Entrepreneurship: Intellectual Property and Capitalization Fundamentals

Flashcards covering intellectual property types, venture financing structures, capitalization table management, and equity splitting strategies as discussed in the lecture.

Patent Law

The single most expensive branch of law, typically costing between $10,000$ and $15,000$ to fully obtain a single patent.

Trademarks

Distinctive words, symbols, designs, slogans, or logos that set a company apart; technically called ServiceMarks for service-based businesses.

Copyright

The exclusive right protecting creators of original works (literary, musical, artistic, or computer code) which belongs to the creator immediately upon creation.

Book Drop

A company started by a BYU student that classifies and resells used books, which recently became highly valuable to AI companies looking to legally ingest book content.

Design Patent

A type of patent that protects the specific look of an original product.

Utility Patent

A type of patent that protects how an original product works.

Business Method Patent

A type of patent that protects a specific business process.

Capitalization Table (Cap Table)

A financial statement, usually in spreadsheet format, that declares who owns the company and the specific percentage or number of shares they hold.

Delaware C Corporation

The standard entity for venture-backed startups because Delaware has a specialized business court with bench trials and no juries.

Entrepreneurial J-Curve

A graphical representation of startup progress consisting of the investment phase, the catch up phase, and the blue sky phase.

Bootstrap

A financing method where the founder's personal resources or customer revenue pay for the company's growth.

Convertible Debt

A hybrid financing instrument that begins as a loan and converts into equity upon a specific trigger event.

SAFE

Stands for Simple Agreement for Future Equity; a pro-entrepreneur instrument that converts to equity but does not require repayment if a trigger event never occurs.

Pre-money Valuation

The agreed-upon value of a company immediately before a new round of investment capital is added.

Post-money Valuation

The value of a company after an investment round, calculated as the pre-money valuation plus the amount of the investment round.

Cram Down

A situation, also known as a down round, where a new investor provides capital at a significantly lower valuation than previous rounds, often wiping out existing equity holders.

Benevolent Dictatorship

A leadership model where one primary founder holds a strong controlling stake to ensure decisive management and a clear mandate.

Dynamic Equity Split (Slicing Pie)

A model created by Mike Moyer where equity self-adjusts based on the actual value of work, cash, and resources contributed by each founder.

Founder Vesting

A mechanism to protect the company from departing founders; the standard is a $4$-year plan with a $1$-year cliff.

Deadweight on the Cap Table

Individuals listed as owners who no longer contribute to the venture, which often makes a company uninvestable to VCs.

Carve-out

A provision in a Series A round where founders are allowed to sell a small portion of their shares to provide personal liquidity and reduce the pressure to sell the company prematurely.