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). Liquidation preference. Whether that’s true or not depends in no small part on how the liquidation preference clause was negotiated with outside investors.

Covenant 60

Covenant Liquidation Preference Ratchet Dilution 60

genylabs.typepad.com

SEPTEMBER 24, 2011

where your stock sits in the liquidity preference stack. what rights and preferences the founders and the other investors have. They had a great managment team, A list VCs, great technology, excellent sales traction and market leadership in a very exciting space. what kind of stock you are getting. what your rights are.

Equity 40

Equity Technical Review San Jose Stock 40

Startup Company Lawyer

FEBRUARY 21, 2010

Due to aggregate liquidation preferences that may exceed the acquisition price in an M&A deal, common stock may be rendered worthless. If you can’t figure this out yourself, you should probably build a liquidation preference spreadsheet to model how liquidation preferences work depending on M&A transaction value.

Retention 31

Retention Liquidation Preference Employee Common Stock 31

ithacaVC

FEBRUARY 23, 2011

As the investors’ aggregate liquidation preference (ALP) increases typically the need for a MCOP also increases. The ALP is the total amount of $ that preferred stock holders are owed on a sale of the company under their liquidation preferences. A few key points to consider: 1.

Liquidation Preference 55

Liquidation Preference Management Preferred Stock Dividend 55

ithacaVC

MAY 1, 2013

The article states “When venture capitalists invest, they typically demand preferred shares that accrue a yearly dividend of about 8 percent. In a sale, the original amount and the interest all come due. It must be paid out before the common shares, which are typically held by the founders and other employees.”

Dividend 45

Dividend Liquidation Preference Common Stock Venture Capital 45

ithacaVC

DECEMBER 13, 2013

They are typically pretty simple: (i) shares owned by founders and (ii) shares authorized for issuance in a stock option pool, some of which may be issued to employees already and some of which will be available for future issuance. So let’s talk about the components of the 2,456,758 share number.

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

Both Sides of the Table

JULY 19, 2011

For one, due to the way liquidation preference work sometimes they have “flat spots&# which means that they might earn the exact same amount from a $40 million sale as they would from a $50 million sale. We’re both principals in a sale. But you want to be the person negotiating your deal.

Term Sheet 319

Term Sheet PR Liquidation Preference Stock Options 319

crowdSPRING Blog

MARCH 13, 2014

Does A Billion-Dollar Valuation Buy Employee Happiness? Good read for entrepreneurs & startup employees on liquidation preferences – crowdspring.co/1neVvzy. New Jersey Votes to Block Tesla’s Direct Sales – crowdspring.co/1gnUjAX. ReadWrite – crowdspring.co/1ekm5xR. 1fEF2ki.

Social Media 96

Social Media Small Business Design Media 96

Gust

MAY 24, 2012

As a quick review, most startups begin life as corporations with a single class of equity securities, referred to as Common Stock , issued to founders, employees, and outside service providers. Options and warrants, when issued, are also typically exercisable for shares of Common Stock.

IPO 159

IPO Equity Common Stock Stock 159

abovethecrowd.com

APRIL 20, 2016

All Unicorn participants — founders, company employees, venture investors and their limited partners (LPs) — are seeing their fortunes put at risk from the very nature of the Unicorn phenomenon itself. We have already seen examples of founders and management obtaining liquidity in front of investors.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

ithacaVC

NOVEMBER 1, 2011

Normally employee options vest over 4 years, with 25% vesting after year 1 and then the balance pro rata (monthly or quarterly) over the remaining 3 years. This allows the acquiror to NOT be burdened with employee options of the selling company. I am probably not in the majority of VCs on this topic. Quick background: 1.

Vesting 60

Vesting Pre-Money Valuation Liquidation Preference Stock Options 60

www.paulgraham.com

APRIL 28, 2010

Youllprobably get either preferred stock, which means stock with extrarights like getting your money back first in a sale, or convertibledebt, which means (on paper) youre lending the company money, andthe debt converts to stock at the next sufficiently big fundinground. [ Or you canbecome a de facto employee of the company.

Angel Investor 63

Angel Investor Syndicate Syndication Dilution 63