Both Sides of the Table
JULY 22, 2010
Things like “ participating preferred stock &# in legalese unsurprisingly never actually call out, “hey, this is the participating preferred language.&# We got a3x participating liquidation preference with interest (not participating with a 3x cap, but 3x participating. 4 * $4 million) and not $4 million.
Startup Company Lawyer
MARCH 14, 2010
The primary rights in these documents, ranked in order of importance in my opinion are: Non-participating preferred liquidation preference. If new investors get better rights in a future equity financings (such as registration rights, price-based anti-dilution, redemption rights, etc.), Anti-dilution protection.
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Both Sides of the Table
SEPTEMBER 5, 2012
Because convertible debt deals often have both a ‘full ratchet’ and often have ‘multiple liquidation preferences’ “ Yup. In a standard VC term sheet there is a standard term called an “anti dilution provision” and they are in nearly 100% of deals. That’s right.
Tim Keane
JANUARY 12, 2010
It also assumes the entire value of the investment is captured for investors at a sale of the company in the time specified in the term-sheet. This results in a range of sale prices; in this example from $118.6MM to $21MM. In most cases, the preferred dividend is paid before any dividend is paid to the common.
Startup Professionals Musings
SEPTEMBER 26, 2015
What they worry about is a whole different set of issues, including how much control they will have over how their money is spent, what will happen when future investors jump in to dilute their position and how they will get some money back if things don’t go according to plan. Terms to prevent equity dilution relative to others.
Up and Running
MAY 21, 2015
They generally also get additional rights that common shareholders don’t get, such as anti-dilution protection, and liquidation preference (discussed further below). Anti-dilution protection. That risk of a decrease in the overall ownership percentage triggers an important term called an anti-dilution protection clause.
ithacaVC
DECEMBER 13, 2013
VCs in particular typically insist on a slug of available options counting in the pre-money share total as they do not want to be diluted later by the issuance of those options. On a fully diluted pre-money basis, that would mean the option pool represents 14.5% (356,758/2,456,758) of the cap table. I have posted on this previously.
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