Founders: Before signing that term sheet, know this. Investors often introduce what’s known as the “option pool shuffle” to require large option pools, diluting founder shares more than investor shares and decreasing the overall value founders retain on exit. This subtle but powerful move can have serious effects on your exit earnings and long-term stake in your company.

Buying a Business? Use a Hold Back to Reduce Risk
A hold back lets you withhold part of the purchase price until the business proves it meets expectations helping protect you from unexpected issues after closing.

Campaign season is here, but fund managers—beware! Before you support your favorite candidate, make sure you’re staying compliant with Section 206 of the Investment Advisers Act, also known as Pay to Play regulations. If you manage funds tied to government or municipal entities, like pension funds or university endowments, your political contributions could lead to restrictions on key decisions.

Avoid costly pitfalls by learning useful strategies for successfully buying or selling a business. We’ll break down critical aspects such as due diligence, purchase agreements, and financing strategies to help you confidently navigate the complex world of mergers and acquisitions.

Crowdfunding founders, take note! You don’t want hundreds or thousands of individual investors cluttering your cap table. The SEC’s Form C gives you the option to raise funds through a Special Purpose Vehicle (SPV), so only the SPV appears on your cap table, simplifying things for your business.

When it comes to repurchase rights in VC firms, the key is fairness. If you’re granting the company the option to buy out a departing partner’s equity, make sure the valuation is based on fair market value to protect all parties involved. Remember, one day, you could be the one leaving!

When reviewing restricted stock agreements, it’s important to avoid unnecessary obligations that could backfire later. A common mistake is writing an obligation for the company to buy back unvested shares at par value, which is often so minimal it’s not worth the hassle.

ESOP vs. EIP: Don’t Mix Them Up
Founders often confuse ESOPs and EIPs. ESOPs are complex and costly best for mature companies. EIPs are startup-friendly, offering affordable equity options. Choosing the wrong one can cost you.

Key Elements Every Founder’s Agreement Needs
Don’t skip the basics include restricted equity terms, defined founder roles, and deadlock resolution. A solid Founder’s Agreement protects your startup from disputes and founder fallout.