funding, angel-investorsI’m raising a seed round.
I’ve gone through a lot of Business Angel Clubs, and might end up with a cap table with a hundred names of inidivduals with small tickets.
I’m trying to convince those 100 guys to group in a holding, in order to have just one big name on the cap table.
What are the pros and cons ?
Lots of people warned me about a big cap table, but no concrete argument was advanced as to why that’s such a deal breaker.
Thanks !
PS : In your answer please specify if you’re an entrepreneur or a VC
(Entrepreneur)
If you can get them into a nominee structure it would benefit you greatly.
In my last round, we had 15ish people on the cap table and when signing paperwork for the next round of investment we had to get signatures from all of them. As you can imagine, many angel investors enjoy their holidays and so I was emailing and faxing copies of the paperwork around the world trying to get everything together before the transfer deadline. It was not easy and strained a number of investor relationships temporarily.
It also means that I had to offer pre-emption rights to every named individual on the cap table and they each got to bring their lawyers to the table during negotiations… which was awful and lengthy. I am unsure how nominee structures with with regards to pre-emption though…
Other companies around us had a nominee structure, meaning they only needed one signature and thankfully the nominee was someone easily accessible. Made life much easier.
Sometimes when VCs see huge cap tables then they see a lot of paperwork and delays and have to weigh up if it is worth their while and the cost of the extra legals dealing with it all.
All content is licensed under CC BY-SA 3.0.