How should we price common shares after a preferred share round?

Q: How should we price common shares after a preferred share round?

A: It is sometimes necessary to establish a price for the common shares of a private company when the most recently completed financing round involved the sale of preferred stock. A price may be needed for a subsequent sale of commons, in which case negotiations and the market will ultimately set the deal price, or more commonly for grants under an ESOP, where the plan documents and tax laws may make it essential that the strike price be “fair market value” on the date of grant. Continue reading »

How does a private company with no existing equity plan compensate advisory board members?

Q: How does a private company with no equity plan in place compensate advisory board members based on performance? 

Barry Reiter

A: Well-constituted and operated advisory boards can add great value. Members may be willing to serve as advisors when they would not wish to accept director liability, or the company principals may not be willing to share information or control.

The company can institute a Continue reading »

How do I do a valuation on my software company when there’s no revenue?

Q: How do I do a valuation on my software company, which was launched in March 2010, when there’s no revenue (or hard-to-project revenue)? Continue reading »