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. ” Full R at-shits.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Gust

OCTOBER 18, 2014

What this investor is seeking is called “permanent, full-ratchet, anti-dilution protection”, and that is neither (a) in line with the market, nor (b) practical. That’s why anti-dilution provisions are typically only applicable to the next financing. So, no , you simply can’t give him what he wants.

Dilution 137

Dilution Ratchet Equity Finance 137

www.seriesseed.com

DECEMBER 9, 2012

A question I have is why is there no anti-dilution protection for the investor? I completely understand not wanting to put in an onerous full ratchet but the fact that there is no weighted average ratchet seems a bit bizarre. I have a hard time believing an early investor wouldn't inset some anti-dilution provision.

Term Sheet 40

Term Sheet Ratchet Dilution Equity 40

Both Sides of the Table

SEPTEMBER 18, 2014

At an accelerator … Me: Raising convertible notes as a seed round is one of the biggest disservices our industry has done to entrepreneurs since 2001-2003 when there were “full ratchets” and “multiple liquidation preferences” – the most hostile terms anybody found in term sheets 10 years ago. A down round?

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

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.

Covenant 60

Covenant Liquidation Preference Ratchet Dilution 60

Tim Keane

JANUARY 12, 2010

.   This is most commonly used when a conversion confers superior economic benefits on the preferred stockholder. ·       Anti-dilution provisions that reduce the price of the preferred shares (using a variety of formulas) in the event that the company issues new stock at a lower price.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Gust

SEPTEMBER 17, 2014

Me: Raising convertible notes as a seed round is one of the biggest disservices our industry has done to entrepreneurs since 2001-2003 when there were “full ratchets” and “multiple liquidation preferences” – the most hostile terms anybody found in term sheets 10 years ago. Me: More dilution? At an accelerator …. A down round?

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153