for work (employee stock options), money (seed, angel and venture investors), services (attorneys, directors, etc.) Read more

Team Member Competency Is Critical To Your Startup

Image via Amazon.com

Image via Amazon.com

Most people think that the Peter Principle (employee rises to his level of incompetence) only applies to large organizations. Let me assure you that it is also alive and well within startups. I see startup founders and managers who are stalled transplants from large organizations, as well as highly-capable technologists trying to start and run a business for the first time.

Forty years ago, in a satiric book named “The Peter Principle”, Dr. Laurence J. Peter first defined this phenomenon. The principle asserts that in a hierarchy, members are promoted so long as they work competently. Sooner or later they are promoted to a position at which they are no longer competent, and there they remain, unless they start or join a startup to get the next level. Read more

What is the best approach to get funding for my startup?

When you create a profile on Gust, you immediately get emailed a link for a free download of Bill Payne’s excellent book “The Definitive Guide to Raising Money from Angels”, which is an excellent overview of the whole process. Good luck!

*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *

I have an amazing idea for a web based start up which is yet untapped. How should I get started?

The challenge you face is that there are other amazing ideas out there. Actually, there are many, many, brilliant, wonderful, amazing ideas out there. So faced with all these amazing ideas, investors invariably choose the ones that have been reduced to practice, developed traction of some kind and proved that they are amazing businesses, not just ideas. Read more

A Founder’s First Key Decision Is The Business Name

Image via Startup Professionals

Image via Startup Professionals

First things first – your startup needs a name! This may seem a silly and frivolous task, but it may be the most important decision you make. The name of your business has a tremendous impact on how customers and investors view you, and in today’s small world, it’s a world-wide decision.

Please don’t send me any more business plans with TBD or NewCo in the title position. Right or wrong, the name you choose, or don’t choose, speaks volumes about your business savvy and understanding of the world you are about to enter. Here are some key things I look for in the name, with some expert help from Alex Frankel and others: Read more