You’ll want to consider whether an initial equity issuance or stock options represents the appropriate incentive for an individual. The founding group should objectively assess each individual’s expected contribution and allocate founders’ shares on that basis (rather than spread equally across the group). Founders are usually the one or two individuals who are the driving force behind the startup, but may be a larger group (usually less than six). Foundersįounders are the initial group of individuals who conceived the idea and/or the first individuals recruited to get the business off the ground. These shares are referred to as founders’ shares. The founders of a startup generally purchase shares at the time of incorporating the company at a nominal price per share, such as $0.0001 per share, paid in cash, since at that time the company will have no operating history, few assets and thus little value. There are a few terms you will hear when discussing the set-up of the capitalization structure for your business and here is what they mean: Initial equity Tech startup founders strive for and investors appreciate a “clean” capital structure for ventures that will eventually seek outside investment.
When setting up or changing your tech startup’s capital structure, hire legal counsel experienced in setting up early-stage ventures and working on investment rounds.
Ensure you understand key relevant terms (e.g.,founders shares, initial equity issuance).Tech startups need to set up a “clean” capital structure from the beginning to attract potential investors, who will seek certain criteria.
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