Is it just me or does there seem to be a lot of investment activity going on? In the last week, I have traded emails saying “did you see this company just raised a huge new round?” or “those guys just raised a bigger round.” This includes Box.com raising $125 million, Docusign’s newest round growing to $55.7 million, and FreeMonee raising $34 million in a Series B financing. On top of that, I received an email today from PrivCo saying this could be the busiest IPO month since May. Of course, you read a new story every day about a new company getting a seed funding or angel investment, such as the new crowdfunding service Upstart.
Now, I know I’m not the only one who sees these emails or reads Techcrunch on a daily basis, so we all get to see this exciting news about new companies, growth, and company exits. Even with the economic downturn on all of our minds, I know this is great for these companies and the emerging company market overall.
With this increase in activity, no matter what stage a private company is in (entering the market with some seed financing, raising that B or C round, or thinking about their exit), it is never too early to get their equity organized.
Here are three questions all growing companies should ask themselves:
- Am I 100% sure the Excel spreadsheet that I use to track my equity is up-to-date and correct?
- Can I easily find the related documentation (stock certificates, plan agreements, etc.) for all of my equity information?
- Do I have accurate contact information for all of my stakeholders?
If the answer to any of those questions is “No,” then raising a new round of funding, communicating stock option plan information to employees, or future exit events (such as getting acquired or going public) become much more difficult.
How difficult could it get, you might wonder? Inaccurate data records could have your potential acquirer wondering what else may be wrong underneath the hood. Your employees won’t receive notices on time which may result in legal issues. And, that funding round you needed to grow may not go through on time.
There’s no time like the present to do an inventory of your equity records, move out of Excel for tracking and reporting, and bring your financial and legal teams together. Who knows … you might even be ready to consider moving to an equity administration system to ensure your information is easier to update and share.