Feld Thoughts

FEBRUARY 9, 2016

I watched, participated, and suffered through every type of creative financing as companies were struggling to raise capital in this time frame. I’ve seen every imaginable type of liquidation preference structure, pay-to-play dynamic, preferred return, ratchet, share/option bonus, option repricing, and carveout.

Cap Table 70

Cap Table Down Round Liquidation Preference Founder 70

Tim Keane

JANUARY 12, 2010

For angel groups, the distinction between groups and VCs on this issue is dwindling, especially as angel groups do bigger rounds of financing.   Note that this applies only to earl stage Series A-type equity financings and assumes no cash dividends are paid to investors. . Second a liquidation preference and a participation.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Scott Edward Walker

APRIL 9, 2012

Introduction We are in the golden age of seed financing. Venture capital funds, seed funds, super angels, angel groups, incubators, and “friends and family” are all playing the seed financing game and investing early in startups in an attempt to land the next Facebook. What is a Convertible Note? price the round).

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Startup Company Lawyer

JANUARY 9, 2011

Convertible debt with a price cap seems to be the preferred structure for early-stage financings. Over the last 12 months, I’ve noticed a trend where early-stage startup companies raise seed financings of between $250K and $1M using a convertible note with a price cap. Is a priced Series A financing a valid alternative?

Liquidation Preference 57

Liquidation Preference Finance Preferred Stock Common Stock 57

Up and Running

AUGUST 17, 2015

Additionally, I had already studied Economics and Finance during undergrad, making the academic part of an MBA seem a little redundant. C Corp versus LLC, non-competes, liquidation preferences, preferred versus common stock, and so on). Is business school really necessary?

Entrepreneur 60

Entrepreneur Cofounder Angel Investor eCommerce 60

www.readwriteweb.com

DECEMBER 29, 2011

While certainly not every business needs to raise venture financing, it is the path for many high-growth technology startups. This includes things like how liquidation preferences impact future rounds and ultimate liquidity, to why VCs ask to expand an option pool before investing as part of their term sheet.

Cap Table 47

Cap Table Term Sheet Liquidation Preference Technical Review 47

genylabs.typepad.com

SEPTEMBER 24, 2011

I wont bother going into details on start-up financing terms ( see this post for an overview of typical VC terms) except to say if you dont know and understand: the firms cap table and valuation. where your stock sits in the liquidity preference stack. what rights and preferences the founders and the other investors have.

Equity 40

Equity Technical Review San Jose Stock 40

abovethecrowd.com

APRIL 20, 2016

Why the Unicorn Financing Market Just Became Dangerous…For All Involved. By the first quarter of 2016, the late-stage financing market had changed materially. Investors were becoming nervous and were no longer willing to underwrite new Unicorn-level financings at the drop of a hat. This is uncharted territory.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Both Sides of the Table

SEPTEMBER 6, 2010

If Ventro was worth $8 billion on $2 million of sales surely a paltry $1 billion would suffice. That said, don’t complicate the topic – If you’re the founder of a company you likely know a lot about things like Liquidation Preferences and how they affect value allocations when the company is sold.

Stock Options 294

Stock Options Stock Valuation Liquidation Preference 294

ithacaVC

DECEMBER 13, 2013

The option plan shares available for future issuance typically represent the number of additional options needed for hiring planned up to the point of the NEXT financing (as in we are doing a Series A round now, how many options do we need prior to doing a Series B round). after the financing closes).

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

ithacaVC

FEBRUARY 23, 2011

The MCOP can serve a critical role as founders and other management team members are diluted down by rounds of financing or if their equity is not in the money. As the investors’ aggregate liquidation preference (ALP) increases typically the need for a MCOP also increases. A few key points to consider: 1.

Liquidation Preference 55

Liquidation Preference Management Preferred Stock Dividend 55

Growthink Blog

MAY 23, 2011

The typical wisdom regarding the appropriate financing course for a new company goes as follows: 1. This venture capital financing - usually between $3 and $10 million - is the first of a number of rounds of outside investment over a period of three to five years. My suggestions for the investors seeking emerging companies to back?

Angel Investor 112

Angel Investor Venture Capital Sweat Equity Cram Down 112

The Startup Lawyer

JUNE 9, 2010

A startup’s Series A financing shouldn’t be a large liquidity event or salary payday for the startup’s founders. In addition, here’s an example of how a startup CEO’s huge salary didn’t help his startup: CEO’s $500,000 Salary Burns Startup Into Fire Sale. Case Study.

Salary 99

Salary Term Sheet Liquidation Preference Liquidity Event 99

K9 Ventures

MARCH 23, 2011

The convertible note was really intended as an instrument for a “bridge financing” – when an equity round was imminent, and likely to occur, but the company needed some money in between. In that case, it made good sense to have a debt instrument, where the note holder then converted into equity when the financing occurred.

Pre-Money Valuation 132

Pre-Money Valuation Valuation Equity Liquidation Preference 132

Startup Company Lawyer

JANUARY 31, 2011

Automatic conversion: on a $1M equity financing with no conversion discount and no price cap , provided that the transaction documents provide for a right to purchase a pro rata share of future financings. (I Optional equity conversion: on other equity financings with no conversion discount and no price cap.

Preferred Stock 60

Preferred Stock Liquidation Preference IPO Common Stock 60

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. The dividend goes unpaid until the company is sold. And I think that makes 100% sense. Dealing with VCs Management'

Dividend 45

Dividend Liquidation Preference Common Stock Venture Capital 45

Scott Edward Walker

AUGUST 31, 2011

Which financing sources should they consider? Because this is only a $725K investment, a good lawyer will recommend structuring the investment as a convertible note or a “Series Seed” financing , rather than a full-blown Series A. These people need help in defining and pursuing their business goals. At what valuation and on what terms?

Silicon Valley 45

Silicon Valley Term Sheet Liquidation Preference Redemption 45

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