Mission Briefing

Sirix had two meetings in one cycle: a real-space coffee with an angel, and a holographic transmission with a VC three systems over. One deck, built for neither. By Friday he had zero checks and no idea why. This issue is about reading the room before you open your mouth.

Venture Odyssey

Departure: Two meetings, one deck

: One deck. Two rooms. Same grin.

From the Guide: Sirius. Bright, well traveled, and proud of its founders. Mostly harmless, occasionally funded.

I was in the docking bay of the Ceres relay, helmet under my arm, waiting on a shuttle slot running forty minutes late, which in shuttle terms is on time, when Sirix packed for the biggest week of his raise.

He had steel-silver skin with a brushed-metal matte, the way the rest of Sirius wears a tan, a thin scar along his jaw, and a small chip out of one ear he had never gotten fixed. The hologram on his wrist ran the same four lines it always ran: Companies 3. Exits 1. Failures 2. Currently: attempt 3. His leather jacket carried the record too, one embroidered patch per company, some faded, one scorched black at the edges. He had seen, in his own telling, every mistake a founder could make. A man who believes that stops checking for the ones he hasn't cataloged yet.

He had two meetings that week. First, real-space coffee with Ange, an angel who made her money hauling cargo across six systems and now wrote personal checks into people she believed in, usually before her cup was empty. She had told the friend who made the introduction it was a fifty-thousand-dollar yes, converted that morning at the interstellar exchange, before the Reticulan markets did whatever they do on Thursdays. Second, a holographic transmission with Reti, a fund partner based in the Reticulum cluster's orbital exchange, known for closing fast and for smiling exactly as wide at yes as at no. That one had taken three trade-net pings to land.

He built one deck. Eighteen slides: market size, competitive landscape, unit economics, a three-cycle model he had spent a weekend defending to himself. A good deck, built for a room of analysts who would take it apart line by line for forty minutes, whether that room was a table or a light-field.

He did not build a second one. One exit behind him, he figured the story was the same in either room and that experience had earned him the right to stop customizing.

I watched him charge his tablet off the docking rail and slide the deck into his bag. Same deck. Same grin. He waved, and I went to find my shuttle.

Layover: The room he was actually in

: She didn't want his market size. She wanted him.

From the Guide: Interstellar angels. Decide fast, forget nothing, and judge a founder by the first forty-five seconds.

Ange picked a cafe on the concourse of Waystation Nine, the kind with actual gravity and actual tables. A cocktail napkin sat beside her cup with three questions in her handwriting: why this, why him, why now. Under her skin, a faint rose-gold shimmer that Sirix had learned, across enough real-space conversations, meant she had mostly decided before he sat down.

A waiter droid set down two cups, hers black, his a Sirian roast that tints itself amber whenever its drinker is nervous. His cup was amber before the droid had finished rolling away.

She asked how he'd gotten into the problem. He gave her forty-five seconds. Then, because the deck was open on his tablet and it felt like the professional thing to do, he pivoted to slide six: market size.

She nodded. He kept going. Slide nine, competitive landscape, four logos and a two-by-two. She interrupted once, to ask what happened to him if this worked. He said the market was large enough for three winners, which was an answer to a different question. Slide eleven, the model, this cycle's burn against next cycle's revenue. Her pen stayed capped. Lines two and three of the napkin stayed blank.

Somewhere around slide twelve the shimmer dimmed, a small private eclipse, and she turned his tablet face down with one finger.

"I don't need your market size," she said. "I need to know why you. You gave me forty-five seconds on that and twenty minutes on a spreadsheet I could build in an afternoon. I'm not an investment committee. I'm one person deciding whether I believe in you enough to hand over fifty thousand dollars I earned hauling cargo."

The roast in his cup went from amber to the color of a warning light. At the next table a couple on a first date watched a founder lose a room in real time and ordered dessert, which is what a concourse does.

Sirix flipped back to the mission slide, but the room had already changed shape. She did write the check, three cycles later, after two more coffees with no tablet anywhere near the table. The deck cost him three cycles he did not have, mid-raise, with a lead waiting on a commitment letter and a deadline that does not move for anyone's learning curve, attempt three or not.

He spent the two cycles between meetings in a rented transmission booth on the concourse, the kind that bills by the light-second, rehearsing for an empty room. The billing is why he rehearsed fast and never once slowly enough to hear himself.

The transmission with Reti opened at the end of the second cycle, and Sirix, still stinging, overcorrected. He opened with the story: why he started, what he believed about the market in the long run, the mission language that had finally landed with Ange. Reti's projection listened, half a second behind the man speaking, which is simply the speed of light doing its job over three systems. Crimson, lacquered, immaculate in a dark suit, he sat behind an open briefcase of term sheets, each with a tiny red flag, the way other people keep a plant on their desk.

Twelve minutes in, he asked one question. "What's your burn multiple against net new ARR this quarter?"

Sirix did not have the number cold. After the coffee he had filed the model under things that kill the room, and now he sat across a projected light-field where the model was the only thing in the room. He pulled up slide eleven, the slide that had lost Ange, and talked through numbers he had never rehearsed defending live. Reti asked a second question before the first had finished landing. "And payback by cohort?" Sirix did not have that one either.

Reti's questions got shorter and more specific. The smile did not move, because a smile projected across three systems does not flicker, it only lags. That is not rudeness. That is a fund running real diligence and getting less back than it expected. The transmission ended on time, politely, with the sentence every founder in every system learns to dread: "We'll circle back once we've had a chance to discuss internally."

They did not circle back.

Arrival: Reading the room before you open your mouth

: Same information. Different order. Different depth.

From the Guide: Half a light-second of delay has ended more pitches than any competitor.

Two cycles later Sirix found me at the same docking-bay cafe where I had watched him pack, and asked what he had done wrong. He was not looking for sympathy. From where he sat, he had shown both rooms the same honest company.

"You've closed rounds before," I said. "That's exactly the problem. You already knew how to do this, so you stopped asking which room you were in. Ange never met your market size. Reti never met you. He met a transmission of you running the wrong deck."

His sardonic half-smile did not fully leave. That was its own kind of answer.

Here is what actually happened that week. Sirix met two different kinds of money and treated them as one. Friends and family, and their close cousin the angel, buy you. The decision is made on belief in the founder and the mission, made fast, on instinct, by one person spending money they earned themselves.

Institutional money buys something else: traction, and the structure holding it up. The decision is made slowly, by a process, on behalf of someone else's money, and it survives or dies on whether the numbers hold under a stranger's scrutiny, however far away that stranger's smile is being projected from.

Same founder. Same company. Same eighteen slides. What changed was which slide came first, how long it stayed up, and how much of the pitch was Sirix talking about himself versus Sirix defending a spreadsheet to a light-field.

Think of it like two job interviews in the same week, one at a family friend's small business and one at a firm with a formal panel. You would not read the same three-page cover letter aloud in both. In one, they already trust you and want to hear you talk about yourself. In the other, nobody has decided anything yet, and your job is to survive their process, not charm it.

Sirix's mistake was not the deck. Founders build one deck all the time, it is efficient and usually fine. His mistake was letting experience stand in for attention. Sixty seconds before you open your mouth, work out which room you are in.

Sirix walked into his next meeting with two openings for the same eighteen slides. The counter on his wrist still read attempt 3. He said it was a counter, not a verdict.

The Blueprint

From the Guide: Before docking, find out whose money it is. Everything else is navigation.

1. Name the layer before you dock. Friends and family, angel, or institutional: whose money is it, and who decides? Done looks like: one sentence, said out loud, before you open the channel.

2. Reorder the same deck for each room. For an angel or friends and family, lead with you: why this problem, why you, what happens if it works, zero slides in the first two minutes. For an institution, lead with your numbers cold: burn multiple, unit economics, cap table shape. Done looks like: two opening sequences for the same deck, written down before you walk in.

3. Score every conversation before the next one. Feel, pull, depth, one to five each, in a single line, inside the same cycle. Low depth on an angel call or low pull on an institutional one is a mismatch, not a bad investor. Done looks like: a log line you wrote today, not a memory you rely on next week.

Free resource: The Layer Navigator. Five questions, and it tells you which layer of money you are actually docking with. See below.

The Free Resource

The Layer Navigator. Five questions, and it tells you which layer of money you are actually docking with, what wins it, and a read built around what you are building. Runs in the browser, nothing to download.

Open The Layer Navigator.

Curious Corner

Three signals picked up from closer to home this cycle.

Mexzungu x Investors: The same room, seen from Ange's side of the table. If you write checks, this is the second opinion before you wire, so the founder across from you gets read properly instead of fast.

Board Composition Model: Every seat you give away is a vote you lose. Model your board before you sign, which is also a preview of next issue.

Outlaw Chronicles #9, Your co-founder owns half your company: Last cycle's story. Before you decide which room you are in, make sure the cap table you are pitching from still holds up.

The Question

Think back to the first two minutes of your last investor meeting, the moment you felt the room shift and kept talking anyway. What did you notice, and what would you open with if you could send that transmission again? Hit reply, I read every one.

Writing this from Barcelona, on a rock that still insists it is the center of something. Next issue: the term sheet clause that quietly decides who controls your board, and why nobody reads it until the vote they lose. Now go chart something the maps haven't caught up with yet. Pepe

The Outlaw Chronicles is for education only. Nothing here is legal advice. For the real thing, you know where to find me.

Mission Briefing

Alfi and Andy started the company on the same day, from the same table, with the same conviction. They split it 50/50 because they were equal partners and that felt right. There was no vesting schedule. There was no buyback clause. Andy left in month nine. By month forty-eight, he owned 50% of a company he had not touched in three years, and Alfi needed his signature on a term sheet she had spent eighteen months building toward. This issue is about what happens when the equity split outlives the partnership.

Venture Odyssey

Departure: Equal partners, equal shares

: Fifty-fifty, no vesting, no buyback

Alfi and Andy had met at a hackathon. Alfi was building the product. Andy was building the pitch. They worked for thirty-six hours straight, came second, and decided that second place at a hackathon was a reasonable origin story for a company that was going to do something real.

They incorporated two weeks later. Alfi carries a tablet everywhere, and the tablet that day showed a simple document: two founders, equal contribution, equal ownership. 50/50. They had a conversation about it that lasted maybe twenty minutes, which is the amount of time most co-founding equity conversations last. Equal felt fair. Equal felt clean. Equal felt like the kind of thing friends did when they trusted each other.

There was no vesting schedule because neither of them knew that vesting schedules were a thing co-founders did. They knew employees vested. They did not know founders vested. Nobody had explained it, and they did not ask, because there was a company to build.

There was no buyback clause because they were not planning on buying anything back. They were planning on building something together for a long time.

Andy had a purple-tinted quality to his presence, from Andromeda, a particular kind of confidence that came from having been through one round of something before and believing he understood how things worked. He was good at the external work. The pitch. The investor meetings. The partnership conversations. He was less good at, and less interested in, the operational grind that came after the pitch and before the next milestone. This did not emerge immediately. It emerged slowly.

Month four: Andy was leading the conversations with potential customers and disappearing for two or three days at a time to "think about strategy." Alfi noticed and did not say anything because they were still in the phase where everything was fragile and direct conversations felt like too much.

Month seven: Andy started an MBA program on the side. He mentioned it at the end of a Monday meeting. Alfi said congratulations and meant it and spent the following week understanding what an MBA program actually required of its students' time.

Month nine: Andy asked for a conversation. He said he had decided to focus on the MBA full-time. He said he still believed in the company. He said he wanted to stay involved at an advisory level. He said he was not giving up his equity because he had built the original pitch and many of the customer relationships and he believed his contribution warranted keeping his shares.

He had 50% of the company. He had worked nine of what would become forty-eight months. He had signed no vesting schedule. He had signed no buyback clause.

He was not wrong about the contribution. He was also not there.

Layover: The signature that was not available

: He can hold this up indefinitely

Alfi built the next thirty-nine months alone, with a team she hired and a product she shipped and a revenue number that eventually attracted a Series A lead investor.

Perry's term sheet arrived and it was everything she had been working toward. $4.5M. Fair valuation. Clean terms. A lead investor who made warm introductions before he wrote cheques. She was ready to close.

The term sheet required all shareholders holding more than 10% to sign the closing documents. There was one shareholder holding 50%. Andy.

She had not spoken to Andy in fourteen months. The last message she had from him was a congratulatory note when she announced the product launch on a business networking platform. She had thanked him. That was the end of the thread.

She sent him an email. He replied three days later. He said he was glad to hear the company was doing well. He said he would need to review the term sheet carefully before he signed anything. He said he had questions about the valuation and about how his position would look after the round.

She forwarded the email to her lawyer. Her lawyer read it and was quiet for a moment before he spoke.

"He can hold this up," the lawyer said.

"For how long?"

"Indefinitely, if he chooses to. There is no mechanism in your current documents that compels him to sign. He is a 50% shareholder with full legal standing to review, object to, negotiate over, and delay the closing of any transaction that affects the company's capitalization."

Alfi said: "He worked here for nine months."

"That is accurate. It is also not the legal question. The legal question is what the documents say."

The documents said 50/50. No vesting. No buyback. No drag-along that applied to this transaction. No mechanism that converted non-participation into consent.

She called me from Barcelona. I was in the office on a Tuesday afternoon. She explained the situation in the flat, precise way of someone who has been holding a difficult truth for long enough that all the emotion has dried out of it.

"I need to know what my options are," she said.

I walked her through them. They were not numerous. She could negotiate with Andy directly, which meant having a conversation she had been avoiding for over a year and potentially paying him to sign. She could pursue a legal claim that his refusal to sign was a breach of some implied duty, which was possible but slow and expensive and uncertain. She could restructure the transaction in a way that did not require his signature, which her lawyers were not confident was available given the current cap table architecture. Or she could wait.

She waited four months. During those four months, her lead investor's fund began its quarterly deployment cycle and began to look at other opportunities. The original term sheet expired. Perry called her and said he still wanted to invest but the valuation would need to be revised to reflect the additional time and market movement.

The revised term sheet was $500,000 lower on the valuation. Andy eventually signed, after two conversations, a legal letter, and an agreement to repurchase a portion of his shares at a modest premium to give him a clean exit.

"The total cost of the delay," her lawyer told her at close, "was about $1.2 million in reduced valuation plus legal fees and the management time you spent on this instead of building."

"For nine months of work," she said.

"For nine months of work and no vesting schedule," he said.

Arrival: The conversation you do not have in month one

: Vesting plus buyback plus drag-along

The 50/50 split is not the problem. Equal co-founders who contribute equally for the life of the company build extraordinary things. The problem is the absence of vesting, and the absence of a buyback clause, and the assumption that the equity represents a future relationship rather than a past one.

Founder vesting is the mechanism that ties equity to continued contribution. A standard four-year vest with a one-year cliff means that if a co-founder leaves in month nine, they leave with the equity they have earned rather than the equity they were promised for four years of contribution. A co-founder who leaves after nine months of a four-year vest with a one-year cliff has earned nothing yet. They leave with zero vested shares and potentially a right to a portion of their unvested shares through a buyback at cost. The company gets the shares back. The cap table reflects reality.

None of this requires malice or anticipation. It requires the conversation in month one that feels unnecessary because everything is going well, and is easiest to have precisely because everything is going well.

Think of it like a marriage with a prenuptial agreement. The prenuptial agreement is not a statement that you expect the marriage to fail. It is a document that says: we care enough about this relationship to be honest about what happens if circumstances change, because circumstances sometimes do, and we would rather have that conversation now than in a different emotional register later.

The equity split conversation that happens on the day you incorporate is the only day in the company's life when that conversation is genuinely easy. Use it. Four years of vesting. One-year cliff. A company buyback right at cost or a small premium for shares that have not vested. A drag-along provision that ensures minority shareholders cannot hold up a future transaction indefinitely.

Alfi built a great company. She just built it carrying a ghost on her cap table.

The Blueprint

1. Institute four-year vesting with a one-year cliff for every founder, including yourself, before you incorporate or immediately after. This is non-negotiable if you care about the company surviving a co-founder departure. Done looks like: a signed founders' agreement with a vesting schedule that starts from your first day of work and includes a clear cliff date.

1. Include a company buyback right for unvested shares. If a co-founder leaves before fully vesting, the company has the right to repurchase their unvested shares at the original price paid. This prevents ghost equity from accumulating on the cap table. Done looks like: a buyback clause in the founders' agreement that specifies the buyback price, the exercise period, and the trigger events.

1. Add a drag-along clause that applies to major transactions. A properly drafted drag-along requires minority shareholders above a threshold to vote in favour of a transaction approved by a majority of shareholders and the board. This prevents a minority holder from blocking a round or an exit that the rest of the company has agreed to. Done looks like: your shareholders' agreement contains a drag-along provision and your lawyers have confirmed it applies to financing transactions.

1. Have the equity conversation explicitly on founding day. Not "this seems fair," but "here is what happens if one of us leaves in month six, in month eighteen, and after we are fully vested." Write down what you agree. Sign it. Put it in the data room. Done looks like: a founders' agreement that is not a standard form with your names inserted, but a document that reflects your specific conversation about these specific scenarios.

1. Revisit the cap table every time you are about to raise. Before any financing round, confirm that every shareholder above a meaningful threshold is findable, reachable, and likely to cooperate with the closing process. If someone is not findable, that is a due diligence risk you need to disclose. Done looks like: a list of all shareholders, their contact information, and their last known status, reviewed sixty days before any planned closing.

Free resource: Founder Vesting Decision Tree. Four questions, see exactly which document your cap table is missing: vesting, buyback, drag-along, or cap table hygiene. See below.

Curious Corner

Slicing Pie by Mike Moyer : A dynamic equity model for early-stage companies that ties share ownership to actual contribution over time. Not right for every company, but a useful framework for thinking about how equity should reflect reality rather than projections made on day one.

Founders Dilemmas: Chapter on Equity by Noam Wasserman : Harvard Business School research on co-founder equity splits across hundreds of startups. The data on outcomes for companies with equal splits versus negotiated splits, and with and without vesting, is sobering and useful. Read the summary before you have the founding day conversation.

The Free Resource

The Founder Vesting Decision Tree. Four questions on vesting, buyback, drag-along, and cap table hygiene. See exactly which document you are missing before a co-founder departure turns into a blocked round. Runs in the browser, nothing to download.

Open the decision tree.

The Question

When you co-founded your company, did you have an explicit conversation about what would happen to the equity if one of you left in month nine? Not a vague agreement that you would figure it out. An actual conversation with a specific answer. If you did, I want to know how you handled it and whether the document matched the conversation. If you did not, you now know why that conversation matters. Hit reply.

Writing this from Barcelona, where I had an espresso this morning and watched a founder walk through this exact scenario from their phone while sitting across from me at a terrace table. It was an interesting forty minutes for everyone involved. Next issue: the co-founder who left eighteen months ago and still owns 25%, and why that number is blocking the next raise.

Have the conversation now. The version of it in month one takes twenty minutes. The version of it in month forty-eight costs considerably more.

Pepe

The Outlaw Chronicles is for education only. Nothing here is legal advice. For the real thing, you know where to find me.

Mission Briefing

Delphi had built a profitable company without raising a cent of outside money. No investors. No liquidation preferences. No board seats to negotiate. His cap table was clean: two columns, two names, two percentages. Then his spouse filed for divorce. In a community property jurisdiction, equity acquired during marriage is potentially marital property. Nobody had mentioned that column existed. This issue is about the one cap table conversation nobody has until they need a lawyer for a different reason.

Venture Odyssey

Departure

: The patient builder

Delphi is from Delphinus, a small and often overlooked constellation that sits near the edge of the Summer Triangle. People from Delphinus tend to be patient in a way that other founders find slightly alarming. Delphi has forehead ridges that deepen when he is thinking, which is most of the time. He carries a leather notebook. He has never owned holographic technology of any kind. He was profitable since month eight of the company's life, which he mentions approximately never, because he considers it a threshold rather than an achievement.

He had built a supply chain analytics platform for food and beverage companies. The product worked. The customers renewed. The team was small and stayed. He had co-founded it with a technical partner who had since taken a reduced role and received a partial buyback. Delphi now held 82% of the company. He had been offered venture money twice and declined twice on the grounds that the capital was not needed and the governance it came with was not worth the price.

He had also, at the age of thirty-one, gotten married. This detail appears in his company documentation nowhere, which is to say it appears exactly as prominently as most founders consider it should appear in their company documentation, which is to say not at all.

His spouse worked in architecture. She was talented and ambitious and entirely unconnected to the supply chain analytics business. The company was his world. The marriage was a different world. For seven years these worlds ran in parallel without intersecting in any legal sense that Delphi had considered.

He did not think about the cap table and the marriage in the same sentence. Nobody had asked him to.

Year seven was difficult. The parallel worlds began to exert pressure on each other. He was working longer hours as the company scaled. His spouse had taken a partnership role that required significant travel. The texture of the relationship changed in the slow and irreversible way of things that have been under pressure for long enough.

He filed for divorce on a quiet Tuesday in October. He told his CFO the following week, not because it was relevant to the CFO's job but because they had worked together for four years and Delphi thought he deserved to know.

His CFO, who had seen several of these situations at previous companies, asked one question. "Is the company in a community property jurisdiction?"

Delphi looked at him for a moment. "What does that mean for the company?"

Layover

: The spreadsheet with no column for this

The jurisdiction in which Delphi had incorporated and in which he lived was a community property state. Community property law holds that assets acquired during the course of a marriage are jointly owned by both spouses, regardless of whose name appears on the title, the account, or the cap table. This includes business interests acquired during the marriage.

Delphi had incorporated the company two years before he got married. The shares he held on the day of the wedding, approximately 40% of a company that was then worth very little, were his separate property. The shares he had acquired since then, through option exercises, buybacks of his co-founder's unvested equity, and other mechanisms, had been acquired during the marriage.

His family law lawyer walked him through the analysis on a Thursday afternoon. I was on the call because Delphi had asked me to sit in, and I sat in the way you sit in on something when you already know roughly what is going to be said and you are there to help the person next to you hear it clearly.

"The shares you held before the marriage date are your separate property," the lawyer said. "We can trace those clearly. The shares you acquired after the marriage date are presumptively community property. That means your spouse has a potential claim to 50% of those shares."

Delphi's notebook was open in front of him. He was not writing in it. He said: "How many shares did I acquire after the marriage?"

The lawyer looked at his notes. "Based on the cap table history you shared, approximately 42% of your current 82% stake was acquired during the marriage. Your spouse's potential community property interest is approximately 21% of the company."

Delphi said: "She has never been involved in the company."

"That is not the legal question. The question is when the assets were acquired and whether they are characterised as community or separate property. Community property regimes do not require contribution to the business. They require marriage at the time of acquisition."

"What does 21% of the company mean in dollar terms?"

The company had been valued informally, by a third-party firm, at $14 million the previous year. 21% of $14 million.

Delphi set down his pen.

"Is there anything to be done?" he said.

"There are several options," the lawyer said carefully. "The first is a negotiated settlement in which your spouse accepts a different asset in exchange for her community property interest in the company shares. The second is a buyout, in which the company or you personally purchase her interest. The third is a valuation dispute, in which you argue that the shares are worth less than the informal valuation. The fourth is that the court orders a partition of the shares, which is extremely disruptive to a private company and something most courts are reluctant to do, but it is available."

I said one thing before the call ended. "The time this would have been much cheaper to address was before the marriage. A prenuptial agreement that addressed the company shares as separate property, or a marital property agreement that established clear characterisation rules, would have made this analysis cleaner. These agreements are enforceable in most community property states if they are properly drafted and disclosed."

Delphi looked at me for a moment. Then he said: "No one mentioned that."

He was right. No one does. The incorporation lawyer does not mention it. The accountant does not mention it. The investor, if you have one, is focused on your cap table, not your marriage. The financial advisor, if you have one, may mention it in the context of estate planning, but most founders at early growth stage do not have a financial advisor. The gap between "this is a legal reality" and "this is a conversation someone had with you before it mattered" is the size of a jurisdiction and a seven-year marriage.

He settled with his spouse over the following eight months. She received a combination of cash and a buyout of her community property interest at an agreed valuation. The total cost was significant. The company was not destabilised. Delphi remains the CEO.

He told me, after the settlement closed, that the thing he thought about most was the gap between the complexity of the cap table conversation he had with investors, which had never happened because there were no investors, and the simplicity of the conversation he had never had about what the cap table meant inside his marriage.

"It was the same spreadsheet," he said. "It just had a column I did not know existed."

Arrival

: The intersection nobody draws

Every founder who gets married after incorporating a company, or incorporates a company after getting married, is creating a potential intersection between family law and corporate law. These two bodies of law almost never communicate with each other until the moment they are forced to, which is usually a divorce proceeding.

The intersection works differently depending on the jurisdiction. Community property states and countries, which include California, Texas, Spain, France, and several other major founder ecosystems, create a presumption that marital assets are jointly owned. Common law jurisdictions, which include most of the UK and many other markets, use different rules. The applicable law is usually the jurisdiction of residence at the time of divorce, not the jurisdiction of incorporation. A Delaware company with a founder living in California is subject to California community property law in a divorce proceeding.

The fix, like most fixes, is much cheaper before the problem exists than after. A prenuptial agreement that properly characterises the founder's company shares as separate property, including shares acquired during the marriage through option exercises or buybacks, is a document that takes a few hours of legal time to prepare. Done before the wedding, disclosed honestly to both parties, it creates a clear record of what was agreed. This is not a romantic document. It is an accurate one.

Think of it like an insurance policy for a risk nobody plans to face. The premium is modest. The coverage is specific. You buy it not because you plan to need it but because the cost of needing it without having it is very large.

The cap table has a column for community property. The column exists whether or not you have looked at it.

Three things to do this week

1. Find out which rules you live under. Where you live when you divorce decides it, not where the company is registered. California, Texas, Arizona, Nevada, Washington, Spain, France, Mexico and a long list of others are community property: what you built while married splits in half by default. Most other US states, England, Kenya, Nigeria, Canada, Australia are equitable distribution: a judge draws the line. Done looks like: one line in your founder file naming your jurisdiction and its regime.

1. Map your shares against your wedding date. Shares you held on the day you married are usually yours. Shares you picked up after, through option exercises, buybacks of a co-founder's stake, or new grants, are the ones on the table. Done looks like: a written note from a family law lawyer showing which slice of your holding is separate and which is marital.

1. Get the document that moves the column. Not married yet: a prenup that names the company shares, including the ones you will acquire later, as separate property. Already married: ask whether a postnup does the same job where you live. Both need full disclosure and both need to be signed properly or they fail in court. Done looks like: a signed agreement that names your equity by company, or a lawyer's letter saying why one is not available to you.

Curious Corner

The SHA Checker : Run your shareholders' agreement through it and look at the transfer restrictions section. If a court can hand shares to a spouse, your right of first refusal and drag-along clauses decide whether that spouse ends up as a shareholder or gets bought out. Most SHAs never contemplated a divorce as a transfer event.

The Board Composition Model : Delphi had no board to negotiate with. If you do, model what happens when a 21% block changes hands mid-dispute. Information rights, voting thresholds, and reserved matters all move with the shares.

The Free Resource

The Divorce Cap Table Exposure Estimator. Put in where you live, when the company formed, when you married, and what you hold. It shows the column: how much of the company your spouse could claim under community property or equitable distribution, and what a prenup that holds does to the number. Runs in the browser, nothing to download.

Open the estimator.

The Question

Have you ever thought about your company shares in the context of your marriage, as in: does your spouse have a legal interest in what you are building, and what would happen to the company if your relationship ended? Not as a doom-scroll exercise. As an actual question with a legal answer that you know. If you have thought about it and taken steps, I want to know what you did. If you have not thought about it, now is a good moment. Hit reply.

Writing this from Barcelona, where I just had a conversation with a founder at a terrace cafe who mentioned his divorce almost as an aside, and then we spent the next forty-five minutes discussing community property rules because that is the kind of conversation that tends to expand once you start it. Next issue: three investors, one term sheet, three completely different deals, and the board observer clause none of them disclosed to each other.

The cap table has more columns than the spreadsheet shows. Count them.

Pepe

The Outlaw Chronicles is for education only. Nothing here is legal advice. For the real thing, you know where to find me.

Mission Briefing

Vegi had read the term sheet three times. His lawyer had read it twice. Everyone agreed it looked standard. It was standard. Full-ratchet anti-dilution was a standard provision. The issue was that nobody had explained what it actually did. When the down round closed two years later, Vegi owned 9% of a company he had started from his kitchen. He had owned 31% the week before the round. This issue is about the clause that made that possible.

Venture Odyssey

Departure

: The round everyone wanted to be in

Vegi is from the Vega system, which is the fifth-brightest star in the night sky and has approximately twice the mass of Earth's sun. People from Vega tend to have a similar relationship with scale. When Vegi built things, he built them big. When he raised money, he raised it confidently. When his Series A came in at a $22M valuation with $4.5M from a lead investor and a set of terms that his lawyer called clean, he felt the specific satisfaction of a person who had done everything right.

Reti had led the round. Reti was from Zeta Reticuli, always smiling, too many teeth. His briefcase contained term sheets with small red flags printed on them in a font that was easy to overlook if you were looking at the valuation and the structure and the lead investor's track record instead of the flags. Reti's track record was real. His portfolio companies had exited. His references checked out. He was, by every measure Vegi applied, a good investor.

The term sheet was forty-one pages. The economics were on pages two through six. Everyone read pages two through six carefully. Everyone felt good about pages two through six.

Schedule B was on page thirty-seven.

Vegi's lawyer flagged it briefly. "Anti-dilution provision, full ratchet. Standard for this stage and this investor. It's a protective mechanism for the investor in case of a down round." Vegi nodded. They had agreed not to do a down round. The projections showed 40% year-over-year growth. The down round scenario was theoretical. They moved on.

The term sheet closed. The money landed. Vegi built.

Layover

: The year the market turned

Eighteen months into the Series A, the market did what markets do with no warning and no apology. The sector Vegi operated in contracted sharply. Three of his largest customers delayed renewals. His monthly revenue went from growing at 12% to flat, and then to declining at 7%. The burn rate that had felt responsible at $22M started feeling heavy at a valuation that no longer made narrative sense.

He needed a bridge round. The conversation with Reti started well. Reti was supportive. He wanted to protect his investment. The bridge terms he proposed were clean. $1.5M at a $9M pre-money valuation.

Vegi's finance person had modelled the dilution on the bridge. At $9M, the new shares would be issued at a price significantly below the Series A. That meant Vegi would be diluted. He modelled that dilution at approximately 12 percentage points, painful but survivable. He owned 31% before the bridge. He expected to own roughly 19% after.

He told his co-founder. His co-founder said they had no choice. Vegi signed the bridge term sheet.

The lawyer called him the following week. Not his regular lawyer. A startup specialist who had been brought in to review the bridge documents. She had spent six hours with the Series A term sheet and the bridge term sheet side by side.

"I need to walk you through something," she said.

"The anti-dilution."

"Yes."

This is what full-ratchet anti-dilution means. When a company raises a new round at a price per share lower than the price at which an existing investor bought in, that existing investor is entitled to have their ownership percentage recalculated as if they had paid the lower price from the beginning. Not a partial adjustment. A full recalculation. Every share they bought is retroactively repriced at the new lower price, which means they receive additional shares to make up the difference, which means everyone else is diluted by the number of additional shares created.

Full ratchet is the most aggressive version of anti-dilution. The alternative is weighted average, which spreads the adjustment across the size of the down round and produces a smaller dilution impact for existing shareholders. Most late-stage investors accept weighted average. Full ratchet is less common, but it appears, and when it appears, it hides in Schedule B.

The bridge was at $9M. The Series A had been at $22M. Reti's fund had invested $4.5M at the $22M valuation. The full-ratchet provision meant they were entitled to receive additional shares equivalent to what they would have received if they had invested at the $9M price instead. The number of additional shares created was large. The dilution to Vegi was not 12 percentage points.

It was 22.

"I own 9%," Vegi said, when the lawyer finished explaining.

"After the bridge closes, yes. Approximately."

"I owned 31% last week."

"Yes."

There was a silence on the call that lasted about fifteen seconds. Vegi was not a person who stayed quiet for fifteen seconds.

"Was this in the documents?"

"It was in Schedule B of the Series A term sheet. It was described accurately. The math was always going to work this way."

"Did anyone explain this to me?"

The lawyer paused for a long moment. Not because the answer was complicated. Because the answer was simple in a way that required some care to deliver.

"The term sheet described it as an anti-dilution protection mechanism for the investor in case of a down round," she said finally. "Which is accurate. What it did not walk you through is the specific arithmetic of what full ratchet versus weighted average produces in a scenario like this one."

"My lawyer at the time said it was standard."

"It is a real provision. Whether it is standard depends on what market you are in, what stage you are at, and whether you had the leverage to negotiate it at the time. At Series A, from this investor, at that moment in the market, it may well have been the starting position. Whether it was the ending position is a different question."

Vegi did not say anything else on the call. He thanked the lawyer and hung up. He sat in his office in the building he had moved into with Series A money and looked at the window for a while.

He called me that evening. I was in Barcelona, between meetings, and his name came up on my phone and I answered because I had worked with him before and I knew when something was wrong from the first word.

"Tell me about full ratchet," he said.

I told him. He already knew. He wanted to hear it from someone who was not on his legal team. When I finished, he said: "Is there anything to do now?"

The honest answer was: not much. The documents were signed. The bridge was closing. The dilution was contractual. The path from here was building the company back up, which was always the only real path, but it would now be building it from 9% instead of 31%.

"Next time," I said, "you negotiate weighted average. You walk away from full ratchet if you have any leverage at all. And if you don't have the leverage to remove it, you model the down round before you sign, not after."

Arrival

: The math that was always going to land there

Here is what no term sheet summary ever says directly: anti-dilution provisions are not for you. They protect the investor from the consequences of a round that goes wrong. Which is a reasonable thing to want protection from. The question is which version of protection you agree to, and what it costs you in the scenario nobody is planning for.

Full ratchet is the nuclear version. Weighted average is the negotiated version. Broad-based weighted average is the most founder-friendly standard form. The difference between them, in a down round of any meaningful size, can be ten, fifteen, twenty percentage points of founder ownership.

Think of it like a loan with a penalty clause. You borrow money and agree that if you miss a payment, the penalty is 5% of the loan. That is weighted average territory, proportionate and recoverable. Full ratchet is agreeing that if you miss any payment, the lender gets to recalculate the entire loan at the penalty rate, retroactively. The number that comes back is always larger than the one you had in your head when you signed.

Vegi's company survived the bridge. He built it back. He raised a Series B at a higher valuation, which partially restored his ownership through anti-dilution mechanics running in reverse. He stayed the CEO. He still runs the company today.

But he now reads Schedule B before he reads pages two through six. And he models the down round scenario before he decides whether the term sheet is standard.

Check the schedule. Every time. Before you decide the math is theoretical.

Three things to do this week

1. Find the anti-dilution provision in every term sheet you have signed or are reviewing. Usually in a section titled "Anti-Dilution" or buried in the definitions of preferred share rights. Identify whether it says "full ratchet" or "weighted average" and which weighted average formula applies. Done looks like: a highlighted copy of the relevant clause with the type labelled, before you agree to anything else.

1. Model a down round before you close any round. Take your current post-money valuation, cut it by 40%, and run the anti-dilution math. If the provision is full ratchet, calculate how many additional shares the investor receives. Calculate what happens to your ownership percentage. Done looks like: a spreadsheet showing founder ownership before and after a hypothetical 40% down round for each investor with anti-dilution rights.

1. Negotiate for broad-based weighted average as your baseline position. Full ratchet is aggressive and uncommon among founder-friendly investors. If a term sheet contains full ratchet, ask for weighted average. If the investor will not move, ask yourself what the leverage balance is and whether you have alternatives. Done looks like: your signed term sheet contains weighted average or a written explanation of why you accepted full ratchet.

Curious Corner

Brad Feld and Jason Mendelson: Venture Deals : The most thorough plain-language explanation of venture term sheets written for founders. Chapter 8 covers anti-dilution in full, including the weighted average formulas and worked examples showing the founder dilution under each scenario.

NVCA Investor Rights Agreement Model : The model investor rights agreement contains the standard broad-based weighted average anti-dilution provision that most professional investors accept as a starting point. If your term sheet varies from this model significantly, you should understand why before you sign.

The Free Resource

The Anti-Dilution Clause Decoder. Paste any anti-dilution clause and see what it actually does to your ownership in a down round. Full-ratchet vs weighted-average vs broad-based, explained in plain English with the math walked out.

Open the decoder.

The Question

Have you ever read the full term sheet you signed, including the schedules, before you closed? Not the summary your lawyer sent. The actual document, every page. If you found something in the back that you had not expected, I want to know what it was and how you handled it. If you have never read past page ten of a term sheet in your life, you are also in a significant majority. Hit reply.

Writing this from Barcelona, where I just spent two hours on a call walking a founder through a term sheet clause that his lead investor described as "totally standard," which it is, in the same way that a penalty kick is standard in football. You know what it does. You just do not want to be on the wrong side of it. Next issue: what happens to your money when a $50M exit lands and the liquidation preference stack goes first.

Read the schedule. Every schedule. Even the ones that look like footnotes.

Pepe

The Outlaw Chronicles is for education only. Nothing here is legal advice. For the real thing, you know where to find me.

Subject line: Due diligence. Day 3. The round is dead.
Preview text: $2.4M Series A on the table. The investor's lawyer asked one question. Nobody had an answer.
Send date: Monday 10 AM CET (weekly cadence)
Status: DRAFT

Mission Briefing

Ori had been writing code for the company for three years. He was, by any measure, the reason the product worked. On day three of Series A due diligence, the investor's lawyer asked whether Ori had signed an IP assignment agreement. He had not. The $2.4M round died in a conference call that lasted eleven minutes. This issue is about why that question exists and how to answer it before it is asked.

Venture Odyssey

Departure: The engineer who built everything

Ori is from the Orion Nebula, which is a stellar nursery, a place where new stars are constantly being born out of gas and dust and improbable gravitational arrangements. People from the Orion Nebula tend to be generative in the specific way of things that cannot stop making other things. Ori had three floating code windows orbiting him at all times. Even at dinner. Even asleep, reportedly. He was the kind of technical mind that founders spend years trying to find and then spend years more trying to retain.

Lyri had found him through a mutual contact, at a conference where she was speaking and he was in the audience looking bored until she said something about distributed state management that made him sit up. She bought him a coffee. He sketched an architecture on a napkin. She offered him a co-founder slot and 30% of the company. He said he needed to think about it. He called her back the next morning.

He never signed a co-founder agreement. There was an email chain where she said "30%" and he said "sounds right" and that was treated, by mutual unspoken agreement, as the founding moment. He had other things to do. She had other things to do. The formalities would happen eventually. Eventually kept moving.

He started writing code. The code became a product. The product got users. The users became revenue. The revenue became a story worth telling to investors.

Lyri ran the fundraising. She was good at it. Emerald-green skin, Lyra constellation origin, a founder who moved fast and signed fast and got things done with the specific momentum of someone who had learned that hesitation was more expensive than mistakes. She had the deck. She had the metrics. She had a lead investor who wanted to close before quarter end.

Perry was from Nova Centauri. He was the kind of investor whose first move was always a warm introduction rather than a term sheet, which was why founders trusted him before he wrote a single number on a page. He had been following the company for seven months. He led due diligence with a small, methodical team. He was the kind of investor who did not want surprises. He had been burned by surprises twice and had developed a philosophical position on them.

The due diligence started on a Monday.

Layover

: The question on day three

Day one was financials. Lyri had those. Clean books, sensible burn, a CFO who had been around long enough to know what investors looked for in a data room.

Day two was contracts. Customer agreements, vendor contracts, employment paperwork for the twelve people on the team. Lyri sent the folder. The investor's legal team reviewed overnight.

Day three was IP.

The IP review is, in most Series A due diligence processes, the moment that separates the rounds that close from the rounds that do not. Not because founders are careless. Because IP has a specific legal property that everything else does not: it does not belong to the company unless someone put it there on purpose.

The investor's lawyer, a careful woman who had done forty of these reviews, sent a request at 9 AM on Wednesday. The request listed several items. Item three was: "Signed IP assignment agreements for all founders and key technical employees confirming that all intellectual property created in connection with the company has been assigned to the company entity."

Lyri read the request in the back of a cab. She forwarded it to the company's lawyer. She texted Ori. She said: "Did you sign an IP assignment at some point early on?"

Ori responded after forty minutes. "I don't think so. What does that mean?"

The company's lawyer called Lyri at 11 AM.

"He has never signed an IP assignment," the lawyer said.

"Can we prepare one now?"

"We can prepare one. The problem is that it covers IP created from this point forward. The IP he created before signing, which is to say the core product, the architecture, three years of commits, is not covered by a document signed today. It was created by him as an individual and was never formally transferred to the company."

Lyri was quiet for a moment. Then she said: "Who does it belong to?"

The pause before the answer was not long. But it was the kind of pause that carries information on its own. "It depends. In most jurisdictions, IP created by an independent contractor or a co-founder who has not signed an assignment belongs to the creator. It does not automatically transfer to the company entity just because the person worked for the company. The company may have an implied licence in some circumstances. Whether that implied licence would survive a legal challenge is a different question."

The call with Perry happened at 3 PM.

He was not unkind about it. Perry was never unkind. But he was clear.

"We cannot close a round where the core product IP is not demonstrably owned by the entity we are investing in," he said. "I want to find a path here. My lawyers are telling me the path requires a formal IP transfer agreement, a legal opinion on its enforceability given the retrospective nature of the transfer, and potentially a clean-up period of sixty to ninety days while we confirm no third-party IP has been incorporated without licence. That is not a Tuesday close."

The round did not die that afternoon. It died six weeks later, when the clean-up process surfaced a second issue: Ori had used an open-source library under a licence that required any commercial product incorporating it to release its own source code. The product had not done that. Fixing it meant a rewrite of one module and a legal letter to the licence holder. The investor's timeline could not absorb it.

$2.4 million. Eleven-minute call. Three years of building.

I was not in that room. But I have been in rooms like it. The texture of the silence after that kind of call is something you do not forget. It is the silence of a very large thing that was going to happen not happening, and everyone on the line understanding it simultaneously.

The part that is hardest to hold is this: Ori had done nothing wrong. He had built something real. He had given three years to a company he believed in. He had simply never been asked to sign a piece of paper that said the thing he built belonged to the company he built it for. Nobody had explained that the paper mattered. Nobody had explained that the company and the person were, in the eyes of IP law, separate entities with separate rights, and that the transfer between them required a deliberate act, not a shared understanding.

Here is what IP assignment actually is. When an employee or contractor creates intellectual property, the default rule in most jurisdictions is that the creator owns it. Not the company. The creator. Employment agreements sometimes include an assignment clause that changes this for work done within the scope of employment. But founders who join before the formal employment structure exists, contractors who work on a project basis, and co-founders who start building before the paperwork is in order are frequently outside the scope of those clauses. The IP assignment agreement is the document that says: anything I have created or will create in connection with this company belongs to this company. Without it, you have a company that uses IP it does not own.

Arrival

: What the data room is actually checking

When a Series A investor runs IP due diligence, they are asking one question underneath all the specific document requests: does this company own what it is selling? The product. The code. The algorithms. The brand. If the answer is yes with documentation, you close. If the answer is yes but informally, you are in a negotiation. If the answer is no, the round pauses until it becomes yes.

The fix is a single document, executed early. A Confidential Information and Invention Assignment Agreement, sometimes called a CIIA or a PIIA depending on which law firm drafted your template. Every founder signs one. Every employee signs one at hire. Every contractor signs one before the first commit. The document says: I assign to the company all IP I create in connection with this company, I confirm I have no prior inventions that conflict, and I will keep company information confidential. It takes ten minutes to sign and roughly three years of consequence if it is missing.

The analogy that comes to mind is a house built by a contractor who never transferred title to the land. You can live in the house. You can renovate it. You can invite people in and show them what you built. But the day someone asks to see the deed, the conversation gets complicated very quickly. The house is real. The ownership is the question.

Sign the assignment. Sign it early. Make it the first document every new team member signs, before they touch a line of code or write a word of the product spec. The data room will ask for it. The question is whether you want to be looking for it on day three, or sending the folder before day one.

The Blueprint

1. Pull out every founder's onboarding paperwork from the company's founding date. For each co-founder, confirm whether they signed a CIIA or PIIA before they began creating anything for the company. If the answer is no or you are not sure, put a flag next to their name. Done looks like: a list with one row per founder, a yes or no next to each, and a date if yes.

1. Run the same check for your first ten employees and any contractor who touched core product code. The IP assignment is most critical for the people who built the most. If you had a freelance developer build your MVP before you had a legal structure in place, their work may not belong to you. Done looks like: every early contributor has either a signed CIIA on file or a note explaining what remediation has been done.

1. Commission retroactive IP assignments for any gap you found in steps 1 and 2, and lock in a signed CIIA on the day-one checklist for every new hire. Retroactive assignments are imperfect but better than nothing. Going forward: nobody touches a line of code without signing the paper.

The Question

When you hired your first engineer or brought on a contractor to build something for your company, did you have them sign an IP assignment before they started? Not during onboarding, after they had already committed something. Before. If you did, I want to know how you built that habit. If you did not, I want to know when you found out it mattered. Reply here. The answer is usually a specific moment, and those moments are worth comparing.

Writing this from Barcelona, where I am reviewing a data room for a founder who asked me to check it before her investors do, which is exactly the right order of operations. Next issue: a term sheet that looked completely standard until you found the clause buried in Schedule B, and what that clause did to a founder's ownership after a down round.

Don't let the paperwork be the thing that stops you. Sign it early and forget about it.

Pepe

The Outlaw Chronicles is for education only. Nothing here is legal advice. For the real thing, you know where to find me.

MISSION BRIEFING

Vegi raised $14M across three rounds. The company sold for $20M. By the time the preference stack cleared, she walked away with just over $1M. Reti's fund collected $11.2M. This issue is about how that arithmetic works and how to see it before you sign.

[HEADER IMAGE: oc-issue4-panel1-departure.png]

VENTURE ODYSSEY

Departure: The Round That Felt Like Winning

The term sheet arrived on a Tuesday. Vegi remembered because she was eating a late lunch at her desk on the Vega system's main orbital platform and nearly knocked the tray off the table when the notification came in.

Series B. $8 million. Post-money valuation of $40 million.

She had been building for four years. Revenue was real. The team was small but good. The product did exactly what it was supposed to do. And now an investor from Zeta Reticuli, one of the most respected funds in the quadrant, wanted to lead the round.

Vegi called her co-founder. She called her mum. She sent a message to the group chat that just said "IT'S HAPPENING" in all capitals.

She did not call a lawyer that day.

The term sheet had a section called "Liquidation Preference." One clause, three sentences. Reti's team had kept it tight. Professional. The number was 1x. Vegi knew that meant one times the investment back before anyone else got paid in an exit scenario. She had heard this was standard. Her previous investors, the angels from the Seed round and the lead from Series A, had the same clause. It seemed fine.

(Here is the thing about "standard" in term sheets. Standard just means common. It does not mean harmless.)

The lawyers turned the term sheet into documents over the following six weeks. Vegi reviewed them carefully. She asked about the things she understood. She did not know what she did not know. Nobody does, until later. That is the whole architecture of the problem.

The documents were signed. The $8M landed. Vegi went back to building.

She did not think about the liquidation preference clause again for three years.

[PANEL IMAGE: oc-issue4-panel2-layover.png]

Layover: The Number That Came Back

The acquisition conversation started quietly. A strategic buyer from a neighbouring system had been watching the company for eighteen months. They liked the product. They liked the team. They thought $20M was a fair price. Vegi thought $20M was a fair price too. It was 2x the last post-money valuation. That felt like a win.

She called me from a noisy cafe somewhere on the orbital platform. I was in Barcelona, sitting on my terrace. It was early evening here, mid-afternoon there.

"We've got an offer," she said. "Twenty million. I think we should take it."

"Who's in the cap table?" I asked.

She listed them. Seed angels with $800K in total. Series A, $5.2M at $14M post. Series B, which was Reti's fund, $8M at $40M post.

I asked about the preference terms.

"They're all 1x," she said. "Non-participating. Standard."

"Send me the documents," I said.

She sent them in ten minutes. I read them in twenty.

Then I called her back.

"Vegi," I said. "I need you to sit down."

Here is what the preference stack actually looked like.

Liquidation preference is the right of investors to get their money back first, before founders or employees, in any exit, sale, or liquidation. Every investor in every round had a 1x non-participating liquidation preference. That sounds symmetrical and harmless. It is neither.

Non-participating means the investors collect their preference and then step aside. They do not share in the remaining proceeds. This is the better version of the clause. Participating preferred would have been worse. So non-participating is good. Remember that.

But stack the preferences and the math changes.

Reti's fund put in $8M at Series B. Preference: $8M first. Paid before anyone else sees a cent.

Series A put in $5.2M. Preference: $5.2M second. Paid after Reti, before anyone else.

Seed angels put in $800K. Preference: $800K third. Paid after Series A.

Total preference stack: $14M. This amount comes off the top of any exit, in order, before common shareholders see anything.

$20M exit, minus $14M preferences, leaves $6M.

That $6M gets distributed to common shareholders by ownership percentage. Vegi owned 17% of the common. Her co-founder owned 14%. The option pool represented 28% of the common.

Vegi's 17% of $6M is $1.02M.

But wait.

Investors with non-participating preferred choose whether to take the preference or convert to common and share in the full proceeds. Rational investors take whichever is higher.

Reti's fund owned 22% of the company. 22% of $20M is $4.4M. The preference produces $8M. Reti takes the preference.

Series A owned 19%. 19% of $20M is $3.8M. The preference produces $5.2M. Series A takes the preference.

Seed angels owned 8%. 8% of $20M is $1.6M. The preference produces $800K. The angels convert to common and take $1.6M instead.

So Reti: $8M. Series A: $5.2M. Angels (converted): roughly $544K. Remaining common pool: approximately $6.2M. Vegi's 17%: $1.054M.

She had modelled $3.4M. She had been planning on $3.4M.

I told her the real number.

There was a pause that lasted about eight seconds.

"That can't be right," she said.

"I'm looking at the documents," I said.

Another pause.

"Tell me what I'm missing."

"You're not missing anything," I said. "The documents are working exactly as written. Reti gets paid first. Series A gets paid second. You and your team get what's left."

She was quiet for a moment. I could hear the cafe in the background. Someone ordering something. A chair scraping.

"I raised fourteen million," she said, finally. "And I'm walking away with one."

"Just over one," I said. "Yes."

She did not say anything for a while.

Arrival: What the Structure Was Always Saying

The deal closed. Vegi's co-founder got $877K. The employees with vested options got varying amounts, most of them less than they had been expecting. Reti's fund returned 1.4x to their LPs and called it a portfolio exit. The press release said both parties were "delighted."

Liquidation preferences are not a punishment. They are not malicious. They are a rational demand from investors writing a cheque without knowing how things turn out. If the company fails, the preference protects some of their money. If the company does moderately well, the preference means they get their capital back before founders profit. This is reasonable.

But a stack of 1x preferences compounds. Each new round adds a new floor. The floor rises. The range of outcomes in which founders see meaningful money narrows. This is not a bug. It is a feature of the structure that investors understand completely and founders often do not, until they do.

Think of it like buying a house with three mortgages from three banks. All three banks must be paid in full before you see any equity. The house sells. The banks take their share in order of seniority. What you actually own is the remainder. If you borrowed 70% of the sale price in total mortgages, you walk away with 30% of the proceeds. This is obvious when the mortgage is a mortgage. It is less obvious when the mortgage is called a liquidation preference.

Vegi knew about liquidation preferences. She had read about them. What she had not done was model her specific stack at different exit values before signing each subsequent round.

That is the practical observation: the preference stack needs to be modelled at every round, not just read. Pull out a spreadsheet. Plug in the new investment. Plug in three exit scenarios: 1x, 2x, 3x your latest post-money valuation. Calculate what each class of shareholder receives. If the founder number at 2x post-money is smaller than you expected, you now have that information before you sign, not after.

Vegi is building again. She knows more now. That is worth something, even if it cost more than she expected to learn it.

[BLUEPRINT IMAGE: oc-issue4-panel3-blueprint.png]

THE BLUEPRINT

Five things to do before your next funding round closes.

1. Build an exit waterfall for three scenarios. Take your post-money valuation from this round. Model what each shareholder class receives at 1x, 2x, and 3x. If the founder column at 2x looks thin, you are seeing your structure clearly for the first time. Do this before you sign, not after.

1. Ask about participation rights explicitly. Non-participating means investors take their preference OR convert to common. Participating means they take the preference AND share in the remainder. Participating is worse for founders. Ask which type each investor has. Ask why.

1. Understand the conversion calculation at each exit price. Non-participating investors convert to common if common beats their preference. Model the conversion threshold for each investor class. Below that price, they take the preference. Above it, they convert. Knowing where each investor's conversion point sits tells you which exit scenarios actually benefit founders.

1. Check whether your preference terms compound or stack. Some deals have participating preferred that also accrues interest. These are preferences that grow over time. If you have these in your documents, model the preference amount at year 3, 4, and 5, not just at signing.

1. Negotiate on participation terms at your most valuable moment. The moment you have the most leverage is before the term sheet is signed. After signing, terms are largely fixed. The conversation about participating vs. non-participating preferred is a legitimate negotiation point. Investors who push for participating preferred in an otherwise standard round are telling you something about how they model exits. Listen.

Free resource: Exit Waterfall Calculator (Google Sheet). Plug in your cap table, preference terms, and an exit price. The sheet distributes proceeds in order and shows what each class receives. Download here: https://mexzungu.com/resources/exit-waterfall-calculator

CURIOUS CORNER

Three things from the cosmos this week.

NVCA Model Term Sheet (2025 edition): The National Venture Capital Association publishes the template term sheet most US VC deals are based on. The liquidation preference section is on page 4. If you have never read the actual model language, this is where "standard" comes from. https://nvca.org/model-legal-documents/

Y Combinator's Plain English Guide to Term Sheets: YC published a guide that walks through term sheet clauses in non-lawyer language. The liquidation preference section is particularly good on the participating vs. non-participating distinction. Written for founders who have never seen one of these before and need to understand it in 20 minutes. https://www.ycombinator.com/library/7j-term-sheet-guide

Carta 2025 State of Private Markets Report: Carta's annual dataset covers exit distributions across thousands of VC-backed companies. The data on founder returns at different exit multiples is sobering. The median exit multiple at which founders start seeing meaningful common stock returns is higher than most people expect. https://carta.com/blog/state-of-private-markets-2025/

THE QUESTION

I want to know about the moment you first modelled your own exit waterfall. Not read about it. Actually sat down, opened a spreadsheet, plugged in the numbers for your specific cap table, and saw what you would actually walk away with. Was it before you signed a round, or after? And if it was after, what did you see?

SIGN-OFF

Writing this from my Barcelona terrace at an hour that is arguably too late but the city is still making noise outside so it feels fine. Next issue: we are going inside the vesting schedule, and there is one word in there that can take four years of work off the table in a single board meeting. Read that sentence again before you sign anything. Now go build something the preference stack does not get to touch.

Pepe

DISCLAIMER

The Outlaw Chronicles is for education only. Nothing here is legal advice. For the real thing, you know where to find me.

If someone forwarded this to you: subscribe at mexzungu.com/newsletter

Your shareholders agreement is working against you

Mission Briefing

Two founders from opposite ends of the galaxy built something real, signed a shareholders agreement they downloaded from the internet, and spent three years assuming they were protected. When one of them wanted out, they discovered the agreement covered everything that had never happened and nothing that had. By the time it was over, €80,000 in legal fees had vanished. Three clauses. Half a page to draft. This is how that happens.

Venture Odyssey

Departure: The Agreement That Looked Fine

Rig met Cassie at a hackathon in 2020. One of those forty-eight hour sprints where everyone is slightly too caffeinated and slightly too optimistic, and the projector fails during the pitch round. They built something that worked. Found early customers. Decided to make it official.

They needed a shareholders agreement.

So they did what most first-time founders do. They searched for one.

The template they found was twelve pages. It covered shareholding percentages, voting rights, what happens if someone wants to sell. There was a confidentiality clause and a non-compete. It had section numbers and recitals and defined terms in bold. It looked exactly like what a shareholders agreement was supposed to look like. Rig from Rigel, who had been writing code for two years before the company existed, and Cassie from Cassiopeia, who had bootstrapped a €2M ARR side operation before pivoting to this, both read it and thought: yes. This is a legal document. This covers us.

Their lawyer reviewed it for two hours, charged them €800, and said it looked fine.

That was not wrong. The document looked fine. The problem was not what was in it.

The problem was the three things that were not.

Rig and Cassie signed. They celebrated. They got to work. The agreement sat in a folder in their Drive, last opened the day the lawyer returned it.

They did not think about it again for three years.

Layover: The Three Gaps Nobody Named

Here is what a shareholders agreement actually is, underneath all the recitals and defined terms.

Think of it less like a business contract and more like a pre-nuptial agreement. Two people, genuinely optimistic about their future together, sitting down to decide what happens if things go sideways before things have gone sideways, when everyone is still aligned and the idea of needing these provisions feels theoretical. The clauses that feel unnecessary in the room where you sign them are the only clauses that matter in the room where things fall apart.

Rig and Cassie had signed the business equivalent of a pre-nup that covered who gets the apartment, but forgot to mention what happens if one of them had been building the apartment before the relationship started.

The first gap was a deadlock resolution mechanism. They were fifty-fifty founders. Equal shares, equal votes. The document said so in clause three, very clearly. What it did not say was: if these two equal co-founders ever disagree on a major decision and cannot resolve it, here is what happens next.

The answer, in their agreement, was nothing. The agreement simply stopped. No casting vote assigned to either founder for specific decision types. No mediation process with defined timescales. No buy-sell mechanism. Two people with exactly equal power and absolutely no tiebreaker.

A deadlock clause with no resolution mechanism is the same thing as no deadlock clause at all.

The second gap was the leaver provision. The agreement said that if a founder left, their shares would be subject to a buyout. This sounds straightforward until you ask one follow-up question: what does "left" mean?

Does it mean someone who resigned because they found a better opportunity? Someone who was constructively dismissed because their co-founder made their working life impossible? Someone who stepped back for health reasons? Someone who joined a direct competitor the following Monday?

These are not the same scenario. They should not produce the same outcome. A well-drafted agreement defines them, names them, prices the buyout differently for each one, and specifies who decides which category a departing founder falls into. Rig and Cassie's agreement had none of that. It had one word: "left." What it meant was anyone's interpretation.

The third gap was IP assignment. Rig had been writing code before the company was incorporated. Some of it came from a side project he had been building for two years before Cassie. When they set up the company, the shareholders agreement said the company owned all its intellectual property.

Which it did. Except for the pre-existing code. Which nobody had formally assigned. Which meant it technically still belonged to Rig. Which nobody thought to ask about until it suddenly mattered enormously.

Three years in, it mattered enormously.

I was introduced to this situation through a mutual contact. The call was short. Rig walked me through what was happening. I was sitting in the client chair in my office in Barcelona, watching the city outside and listening to a very calm, very precise technical founder describe a situation that was not calm at all.

I asked him whether the pre-existing code had ever been formally assigned in writing, separate from the shareholders agreement.

There was a pause.

"I don't know," he said. "We just assumed the company owned it because we were building it for the company."

"Did you build it before you incorporated?"

Another pause. Longer this time.

"Some of it," he said. "Does that matter?"

It mattered. It mattered a great deal.

Arrival: What €80,000 Looks Like in Practice

Cassie had decided to leave. She had found something else. She was tired. She and Rig had not been getting along for months. The departure was not a surprise. The problems it created were.

They could not agree on whether the code Rig had built before incorporation was company IP or Rig's personal IP. Without a formal IP assignment on record, both arguments had merit. This turned into a dispute about what the company owed Cassie for her shares, which turned into a dispute about the company's value, which turned into a dispute about the definition of "left."

Was this a good leaver scenario, because Cassie's departure was at least partly attributable to the breakdown of the working relationship? Or a bad leaver scenario, because she had technically resigned voluntarily?

The agreement did not say. Both lawyers said their client was right. Both clients believed their lawyer.

When they hit deadlock on the IP question, they had no mechanism for resolving it. They tried mediation. Mediation required both parties to agree to a mediator. They could not agree on a mediator either.

By the time they settled, fifteen months had passed and €80,000 had been spent. For context: a properly drafted shareholders agreement, reviewed by a lawyer who understood what was actually missing from the template, would have cost them approximately €3,000 more at signing. That is the difference between an €800 review and a €3,800 review. They spent three thousand euros on the logo. The agreement that governed the entire ownership structure of the company got the template.

Now step out of the story for a moment.

Imagine two musicians forming a band. They write a partnership agreement covering how to split revenue from gigs and what happens if they want to bring in a third member. But they forget to specify who owns the songs one of them wrote before the band existed, what happens if one of them wants to leave, and who gets to make the call if they cannot agree on whether to take a particular booking. Three years of touring later, someone wants out. The songs become the lawsuit. The agreement, which covered all the things that never happened, is useless for the things that did.

This is not a story about bad lawyers. The lawyer who reviewed Rig and Cassie's agreement was working with a template that covered the standard scenarios. Standard templates cover standard scenarios. Nobody told them what the non-standard scenarios looked like. Those were the ones worth paying for.

Go read your own shareholders agreement today. Not to review it fully. Just to search for three things: a deadlock resolution mechanism, a definition of good leaver versus bad leaver, and confirmation that any pre-existing IP was formally assigned. If one of them is missing, you have found the gap worth filling.

The Blueprint

1. Pull up your shareholders agreement and search for the word "deadlock."
If it does not appear, or appears without a corresponding resolution process, your fifty-fifty structure has no tiebreaker. Done looks like: you can point to a specific clause that says what happens if both founders disagree on a reserved decision and cannot resolve it in fourteen days. That clause must include at least one of: a casting vote assigned to a specific role, a mediation process with a named procedure, or a buy-sell mechanism.

2. Find the leaver clause and write out in plain language what it actually says happens when a founder leaves.
Then ask: does it distinguish between a founder who resigned, a founder who was pushed out, a founder who left for health reasons, and a founder who joined a competitor? If the outcome is the same for all four scenarios, the clause is not doing its job. Done looks like: your agreement uses the words "good leaver" and "bad leaver," defines both, prices the buyout differently for each, and names who makes the categorisation call.

3. Identify every piece of IP the company relies on and trace it back to when it was created.
Anything created before incorporation, or created by a founder using personal resources or pre-existing work, is not automatically company property even if your shareholders agreement says the company owns all its IP. Done looks like: a signed IP assignment agreement, separate from the shareholders agreement, that formally transfers each piece of pre-existing IP to the company. If you incorporated through Stripe Atlas, Clerky, or similar, check whether this was included. It often is not.

4. Find the drag-along clause and check the threshold.
It should specify the percentage at which a majority of shareholders can require the rest to sell their shares in an exit. If that threshold is 50%, a minority shareholder can block a sale. Done looks like: your drag-along is set at a threshold that reflects how you actually want exit decisions made, and your lawyers have confirmed it works under the law of the jurisdiction where you are registered.

5. Book thirty minutes with a startup lawyer to review just these four points.
Not to rewrite the agreement. Just to confirm whether the gaps exist and, if they do, what closing them would cost. Done looks like: a written summary from the lawyer of what is missing and a quote for fixing it. Get this done before the next time someone joins or leaves the cap table. Not after.

Free resource: Shareholders Agreement Clause Checklist. Five clauses to check before you sign anything, with plain-language explanations of what "done" looks like for each. Read it here: mexzungu.com/resources/sha-checklist

Curious Corner

Legal Nodes' Delaware Incorporation Guide: Updated 2025. Walks through every post-incorporation document founders must sign, including why the IP Assignment Agreement (PIIA) is a separate document from your SHA and your formation package. The section on what investors check at due diligence is worth reading before your next round.

NVCA Model Legal Documents: The closest thing to an accepted standard in US venture-backed companies. The drag-along, co-sale, and voting provisions sections are worth reading even if you are not raising US venture, because they show what sophisticated parties expect to see and why.

SeedLegals' Shareholders Agreement Guide: A plain-language breakdown of what a shareholders agreement must contain, written for founders who are about to sign one. Covers the clauses investors care about most, the difference between a SHA and your Articles, and when to create one. UK-focused but the clause logic applies everywhere.

The Question

The moment your lawyer walked you through the leaver provisions, were you actually following the explanation, or nodding at the right intervals while thinking about the pitch deck you had to finish that evening? Most founders remember signing. Very few remember understanding. Reply and tell me: which clause in your current agreement would you least want tested in a dispute right now?

Sign-Off

Writing this from Barcelona on a warm June evening, the kind where the terrace is clearly the correct place to be working but I'm at my desk running SHA clause diagnostics instead. Next issue: employee equity, and specifically the ways a well-intentioned option plan can be quietly unenforceable in three of the five countries where your team actually lives.

Go fix the clause before it fixes you. Pepe

Disclaimer

The Outlaw Chronicles is for education only. Nothing here is legal advice. For the real thing, you know where to find me.

I'll tell you why. Because the legal industry has built an entire culture around making clients feel stupid. The jargon, the formality, the six-page emails that say nothing, the invoices that arrive without context. It's all designed to create a dependency, not a partnership.

Here's a radical idea. You should understand every single structural decision in your venture. Not at a "leave it to the lawyers" level. At a "I can explain this to my co-founder and my investor in plain language" level.

If your lawyer can't explain your cap table in two minutes without jargon, that's not your problem. That's theirs.

If your governance framework lives in a 200-page document nobody has read, it doesn't exist. Governance that nobody understands is governance that nobody follows.

The best framework I ever designed fit on a napkin. Literally. A founder and I sat at a bar in Nairobi and sketched the entire decision-making structure for a multi-country operation on a cocktail napkin. That napkin became the blueprint for the formal docs.

Simple doesn't mean unsophisticated. Simple means everyone knows the rules.

Demand clarity from your advisors. If they can't deliver it, find ones who can.

#LegalClarity #VentureArchitecture #Mexzungu #FounderAdvice

Nairobi. Paris. Mexico City. New York. Barcelona. Kigali. Mauritius. Johannesburg. The list keeps growing. Every market has different regulations, different corporate forms, different cultural expectations around how business gets done.

But the pattern underneath is always the same.

Business moves at the speed of trust.

Not at the speed of your slide deck. Not at the speed of your legal review. Trust.

In Nairobi, I learned that the deal closes over dinner, not in the boardroom. In Paris, I learned that precision earns respect before personality does. In Mexico City, I learned that family structures and business structures are often the same conversation. In New York, I learned that nobody cares where you're from if you can close.

The best venture architects aren't just technically excellent. They're culturally fluent. They know that a governance framework that works in Delaware might collapse in Nairobi. That an investor relationship built on New York norms might alienate a founder in Kigali.

This is what you can't learn from a textbook. It comes from being in those rooms, in those countries, making those mistakes, and earning that trust.

Structure is universal. Context is everything.

#CrossBorder #VentureArchitecture #Mexzungu #GlobalFounder

Different deals, different structures, different continents. I built the governance frameworks, structured the entities, sat in the rooms where capital decisions were made.

You want to know the thing that almost killed the biggest deals?

Misaligned expectations between founders and investors about control.

Not valuation. Not terms. Control.

Who picks the board? Who approves the next raise? What happens if the founder and the lead investor disagree on strategy?

I watched smart people burn months because they negotiated the number on the term sheet but never designed the decision-making architecture underneath it.

The money is never the hard part. The structure around the money is.

Every cap raise should start with a governance conversation, not a valuation conversation. Who decides what? Under what conditions? With what override mechanisms?

If you're raising right now and nobody has asked you these questions yet, your advisors are doing it wrong.

The money will come. The architecture determines whether you survive once it does.

#Governance #StartupFundraising #VentureArchitecture #Mexzungu

I grew up in Mexico. My dad spent his career in government. He signed me up for law school without asking. Having a gap year wasn't a thing back then. So I became a lawyer.

I went to big law because I wanted to tackle big monsters. Then Yale. Then Mauritius, which is where my Africa story actually started.

From there I flew to Kigali for four days to sign financing for a campus. I stayed four months. Negotiating a bond with the government pension fund, a loan with the largest local bank, and building terms with a Turkish contractor. Four days became four months because the work was real and someone had to stay until it was done.

Then came Nairobi. I was on a business trip from Mauritius to Dakar. Two-day layover. COVID hit. Two days became two years.

Every step was an accident that turned into a decision.

And every accident built the exact skill set that no traditional path could have assembled. Cross-border structuring. Multi-jurisdictional governance. Capital raising across cultures where trust matters more than term sheets.

Mexzungu exists for the people who took the weird path.

The founder who grew up in Lagos, studied in London, and is building in Kigali. The operator who spent five years in corporate and now can't breathe in those rooms anymore. The creative who knows their business needs real structure but can't stomach the pin-striped-suit consulting world.

You don't need to fit the mould. You need someone who understands why you broke it.

Mexzungu is an outlaw studio built by an outsider, for outsiders. Structure without the straitjacket. Big law rhythm meets rock and roll rhyme.

The beautifully unconventional ones. That's who we're here for.

#FounderManifesto #VentureArchitecture #Mexzungu #BuildDifferent

Every founder who calls me is in one of three situations. Here's which one you are.

The Builder. You're pre-Series A. You've got traction, maybe some revenue, and you're about to raise real money for the first time. Your structure was built on a template from the internet. You know it won't hold, but you don't know where it'll break. You need someone to pressure-test the whole thing before an investor does.

The Scaler. You've raised. Maybe $2M, maybe $20M. Now you're expanding into new markets, adding entities, hiring across borders. The structure that worked for one country is cracking under the weight of three. You need architectural oversight, not more lawyers billing by the hour.

The Fixer. Something already broke. A co-founder dispute. A cap table that doesn't work anymore. A board that can't make decisions. An investor relationship that went sideways. You need someone who's seen this exact situation before and knows the structural path out.

All three need the same thing. Not legal advice. Venture architecture.

Someone who can look at the whole picture, not just the document in front of them. Someone who's been the operator, the board member, and the investor. Not just the advisor.

If you recognised yourself in one of those, that's exactly who Mexzungu is for.

DM me which one you are. I'll tell you the first thing I'd look at.

Mission Briefing

Once upon a spreadsheet, a founder thought she owned 55% of her company. She'd been showing that number to investors for 18 months. Then three SAFEs converted, the real math came in, and she owned 31%. This is the story of how that happens, and how to make sure it doesn't happen to you.

The Deep Dive

Your Cap Table Is Lying to You

Let me tell you about something that happens more often than anyone in this industry wants to admit.

A founder builds something real. Gets traction. Raises a bit of money from people who believe in the vision. Then one day, usually on the worst possible day, someone runs the actual numbers and the story the spreadsheet has been telling turns out to be fiction.

I've watched this play out more times than I'd like. The details change every time. The plot never does.

1. Departure (Business Launch)

Two friends start a company. They split the equity 50/50 because they're equal partners and that feels right. They set aside 10% for an option pool because someone told them they should. The cap table is clean:

Everyone's happy. The spreadsheet looks great. Life is good.

2. Layover (Angel Funding)

Over the next year, they raise $400K from three angel investors. One SAFE at a $3M cap. Another at $5M. A third at $4M with a 20% discount. Three separate conversations, three handshakes, three moments of "we just got funded!" excitement.

Here's the thing about SAFEs. They stand for Simple Agreement for Future Equity, which is one of the great marketing achievements of our time. Every word in that name is designed to make you feel comfortable. "Simple." "Future." "Equity." It all sounds so... manageable.

But SAFEs don't show up on your cap table. Not yet. They're promises. They're guests who've RSVP'd to the party but haven't arrived yet. So the spreadsheet still reads 45/45/10. The founders still tell everyone they own 90% of their company.

They believe it. Why wouldn't they? The spreadsheet says so.

3. Arrival (VC Investment)

A VC offers to lead a $2M round at $10M pre-money. Everyone celebrates the valuation. Champagne. LinkedIn posts. "Excited to announce..."

Then the lawyers run the conversion model. And the spreadsheet finally tells the truth.

Combined founder ownership: 52%. Down from the 90% they'd been telling themselves. And here's what makes it worse: none of this was hidden. Nobody lied. Nobody acted in bad faith. The math was always going to land here. The founders just never asked the spreadsheet the right questions.

Why stories like this keep repeating

There are three reasons, and they show up in almost every version of this story I've seen.

The invisible instrument problem. SAFEs live outside your cap table until they convert. So you issue one, then another, then a third, and your spreadsheet keeps telling you a story that stopped being true months ago. It's like checking your bank balance without counting all the pizza you ordered on Uber Eats last weekend. The number looks fine until it doesn't.

The scenario nobody models. Every time I sit down with a founder, I ask the same question: "What does your cap table look like if you raise your Series A at $8M instead of $12M?" The most common answer is a pause, followed by "I'd have to ask my lawyer." That pause is where the problem lives. Your lawyer should have already walked you through this. If they haven't, they're processing paperwork, not doing architecture.

The option pool shuffle. This one is subtle, and I want to explain it gently because it's not anyone being malicious. It's just how the game works.

When a VC says they want a 15% option pool "post-money," it sounds reasonable. But the standard practice is that this pool comes from the founders' shares, not from the new investment. So before the round closes, the founders dilute themselves to create the pool. The VC's percentage is calculated after that dilution.

It's standard. It's legal. And it means the founders are quietly paying for something that benefits the company broadly. Most founders don't fully understand this mechanic until after the documents are signed. Not because anyone hid it. Just because nobody explained it in plain language.

What you can do about it

The good news is that none of this is complicated. It's just maths that nobody does until the moment it matters.

Model your SAFEs today.

I built a free cap table calculator you can use right now. It's pre-filled with the example from this story, so you can see the mechanics in action. Then clear the yellow cells and plug in your own numbers.

Google Sheet · click to make your own copy

Enter your founders, your SAFEs, your Series A terms, and watch what happens. Model what happens at three different valuations: your optimistic case, a realistic one, and the scenario you'd rather not think about. If you can see the range, you can make informed decisions. If you can't, you're writing a story without knowing the ending.

Keep a running total. Every time you issue a new SAFE, update the model. If the next one pushes your combined founder ownership below 50% at any reasonable conversion scenario, that's worth a conversation before you sign.

Understand the option pool before you negotiate. When a term sheet says "15% option pool," ask: pre-money or post-money? Who bears the dilution? Is the pool sized for your actual hiring plan, or is it bigger than you need? These aren't adversarial questions. They're structural ones. Good investors will respect you for asking.

Get a proper cap table tool. Carta, Pulley, Ledgy, whatever works in your jurisdiction. Not a spreadsheet. A tool that models conversion scenarios and shows you the real numbers. Because spreadsheets don't update themselves, and the gap between what you think you own and what you actually own tends to grow quietly.

The Blueprint

Cap Table Reality Check: 5 Questions

Grab the free calculator and answer these five questions:

The Docket

Things that caught my eye this week

The Question

When did you first realise your cap table was off?

Click the one that's you.

Every click opens an email. Add your story or just send it blank. I read every one.

Writing this from Barcelona, where the jacarandas are about to bloom and the terrace is finally warm enough to work from again. Next issue lands next Monday. Until then, maybe go check that spreadsheet. Just in case.

Have a great day ahead,

Pepe Carrillo

Founder, Mexzungu Group · Venture Architect

mexzungu.com · pepecarrillo.co · LinkedIn

Mexzungu Group · Outlaw Studio · Barcelona

The Outlaw Chronicles is for educational purposes only. It does not constitute legal, financial, or professional advice. For structuring decisions, engage qualified professionals in your jurisdiction.

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