Boat Update: An anonymous donor is paying for the removal of the boat, happening today. Mayor Johnson, salvage guy Jerry Guyer, crews, and the media are on hand. Big day.

Brady Williamson, Madison legal giant defending free speech, dies captimes.com/news/brady-will…

Wisconsin Republicans recruiting legion of monitors to observe polls, set stage for lawsuits jsonline.com/story/news/poli…

How to Fix a Broken Cap Table: A Practical Guide ✨ Last week I wrote: > "With Down Rounds at 20% of all venture deals closed in 2023, a second order effect is coming into play: Broken cap tables." But what's a broken cap table, again? ⬛ Definition: "Too much dilution, too early" —Example: Venture studio owns ~45% of the common, while the co-founders own ~29% collectively (and single digits, individually). • It's not inaccurate data, missing paperwork or poor cap table maintenance that's the real problem, it's misaligned shareholder interests. Useful benchmarks for bad cap tables: • If founding team ESOP owns less than 50% post-seed • If individual founder/CEO owns <10% post-seed Common ways to avoid a broken cap tables: • Selling less than 30% of equity through Seed • Preventing advisors, incubators & accelerators from taking excessive equity • Removing dead equity from former founders, advisors & bad vesting policies So what do you do once you see a broken cap table? 1. Do nothing, don't invest: This is the vast majority of outcomes—investors see a broken cap table and just move on. 2. Ask and receive: Investors may be receptive to term adjustments, sometimes such as heavy discounts from Post-Money Safes, elimination of super pro rata rights, or removing full ratchet anti-dilution mechanisms. All you have to do is ask! —Example: A never-diluting 10% penny strike warrant is a self-destructive mechanism. 10% of zero is worthless. 3. Negotiate with a Carrot: Search for win-win solutions. Remember, incentives matter more than you think! Offer attractive terms for shareholders with "dead equity," like secondary market access or buyback premiums, to encourage cap table alignment. —What's a reasonable resale discount? Look at FMV of 409A and remember Carta's 70-80% median discount on common vs. preferred price at the seed stage. —Of course, other factors apply: securities laws (eg, Rule 144) must still be followed. And there may be adverse tax consequences (eg, QSBS redemption exceptions, 409A pricing adjustments) 4. Hardball Negotiations:  If incentives fail, consider tougher tactics like pay-to-play requirements, board restructuring, or dilution through new funding rounds. —I don't want to endorse all these tactics or give away the secrets, but here are some things that I have seen work: • Aggressively expand option pool: create a 40% option pool and allocate 30% to the founders. • Insert pay-to-play provisions (existing investors pay to maintain their ownership percentage during future funding rounds or else lose [preferred stock] rights) • Name and shame (internally or through PR, but that can backfire) • Pack the board • Dilute the unwilling investors or holders by raising a new round • Threaten to wind down the company or M&A via acquihire • In conclusion, seek alignment, not just investment! Incentivize the founders and team.