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Down Rounds in Startup Funding: Navigating Valuation Challenges
In the dynamic world of startup financing, not every funding round represents an upward trajectory. While founders and investors alike prefer to see steadily increasing valuations, market realities sometimes necessitate a different path.
Startup Due Diligence: Essential Preparation for Funding and Growth
In the startup journey, few processes are as critical - or as intimidating - as due diligence. Whether you’re raising venture funding, preparing for acquisition, or negotiating a strategic partnership, how well you handle due diligence can directly affect your valuation, deal terms, and long-term growth trajectory.
Raising Money From Non-Accredited Investors: Expanding Your Funding Options
Traditional startup funding often relies on accredited angels and venture capitalists. But thanks to regulatory changes, startups can now raise capital from a much wider group - non-accredited investors. This shift opens up new possibilities for founders to access funding, turn customers into stakeholders, and build brand communities.
FAQs
Open allNot always. While acceleration is common, especially at the executive level, it must be specifically negotiated and documented in the equity agreement.
Yes. Founders, executives, and employees can all negotiate acceleration clauses, though terms often vary by role and seniority.
It ensures employees remain motivated and engaged after an acquisition, protecting company value and reducing turnover risk.
Single trigger accelerates vesting upon one event, such as an acquisition, while double trigger requires both an acquisition and a termination without cause.
No. Vesting schedules can also apply to contractors, advisors, and executives who receive equity compensation under the company’s equity incentive plan.
Yes. While time-based vesting is standard, many startups use performance-based or hybrid structures to align equity with specific goals or milestones.
A cliff ensures employees demonstrate commitment and cultural fit before receiving ownership. It also protects the company from granting equity to short-term hires.
The standard structure is a four-year schedule with a one-year cliff, followed by monthly or quarterly vesting for the remaining equity.
Ideally at incorporation. Waiting too long can create dilution challenges and complicate negotiations with investors.
An EIP can include stock options, restricted stock, RSUs, and other equity-based awards, giving flexibility to tailor compensation.
Yes. Even small teams benefit from setting aside equity early. Without one, you risk complications in hiring, fundraising, and future compliance.
Most early-stage startups set aside 10–20% of total equity, but the right size depends on your growth plan, hiring needs, and investor input.
Yes. A larger pool can dilute per-share value, which impacts how acquisition proceeds are distributed among shareholders and option holders.
Founders can negotiate for vesting acceleration, retention bonuses, or favorable conversion terms to ensure employees benefit from the deal.
Not always. Depending on the agreement, unvested options may continue vesting, accelerate, or be canceled and replaced with new grants.
Option pools may either remain under the existing plan with the same vesting schedules or be converted into the acquiring company’s plan under a conversion ratio.