"Video Lecture _ Lecture 18 Legal and Accounting Basics for Start”
In this blog post,
I'm going to discuss the main ideas presented in the 18th lecture "Legal
and Accounting Basics for Startups" by Kirsty Nathoo and Carolynn Levy.
Before starting I want to talk about the lecturers and give some information
about them. Kristy Nathoo is a partner and the CFO of Y Combinator. She is a
graduate of the University of Cambridge. Nathoo was an audit manager for
PriceWaterhouseCoopers from 2002-2010. In 2010, Paul Graham and Jessica
Livingston offered Kirsty to be their in-house accountant. In 2012, she was
promoted to be their CFO. Carolynn Levy is a Partner and General Counsel of 'Y
Combinator'. Ms. Levy was a Lawyer at Wilson Sonsini Goodrich and Rosati, where
she helped hundreds of startup with legal questions. She is a member of the
State Bar of California. Ms. Levy has a J.D. from the USF School of Law, and a
B.A. in Political Science from UCLA. So in this lecture, they present their
view about how to make investors and same time protect yourself and your
business. Thus, they think that in the process of creating the business that
appears to be somewhat simple start one should be sure that there is nothing
missed. First of all, while starting your business you should consider it as an
independent legitimate object. In this way, you may assure yourself from
personal responsibility and guarantee that all of the money you obtain applies
to the company. Therefore, the speaker Carolynn recommended to set the company
in plain and established law place which can be Delaware state. Next, she
analyzes a distribution of the impartiality. In her point of view, the
execution has way higher value than the concept. When ideas and concepts are
essential, no one’s going to buy one. Thus, the value is created when the whole
founder team works together to execute on an idea. Furthermore, she stated that
one needs to maintain the passion in order to
give an excessive amount of stock to the founder who is credited with
coming up with the idea for the company. As a rule of thumb in 'YC', the stock
distribution doesn’t have to be exactly equal. However, if it’s very excessive,
that’s a huge red flag for us. Consequently,
all this can be analyzed and explained if you’re looking forward and
acknowledging among the founder group that everything that happened before the
development of the company shouldn’t matter. So after this, you understand that
there is no matter whose thought it was, who coded it or who designed it, from
the day you set the company, that equals zero. After this lecture proceeded
with a point regarding buying stocks in own company. It might seem odd but
actually, you have to contract several papers to get standard, proper, and true
stock. Following ensures you to get the ability to buy a part of your own
company. In this case, you are an individual who gains a part of your own company.
Do you know how to raise the money for your business?
This process can be done in two methods:
- Priced _ when the price is set (series A or B).
- Non-Priced Rounds_ when the price is not set (seed round).
Kirsty Nathoo believes that while selling your company it
is essential to remember how much you will gain. It is important not to miss
control in priced rounds. Then they acknowledged an influence of the investors
and their terms. They are several cases which she mentioned:
1. Board Seat _ when an investor attempts to control all
directions.
2. Advisers _ in this process an investor might assist and
support you without special cases.
3. Pro-Rata Rights _ advantage to save your percentage
ownership in a company by buying more shares in the company in the future.
4. Information Rights _ situation when investors are being
informed about the updates.
They continue their lecture and brought another topic which
is about expenses of the company. This
sector has its own importance as it the situations were an individual and the
company demand to be highly precise and separated.
In conclusion, in
order to have fewer problems and a long way in making investors and protecting
your business you have to follow the points mentioned above by experts. Thus,
it is vital to have suitable insides near you as if you start your
startup/business prepared you will have more chances to succeed.
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