The Misleading Attractiveness of S Corp Elections
Gust Blog
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4d ago
Investors prefer investing in Delaware C Corps which don’t allow founders to take personal tax losses for early expenses. Many founders are tempted to make an S-Corp election which allows a pass-through tax treatment similar to an LLC. While that could be a small short term gain in the early days, it can jeopardize a much larger tax free gain in the future ($10M+) . Most typical startups should avoid tinkering with their tax treatment; if it really seems important it is best to tap in a professional ..read more
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Understand the Funding Process and What Investors Want to See
Gust Blog
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2w ago
Some very small businesses—particularly those that offer the professional or personal services of a single individual—can be launched and grown with few or no resources other than human time and talent. But most businesses require some money before they can be started—to pay for software, buy tools or equipment, lease office space, or pay for the time worked by employees or outside contractors. Since most entrepreneurs are not independently wealthy, and since, as we saw in Chapter 13, banks won’t lend money to startups, it is often necessary to raise funds by exchanging an ownership interest i ..read more
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Don’t Panic! Your pre-revenue startup doesn’t owe $85,165 in Delaware Franchise Taxes
Gust Blog
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1M ago
It’s Delaware Franchise Tax Season! If you’re incorporated in Delaware and you’re staring at a terrifying notice with the number $85,165.00 on it, don’t panic. It’s very likely that your startup only owes $400. Read on for details on how to refigure your bill, easily file your report, and reduce your stress in future years ..read more
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Startup Strategies: The Strategic and Financial Significance of Intellectual Property
Gust Blog
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1M ago
Stephanie M Smith & Milton Springut ..read more
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Using Copyrighted Works in AI Training Data May Infringe Even if the AI Output Doesn’t
Gust Blog
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2M ago
Thomson Reuters Enterprise Centre GmbH v. Ross Intelligence Inc., decided in the federal District Court in Delaware on September 25, 2023, asks the question whether a company can train its AI on a competitor’s copyrighted works in order to help it compete? What if the AI output does not infringe the competitor’s copyrights? The answer so far is “maybe,” but that the answer is not “no” adds to the hazards of using copyrighted works as training data. Thomson Reuters v. Ross is a trial court decision denying summary judgment on the points at issue, and is therefore not a definitive declaration of ..read more
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Why Every Angel Needs to Invest in at Least 20 Companies
Gust Blog
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3M ago
When people hear about the 25 percent annualized rate of return that active angel investors obtain, they assume that there must be some secret involved—perhaps an old-boy network of hidden links that connects angels to brilliant entrepreneurs and tech innovators or a mathematical algorithm developed by some genius at MIT that helps angels identify and invest in the businesses that are guaranteed to be the Apples, Googles, and Facebooks of tomorrow. In reality, there are few secrets about the investment world, including the world of startups. But there are some little-known truths that serious ..read more
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Survive the Term Sheet Negotiation and Investor Due Diligence Part 1
Gust Blog
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4M ago
The principal roles of the lead investor was to negotiate the terms of an investment with the founder of the startup. In theory, the terms could be “here’s a million dollars to use; if the company becomes a big success, please give it back to us.” Unfortunately, that’s not the way it works. When a corporation is established, its ownership is divided into pieces called shares of common stock. That’s what you as a founder will have, which is why it’s also known as founders’ stock. There is a different kind of stock that investors can choose to purchase, called preferred stock. While the name mak ..read more
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Survive the Term Sheet Negotiation and Investor Due Diligence Part 2
Gust Blog
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4M ago
Over the past 20 years, the typical structure for seed/angel deals has shifted from common stock (in the mid-1990s) to convertible notes (late 1990s through early 2000s) to full Series A convertible preferred (mid-2000s) to convertible notes with a cap (late 2000s) to Series Seed convertible preferred or similar (present). This shows the increasing sophistication of investors and founders, the increasing experience and publicity surrounding the advantages/disadvantages of various options, and the increasing availability of model documents and online generators for different choices ..read more
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7 Tips On Written Communications To Startup Investors
Gust Blog
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4M ago
Even in this age of videos and text messages, the quickest way to kill your startup dream with investors, business partners, or even customers, is embarrassingly poor writing. Being very visible in the startup community, I still get an amazing number of badly written emails, rambling executive summaries, and business plans with one paragraph per chapter. In the competitive realm of business, you only get one chance to make a great first impression. You have to be able to communicate effectively in all the common forms, including business writing, as well as talking, presenting, and producing v ..read more
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How a Great Brand Story Can Help You Nail Your Pitch Deck
Gust Blog
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5M ago
Pitch decks for demo day. Goes without saying that raising capital is a critical moment for any startup. It’s your first impression that can essentially make or break (figuratively) the opportunity at hand. Branding is what sets one business apart from another. It's what makes Apple a luxury tech brand and Nike a reputable sports brand. Understanding how to create an effective branding strategy can help your startup stand out on your big day ..read more
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