Forums: Discussions for entrepreneurs and small business.

I am raising a small "friends and family round" and am torn as to whether to issue the investors common or preferred stock.  I expect to raise a bigger angel round if my concept is proved in the next 12 months, which will undoubtedly be preferred stock.  Any views?


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Sam Simon

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Well, I think Robert is right. If you do a small family round, it’s probably not worth it bothering to issue another class of shares such as Preferred A. As a matter of fact, it might further complicate your subsequent angle round, as they will definitely expect to receive preferred shares in return for their investment and thus you would likely have to issue yet another class of shares such as Preferred B.

If it’s just family and friends, it might be a smart move to issue common stock as it will make your own shareholding look less dominant in the eyes of potential investors. Moreover, since common stockholders usually get to vote on most company-related matters, you might shore up some additional voting power.

I hope this helps.



Mark



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Jackson Steiner
http://www.JacksonSteiner.com

Advanced Document Design for entrepreneurs, intermediaries, and the financial services industry.
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