A venture capitalist answers entrepreneurs' questions on funding, equity, compensation, patents and winding down a company.
Commenters link it as a practical reference for startup compensation, angel investing and convertible debt valuation caps.
H1-B Transfer to your startup? http://www.askthevc.com/blog/archives/2008/04/does-having-a-h.php
See one of the comments:
"I have a lot of experience with this, having done it several times myself. Proving the company is 'real' to the USCIS can be tricky, because they don't consider companies with cash but no revenue to be viable. Luckily it never usually gets to that stage of analysis for a simple H1B (although green cards are a whole different matter). Just make sure you have an office address,letterhead, phone numbers, a bank account and good lawyers. The USCIS will often pick up on little details that show the business is being run out of someones backyard.
The hardest part is in the early stages, prior to transferring the H1B visa, because technically the visa holder can have no involvement in the company i.e. cannot attend meetings or talk about the opportunity without violating their status.
One approach I used successfully was to get my accountant to create an LLC. The LLC held my shares in the new startup. My immigration attorney then applied for a part-time concurrent H1B to work for that LLC as a board member a couple of hours a week, in parallel with myexisting H1B visa, allowing me to be involved from day one (you can start work the moment the visa is filed). When the startup was funded, they then filed a H1B transfer for me. "
1) If monetizing is likely, start to monetize. Proving that you can at least start will help fundraising immensely, and it's a long road.
2) Fundraising is a 3-6 month long process. Start before you need it. Angels are hard to find (especially in a non-hub), so start networking now.
3) You're talking about raising multiple rounds. Common! Angel, seed, series A, series B, etc. etc. The first round investors get a better valuation for their dollar but will expect to get diluted in later rounds.
4) Original source may opt to not invest more in later rounds. They retain the (diluted) ownership that they bought and generally have no special cash out options. Oftentimes early funding is convertible debt (aka bridge loan). Any investor expects a pay-out really only in a liquidity event (IPO or acquisition). Most have a 3-7 year horizon.
In general, read:
http://paulgraham.com/startupfunding.html
http://venturehacks.com
http://www.askthevc.com/
Although not a book about becoming a VC or angel investor, Venture Deals by Brad Feld and Jason Mendelson of TechStars and Foundry Group does cover a lot about investments and common things you should understand (which is something useful to know if you're looking to get into the business).
Link: http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalist/dp/0470929820/ref=sr_1_1?ie=UTF8&qid=1324222127&sr=8-1
Although again this isn't a book on the subject, here is a blog post talking about it: http://www.askthevc.com/wp/archives/2007/01/how-to-become-a-venture-capitalist.html
Also: http://www.quora.com/How-do-you-become-a-venture-capitalist?q=how+to+become+a+vc
Sounds like a reasonable argument, but you're wrong. The only thing they want is your money. I put these guys in the same boat as the angel groups that charge you an upfront fee to make an application.
Here's Brad Feld's take:
http://www.askthevc.com/wp/archives/2011/08/are-people-who-claim-to-be-vc-brokers-legit.html?utm_source=feedburner&utm_medium=twitter&utm_campaign=Feed%3A+askthevc+%28Ask+the+VC%29
I think this happens more often than most people think. Brad Feld gives some good advice on how to handle these situations: http://www.askthevc.com/wp/archives/2008/06/ive-got-angels-who-want-to-invest-but-not-lead-now-what.html
Best of luck and let us know how it turns out!
I would think that as CTO he would have at least 1% equity [1]. If that's the case then he has increased his net worth by about $20m.
<also pure speculation>
[1] http://www.askthevc.com/wp/archives/2007/06/what-are-typical-compensation-numbers.html