Emerging Enterprise Center Blog - Commentary and Analysis For Entrepreneurs and Startups

First, a disclaimer: The client referred to below has read and signed off on this post. Now to the matter at hand: We were retained by an investor leading a $1mm seed preferred type financing for a start-up digital media company. The investor will end up with around 20% of the company after close. The company is pretty hot and the entrepreneur is already a one time winner in the space. The entrepreneur is a huge Fred Wilson fan and can’t imagine how costs could exceed $5K for this deal. In an effort to control costs, once the investment got... More

The angel investment debate rages on. I don’t know if rages is quite the word, but it continues. Many people have written about it including Brad Feld, who cites a number of others. I have written about it.  Mostly the debate revolves around who is and who is not a “good” angel investor. If the disputants are to be believed, a VC who just plopped $250K into your business to get an option on leading the next round is a “bad” seed investor but a VC who thinks like an angel investor and will give you some bandwidth is a “good” seed investor. I... More

 There is a lot of stuff in the blogosphere on the subject of the impending crash in seed investments and its corollary: that all this seed investing that is going on is somehow bad for entrepreneurs and investors and, by extension, the entire ecosystem. The various arguments are nicely laid out in a couple of posts by Andy Payne first “Coming Seed Fund Crash” and second “More on the ‘Seed Fund Crash’”. There is also a nice summary of the discussion at Cloud Avenue. Finally, Paul Kedrowsky and Chris Dixon have weighed in. The thing that strikes me about this conversation is that... More

Despite all the talk in the legal world about forms, and there is a lot of it, and despite the great success of the NVCA Series A documents project originally inspired by Sarah Reed, it took Fred Wilson’s recent blog post to create some interesting back and forth commentary on seed forms. Good forms are a wonderful thing. They can save tons of time and cost – each of which is in short supply for early stage entrepreneurs. Now, not every shoe fits every foot, and sometimes work is needed and is appropriate. At the risk of stating the obvious,... More

Seed and angel investments often come in the form of convertible notes – often notes that are convertible into some future round of equity investment at a discount to the valuation at the time of conversion. They have other terms as well such as interest rates, maturity dates, prepayment premiums in the event of an early sale of the business, waiver of certain debtor protections etc. These all may form the focus of future posts. I want to focus on what, if any, influence seed/angel investors who invest in these types of notes want (or get) concerning the terms of... More

I ran into an entrepreneur that I know pretty well at a social gathering. As is often the case, the conversation turned to capital raising. It turns out that he has raised several hundred thousand dollars of "growth" capital through a loan from brokerage house. As I understand it the entrepreneur went to a number of wealth individuals and convinced them to open trading accounts at the brokerage house and use the securities in the account to collateralize/guarantee a loan to the entrepreneur’s company (in effect a margin loan with the proceeds being used to fund the business). In consideration... More