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.

Valuation 405

Valuation Liquidation Preference Pre-Money Valuation Term Sheet 405

Startup Company Lawyer

MARCH 14, 2010

In addition, I think that a “peace treaty&# between early-stage investors and startup companies on standard terms (at least at a term sheet level) is a step in the right direction. The primary rights in these documents, ranked in order of importance in my opinion are: Non-participating preferred liquidation preference.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

The Startup Toolkit

NOVEMBER 4, 2011

The financials immediately jump out when we talk about term sheets: what’s the valuation? Next, we check that we’re safe from any particularly onerous terms like participation preferred. In an early stage deal, you check the numbers to avoid getting exploited, but you make your decision based on the investors.

Term Sheet 31

Term Sheet Dilution Participating Preferred B2C 31

The Equity Kicker

JANUARY 25, 2016

On Friday it seemed like everyone in the venture capital industry was again reading about market turmoil, this time the news is that angel investors are pulling back and valuations taking a hit. The best startups capture all the returns so focusing too much on entry valuation is a mistake. I read it too, because it’s a big deal.

Venture Capital 60

Venture Capital Angel Investor Startup Participating Preferred 60

The Startup Toolkit

NOVEMBER 4, 2011

The financials immediately jump out when we talk about term sheets: what’s the valuation? Next, we check that we’re safe from any particularly onerous terms like participation preferred. In an early stage deal, you check the numbers to avoid getting exploited, but you make your decision based on the investors.

Term Sheet 20

Term Sheet Dilution Participating Preferred B2C 20

Feld Thoughts

FEBRUARY 28, 2023

In the USA, the conversion right ensures that holders of preferred shares are not disadvantaged compared to holders of common shares; in Germany, this legal consequence must result directly from the structure of the preferred shares. The tax framework and valuation issues are particularly complex and not very employee-friendly.

Germany 165

Germany Liquidation Preference Option Pool Advisory Board 165

www.payne.org

SEPTEMBER 22, 2011

If the company is acquired for $5m (or less), the preferred stock holders get all of the proceeds and the common stock holders get nothing. The total preference is less of an issue in early stage companies (e.g. However, it can be a significant issue in later stage companies that have raised a lot of money.

Equity 56

Equity Employee Vesting Preferred Stock 56