Monthly ArchivesOctober 2018

Founder Dilution: What It Is and How It Affects Founder Equity image


As a startup that is raising capital, the amount you own today of your company will decline depending on how much capital you raise, how many times you raise, your pre-money valuations and any investor preferences along the way. This is known as dilution and being able to map this out from day one and in multiple scenarios is important so that, as a founder you can protect your equity (possibly). As more funding rounds occur, early investors will also become diluted – not just the initial founders. There are key dilution definitions each founder needs to fully understand.   Keep in mind that there may not be anything you can do to prevent yourself from being diluted over time.  That ...

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There Have Never Been So Many Bonds That Are Almost Junk image

That was the name of a recent article that appeared in the Wall Street Journal.  The amount of BBB rated bonds, the lowest investment grade rating before junk status, has been growing as a % of the overall bond market. As you can see from the charts above, overall value of US corporate debt has grown incredibly since the financial crisis as low interest rates enticed a borrowing binge. The next downturn could be more painful than usual for creditors, with knock-on effects for shareholders.  Credit markets send two classic signals: The first shows excessive risk taking, when companies pay very little above Treasury bonds—as in the late 1990s and 2007, and again today. Furthermore, the scale of the debt at risk ...

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September 2018 Update image

Monthly Recap It was a very busy month, although it was overshadowed with sexual assault claims and hearing on Judge Kavanaugh and whether or not he should serve a lifetime appointment on the Supreme Court. To recap, here are just some of the noteworthy events and stories from September: The Federal reserve raised interest rates to between 2 - 2.25% and is expected to raise them again when they meet in December. Although, Fed President Bullard thinks the Fed shouldn't raise rates right now. Meanwhile, Turkey rises interest rates to 24% in a dramatic bid to control rocketing inflation and prevent a currency crisis. Goodbye, NAFTA. Hello, ‘USMCA.’ The deal has a new name, new rules for cars and trucks, and labor and ...

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