Initially, startup companies are often funded by the founding team using their own personal resources and that of their family and friends. That’s where private share offerings come in.
Growing Beyond the Seed Stage
Once things start get bigger, other sources of funding will likely be required in order to advance from the seed and pre-seed stage to much larger share offerings which could be offered to institutions like venture capital firms.
Components to Offerings
There are a few components to offerings like, subscription agreements, term sheets, and shareholders agreements, etc, which are all part of the offering
Founders
The founder’s will want to give up as little as possible in terms of the percentage of common share ownership in order to obtain the capital they need in order to progress their company to the next stage of development be.
Investors
An investor is looking to maximize their return on capital without exposing their capital to undue risk plan.
Reaching a Deal
Ideally a deal is reached which is fair to all parties based on the estimated value of the company at its various stages of development.
This is driven by the costs incurred by the company in order to continue its growth as compared to the future earnings potential of the company it.