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

I am coming back to one of my personal bugbears. Clients seem to have a positive desire to express option grants in terms of a percentage of the company, as in "You will receive options to purchase 5% shares of Common Stock of the Company…" The problem is 5% of what? As of when? Usually clients resort the percentage expression precisely because there is some ambiguity in the cap table. This ambiguity is usually around some new money coming in. For example, is it to be 5% before or after the bridge note is converted? Before or after the next... More

One thing that I find many entrepreneurs (particularly first time entrepreneurs) struggle with is the distinction between options and restricted stock and why one would use restricted stock instead of options.  See also the following link:  Stock Options and Restricted Stock. I think it is fair to say that most, perhaps all, entrepreneurs have heard of options.  But, just in case, options are contractual rights to purchase shares of stock (usually common stock) at a fixed price.  In the employment context, options typically vest over time.  For example, four year vesting is a common provision in a venture financed company. ... More