What is "accelerated vesting" and what conditions usually trigger it?

Typically when you are granted options at a startup they "vest" over a period of time.  Usually 25% of the employee's options "vest" after 12 months of employment.  Each month after that, the remaining 75% of the options vest at the rate of 1/48 per month.  So, after 4 years, an employee's options are fully vested.  "Accelerated vesting" describes an event where an employees options would vest faster than the typical rate described above.  In terms of what triggers accelerated vesting, this depends on what is written in the employee contract, or, in the case of the founders, in the term sheet issued by investors.  Any number of things could be written into these documents to accelerate vesting, such as an acquisition by other company (i.e. if the company you are working for is acquired and you've only been there 2 years, it is possible to have the rest of your options vest immediately).  Investors and acquirers typically aren't big fans of accelerated vesting, because once an employee is fully vested, there is less motivation for them to hang around and continue to build value in the company.

What was Netscape's valuation at IPO?

Valuation at start of the day was ~$1.036B (~37 million shares * $28 offering price).  Valuation at the end of the day was ~$2.155B (~37 million shares * 58.25). 

Source: http://www.nydailynews.com/archi….  I worked backwards from Andreessen's 1 million shares / 2.7% stake to get the total number of shares. 

What is a liquidation preference?

Let’s start with the different kinds of stocks.

Common vs. Preferred Stock

Startup employees who receive stock usually get common stock. This means that their ownership in a company allows them certain voting rights, including the right to vote on any significant changes to corporate policy (e.g., mergers and acquisitions), and electing the board of directors. They are also among the very last to be paid in the event of a company’s insolvency. They get the leftovers of a company’s assets – if any – only after preferred shareholders, bondholders and secured debt holders have been paid in full. On the other hand, they tend to outperform preferred stock.

Startup investors typically get preferred stock. It’s the liquidation preference that pretty much defines preferred stock. Unlike common stock, preferred stock offers enhanced liquidation preferences. In other words, preferred stockholders have higher priority over common stockholders in the event of a company’s liquidation, entitling them to be paid first, ahead of others with the exception of bondholders and secured creditors (if any). In this context, liquidation means either the company is sold or declares bankruptcy.

(As a side note, if the company goes to public offering, preferred stock converts to common stock and the liquidation preference is extinguished.)

Rationale

The reason why investors invariably receive liquidation preference (if they have preferred stock) over common stockholders is because they are taking larger risks by providing startups with substantial capital. In order to mitigate those risks, liquidation preference assures those with preferred stock that in the event of the company’s insolvency (whether it files for bankruptcy or is sold), they’ll get paid before everyone else, except for perhaps bondholders and secured creditors.

This becomes particularly crucial if there isn’t enough money to repay other debt holders if there’s a liquidity event. Since investors took great risk in the early stages of a startup’s life, they want to ensure that they can be made whole as much as possible. Liquidation preference is their insurance policy.

Multipliers

Early investors typically receive a 1x liquidation preference, which means they can recover up to the full amount of their original investment. However, it’s possible to see some early investors given as much as a 2x, 3x or even higher liquidation preference.

The way it works for a simple 1x preference is like this:

  • VC invests $10 million for 50% equity in a $20 million post-money valuation transaction.
  • If the company is sold for $15 million, VC gets their original $10 million first, plus half of the remaining $5 million, for a total of $12.5 million.
  • The remaining $2.5 million is split between the common stockholders.

However, if the VC’s liquidated preference is greater than 1x, then they would would receive everything, leaving nothing left for the common shareholders to split.

Additional Complexities

Preferred shares are also either participating or nonparticipating preferred.

If they’re participating, then they receive their liquidation preference plus an additional portion of the proceeds after all liquidation preferences have been paid. This essentially means that once all liquidation preferences have been satisfied, their preferred stock would be treated as common stock for purposes of calculating the additional payout.

If they’re nonparticipating, then they do not participate as common shareholders after the preferreds are paid; they receive only their liquidation preference.

Since these conditions can become fairly convoluted, it’s highly advisable to get an attorney to help you review the term sheet. LawTrades offers the guidance you need to navigate through liquidation preferences, and other terms, at a price that works for you. Also feel free to message me if I can help you answer any additional questions.

What conferences or industry events should I attend if I want to be well ahead of trends in software, web services, security, machine learning, etc?

No offense, but the cutting edge of research in those fields is some intense stuff.  Because it's so new, there hasn't been a "layman's explanation" yet, or even a clue as to how that technology could be applied to the real world.  In machine learning, for example, you'll get what are essentially math or statistics papers with pages of proofs and derivations about minimization of some bizarre norm for matrices too large to fit on disk (or whatever).

It isn't until someone takes that, understands it, and applies it to a problem that everyone goes "aha!  this technique is valuable to solve this type of problem."  By then, the secret is out =)

That said, some conferences that focus on applications (and might have more readable papers) are:
WSDM (http://www.wsdm-conference.org/2…)
MMDS (http://www.stanford.edu/group/mmds/)
OSDI (http://www.usenix.org/events/osd…)
DEF CON (http://www.defcon.org/)

edit: just FYI, the question text changed a while after I submitted this answer.  it used to be about conferences for a non-technical person interested in bleeding-edge machine learning.

Does it make sense to look for investment in Europe or the US?

What are you going to use the money for?
How important is the money as opposed to contacts, network, mentoring?

If all you need is money, I would go for local, be it in Europe or elsewhere. Often much easier than going to a foreign country.

If you need advice, access to networking, partners, PR – go for SF Bay Area. Will be hard if you don't have either great contacts or a product with very good traction and/or revenues/profits.

How influenced are VCs by mentions/opinions of a startup in top blogs, newspapers, etc.? How do these affect the startup's fundability or term sheets?

Most VCs would probably tell you that blog and media mentions don't matter. However, I've seen feature stories from major blogs and media be valuable in several ways.

First and foremost, major coverage gets you on VC's radars. If you get TechCrunch or NYTimes coverage and have either some promising traction or an intriguing idea, then you're likely to get contacted by several VCs. This gets your foot in the door, saving you the trouble of having to arrange an introduction.

Second, repeat coverage makes it appear that you are a "hot" company that will have many suitors. If a VC thinks that they are fighting for your deal, they will act faster and offer better terms. As much as any individual partner or fund tries to avoid it, there definitely is a "herd mentality" on Sand Hill Road.

Third, the coverage you get will affect what a partner hears when they speak with others in the valley. Positive (and frequent) coverage will lead to positive reinforcement from others they discuss the deal with.

What is Guy Kawasaki's Garage Technology Ventures doing now?

Guy advises various start-ups (Jajah, Doba, Tynt, Slideshare, Paper.li, Posterous) and he's Managing Director of Garage Technology Ventures. He's also the co-founder of Nononina, the company behind Truemors and Alltop.com.

There's a list of businesses he's involved in on his blog: http://blog.guykawasaki.com/ and a list of investments on the Garage website. In addition to that, he's also a writer / blogger.

Is Google Ventures a good place for a startup to get funding?

Abso-freakin-lutely.

I'm the co-founder of OpenCandy and have had an exceptional experience with Google Ventures ("GV") since they led our Series B in April 2010.

Here's the scoop:

  • Underrated – Certain "blue chip" Sand Hill snobs may classify GV as "JV VC" because of their brief/unproven history and lack of (VC) experience. Eight months with these guys/gals and I can confidently say *bullshit.* GV is a startup (so certainly there is perceived risk/uncertainty) but because they're a startup, they're able to hustle and innovate in a way other older/larger firms with structural or mental constraints can not. Sound familiar, founders? 😉 Their "lack of VC experience" is a compromise in exchange for an absolute abudance of entrepreneurial/operational experience which is a trade I'd make any day.
  • Value – Sure, all investors claim and many investors add value through connections, advice, and the like. Many feel like consultants. GV feels like part of the founding team; rolling up their sleeves and directly impacting our success. GV focuses on adding value in areas (PR, hiring, UX design) that aren't necessarily innate to a founding team. They have access to 10's of thousands of Google (company) employees – what other investor can bring that to the table? One metric my co-founder Darrius Thompson and I have noticed is that we connect with someone at GV almost on a weekly basis, almost always because we reach out to them. Traditionally, we connect with investors on a monthly basis, and typically because they reach out to us. The model has flipped.
  • Team – Obviously, the aforementioned value comes from the prolific team they've constructed. We interact most often with Joe Kraus (on our board) and Karim Faris (led our deal). Joe has a masterful, Zen-like approach to listening and digesting; then thoughtfully and masterfully communicating a twist on what we were thinking or what we should have been thinking. I can safely say he's been one of the most impactful forces to both OpenCandy's growth and my own personal development. Karim is incredibly thorough, thoughtful, and analytical which we first experienced during our deal process. He's definitely one of the smartest, hard-working guys I've met in the venture world. I could go on and on, as I haven't mentioned David Krane (who is obviously a marketing/PR mastermind but does adds a lot of value that doesn't show up in the box score), Braden Kowitz (who has been instrumental to the design of our new products), Wesley Chan, etc.
  • Brand – Oliver Roup's spot on. Normal people, including those talented engineers you're trying to attract or those bd/marketing folks at that big partner you're trying to land, have no brand affinity to "big name" VCs. But they do pay attention when you tell them you're "backed by Google Ventures."

Like some of you reading this we certainly had our hesitancies and questions before we took money from GV. Ranging from "is this another corporate/strategic investor (we know how well most of those have worked out) or Larry/Sergey/Eric's temporary side project?" to "will the taint/bias of the Google name negatively impact our ability to work with Google's competitors?" and so forth. Such uncertainty has been trumped by what I've described above.

In closing, I'm very bullish on taking an investment from Google Ventures if you're fortunate to have that option. To be fair, perhaps we're still in the honeymoon phase and we've only witnessed the early chapters in our journey. There will be twists and turns, peaks and valleys. But based on my experience thus far, I'm certainly thrilled to have these guys alongside that crazy startup roller coaster.

If you have any other questions about GV, happy to share more insight and specifics.

Which venture capital firms lead angel/seed investments?

Most of the "Micro-VC" seed fund managers do (and often require/prefer a lead/co-lead position in a seed round). 

This very fast growing group includes folks such as Floodgate, Freestyle, Forerunner, Softech, Harrison Metal, Baseline, and Felicis (there are at least 75-100 more now in existence.

Many large firms still do, but I think this will be less and less prevalent.  AH has already brought the reins in significantly on doing seed deals.  Why?

1) Misalignment with fund size relating to portfolio management/deployment requirements.

2) Small deals run the risk of conflicting the VC out of large growth opportunities in a competitor. With a $400MM+ fund, you can't run that risk.

3) The seed managers tend to be better value add stewards at the early stages of the company.  Not necessarily because of skill/experience, but because of the model that enables spending more time with companies. 

4) Better risk/return play for bigger managers. Some of the noise gets sifted out  early. Since bigger managers have the dollars to deploy, they can still meet ownership targets getting in at the A (or even B) round.