Both Sides of the Table

MARCH 1, 2016

At the Upfront Summit in early February, we had a chance to have many off-the-record conversations with Limited Partners (LPs) who fund Venture Capital (VC) funds about their views of the market. LPs See The Over-Valuations and Don’t Like It. All isn’t completely rosy in the LP views of the venture industry.

Venture Capital 150

Venture Capital LP Silicon Valley Marketing 150

ithacaVC

DECEMBER 14, 2011

Continuing with the “No Mess” theme of commenting on things that give VCs pause, I thought it would be good to touch on liquidation preference. Specifically, “too much” liquidation preference (I will use “LP” for liquidation preference). It might be.

Liquidation Preference 49

Liquidation Preference LP Preferred Stock Liquidity Event 49

David Teten

AUGUST 21, 2019

not because of LP objections or moral concerns, but because the pool of potential M&A buyers is greatly limited. But this is the same for a VC round with a liquidation preference. No personal guarantees , unlike some traditional lenders. Attractive to founders in controversial sectors.

Revenue 60

Revenue Liquidation Preference Equity Cofounder 60

ithacaVC

MAY 4, 2011

Let’s say that the Series A liquidation preference (LP) is 1X and that the Series B LP is 1.5X. The Series C investor negotiates a term sheet that provides for the Series C to be senior to the A and B and also for the Series C to have a 1X LP. LP; we need that too.” Here is an example.

Term Sheet 49

Term Sheet LP Ratchet Liquidation Preference 49

ithacaVC

FEBRUARY 13, 2013

Someone who negotiates carry yet never sees a return, fights for attribution, tames cantankerous LP side-letter requests…. Yet gentle enough not to squish dreams of MBA students. Somebody who perpetually resides in the top-quartile. So, God made a VC! and then finish a hard days work with a five mile drive to the home-by-the-sea.

Liquidation Preference 55

Liquidation Preference IRR Due Diligence LP 55

Both Sides of the Table

MARCH 3, 2013

In a discussion I had with Fred Wilson at the Invesco LP meeting Fred said the same about the influence of Clayton. We talked about Liquidation Preference, Voting Rights, and all of the other valuable terms crowd-funding investors don’t understand. Neither does Clayton.

Bankruptcy 403

Bankruptcy Offshore Liquidation Preference Balance Sheet 403

abovethecrowd.com

APRIL 20, 2016

If you really want to liberate your own common shares and those of your employees, then you want to convert the preferred to common and remove both the control and the liquidation preference over your shares. For the most part, early investors in Unicorns are in the same position as founders and employees.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40