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Today’s post highlights some of the key considerations to have in mind when finding startup advisors for your company.

Startup advisors can be an extremely valuable resource for early-stage companies. Typically advisors bring startup experience, a large network of entrepreneurs, investors and other types of advisors, and sound business advice for growing your company. In today’s post, we’ve highlighted some of the key considerations to have in mind when considering hiring advisors for your startup:

Are They the Right Fit?

Perhaps the most important consideration is finding a person that understands your business and goals and finding someone that has industry experience and contacts that you can leverage strategically for the benefit of your business. They should also be someone you trust and that you know will give you reliable advice. It also helps if you get along with and enjoy…

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Startup advisors


To protect against founders taking their equity and running, startups often have a repurchase option to buy back shares from the departing founder.

Most founders are concerned about making sure each of the co-founders are invested in the company. Founders often ask about protecting against a co-founder leaving the company, taking his or her equity, and sharing in the potential future upside value of the startup without continuing to work for that right. To protect against this, startups often have a “repurchase option” to buy back shares from the departing founder.

When Can the Company Exercise the Repurchase Option?

While terms can vary, the shares issued to the founders are often subject to a vesting schedule that requires the founder fulfill certain obligations—e.g. to stay with the company a period of time, achieve certain milestones, or any other creative requirements the founders agree on— in…

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Repurchase Option


Today’s post highlights cumulative voting in director elections and why it might make sense for your company.

When you form a company, there are several key decisions that you need to make upfront to make sure you protect your interests and position your company for long-term success. Sorting out the voting system for electing directors is one of those key decisions. Today’s post highlights cumulative voting in director elections and why it might make sense for your company.

What is Cumulative Voting?

Cumulative voting is a type of voting system that allows shareholders to vote their shares cumulatively, which is to say that the shareholders can vote all of their shares for a single director candidate. For context, in a “normal” voting system assuming one vote per share, each shareholder can vote only as many shares as they have…

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Cumulative Voting


Option pool size has considerable impact on valuation in startup financing, and ultimately it impacts the amount of dilution to founders’ shares.

Many startups ask us about reserving an option “pool.” The “option pool” is a reserve of authorized but unissued shares of stock that the founders intend to use to compensate future key employees and investors. There is no size of option pool that is right for every company, although you’ve probably read that a “standard” option pool is generally somewhere between 10-20%. Many founders aren’t terribly concerned with the exact size of the option pool, although we think they should be. The size of the option pool has a considerable impact on the valuation of a startup when it raises capital from investors and ultimately the amount of dilution to founders’ shares.

Pre-money Valuation and Option Pools

As we’ve discussed in our…

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The Delaware court held that board resignations need not be in writing because Delaware Code Section 141(b) is a permissive statute.

A recent Delaware court case discussed what type of action is necessary for directors to resign from a corporation’s board of directors. Ultimately, the court held that director resignations need not be in writing because Delaware Code Section 141(b) is a permissive statute.

 Summary of the Case

The CEO of Biolase, Inc, Federico Pignatelli, thought that Biolase’s board needed more experienced directors, and he asked some of the board members to resign so he could fill their positions with more seasoned directors. The board members resigned. But without Pignatelli’s knowledge, the directors he wished to replace had also aligned themselves with the new board members in order to try and replace Pignatelli as CEO. In an attempt to disrupt the new board…

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The LLC entity offers a ton of flexibility for its Members. But can LLC Members pay themselves a salary? Yes, if they elect to be taxed as Corp.

As we’ve discussed in previous posts, the limited liability company (LLC) entity offers a ton of flexibility when organizing the management and economic structure of the company. Because of this flexibility, the LLC has quickly become the most popular entity to form when seeking limited liability protection for new businesses. One question that often crops up is, “Can I pay myself a salary as the owner of a LLC?”

Can LLC Members Pay Themselves a Salary?

The short answer is: It depends on how the LLC is taxed.

LLC Taxed as a Partnership

For tax purposes, a LLC is by default a pass-through entity—i.e. any money that comes into the business will “pass-through” to the individual members of the company regardless of whether they receive…

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LLC Member Salary


This week's news roundup discusses Seattle startup Mindbloom, Microsoft reading email to help FBI build trade secret case, and Time Warner CEO's huge pay.

Former Microsoft Employee Arrested for Stealing Trade Secrets

A former Microsoft software architect, Alex A. Kibkalo, was arrested in Bellevue this week on federal charges cased on the allegation that he unlawfully passed proprietary information, including unreleased Windows 8 code, to an anonymous blogger. But Microsoft failed to maintain momentum as the victim in the case when it was criticized for the method by which it uncovered the crime it ultimately turned over to the FBI.  Microsoft was approached by a source who had been asked by the blogger to help interpret the misappropriated proprietary data, and the source disclosed that the blogger used a Microsoft account. Per the Microsoft terms of service, Microsoft decided it had the right to read the…

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Time Warner Golden Parachute


Any time an executive of a successful company decides to exit, investors fear that the successor executive will fail to maintain the company’s success.

I recently read a New York Times article that discussed investor reactions to a successful chief executive deciding to exit a company. The article discussed how Manchester United’s coach, Alex Ferguson, announced Wednesday that he will retire at the end of the season. As a result, Manchester United’s shares fell nearly five percent Wednesday morning. Today’s post explores the impact of Ferguson’s exit, as well as the general impact of exiting executives.

A Brief Background
Manchester United, the English soccer club, raised $232 million in its IPO last year. During the IPO process, there were serious concerns about the club’s financial projections once Ferguson retired. Many believed that the club’s success over the prior two decades was attributable in large part to…

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This post explores some operational issues you should consider during the due diligence phase of the purchase and sale of a business.

In today’s post we continue exploring the depths of the due diligence phase of purchasing a business. We’ve already discussed the financial issues and the legal issues, and today we’ll look at the operational issues surrounding due diligence. We’ve highlighted four important questions to answer regarding operational issues of a business you’re looking to purchase.

What products or services does the company offer?
It may seem like a no-brainer to most, but it is important to acquire an in-depth knowledge of the products or services of the company you’re purchasing. In many cases, the purchaser is well aware of the products or services because it is the products or services of the company that attracted the purchaser to the deal. The better…

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iVLG's weekly News Roundup provides business owners and entrepreneurs the latest news surrounding business and recent cases and legislation.

Mergers and Acquisitions

Avis Purchasing Zipcar for $500 Million
The Avis Budget Group announced Wednesday that it will purchase Zipcar for $500 million cash. The deal signals a new direction for Avis. The car rental industry has become more and more competitive with Hertz recently purchasing Dollar Thrifty, and several car rental companies jumping on the hourly rental bandwagon.

Avis is seeking to attract a younger, progressive market with its recent acquisition of Zipcar, as Zipcar members tend to be younger, more urban  individuals as opposed to the traditional business or tourist market that Avis currently targets. Zipcar currently has over 760,000 members in 20 metropolitan areas in the U.S., Canada, and Europe, many of which are located near college campuses. Avis offered…

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