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. What the entrepreneurs were really saying is, “I don’t want to take a lower valuation now, while I don’t have customers or a full team. That’s right.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Both Sides of the Table

APRIL 14, 2010

That means that the likely have a minimum of $15 million in liquidation preferences. It will usually be higher because the liquidation preference has a dividend so if the deal is long in the tooth assume that the liquidation preference might be $20-22 million. Take liquidation preferences head on.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

Startup Company Lawyer

MARCH 14, 2010

To differentiate it from typical “Series A&# preferred stock, which comes with certain expectations with regard to rights. There is no real rule to what a particular series of preferred stock is called. a couple of million dollars), and (iv) is only investing a small amount (i.e. under $500K). Registration rights.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Scott Edward Walker

APRIL 9, 2012

(ii) why are convertible notes issued instead of shares of common or preferred stock? Part 2 will discuss the two most significant issues for founders in connection with the issuance of convertible notes: (i) the valuation cap and (ii) the discount (and how they interrelate). A high strike price undermines that goal.

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

ithacaVC

APRIL 25, 2014

For example, cell E2 is the spot to put in the negotiated pre-money valuation. The model includes a simple waterfall analysis using both participating and non-participating preferred (see line 44 and then columns M and O). The larger the preferred stock liquidation preference the larger the impact of participating preferred.

Cap Table 79

Cap Table Preferred Stock Pre-Money Valuation Liquidation Preference 79

ithacaVC

APRIL 25, 2012

If you want to scare off VCs, start your pitch with “we are looking to raise $X at a pre-money valuation of $Y” Stating how much you want to raise is fine and recommended. However, stating a desired pre-money valuation early in the process is not a good idea. Here is why.

Valuation 49

Valuation Pre-Money Valuation Liquidation Preference Preferred Stock 49

Scott Edward Walker

APRIL 22, 2012

(ii) why are convertible notes issued instead of shares of common or preferred stock? This part 2 will address the economics of a convertible note seed financing and the three key economic terms: (i) the conversion discount, (ii) the conversion valuation cap and (iii) the interest rate. What is a Conversion Valuation Cap?

Pre-Money Valuation 72

Pre-Money Valuation Finance Liquidation Preference Founder 72

www.mattbartus.com

DECEMBER 9, 2012

How to pump up your VC valuation. Let’s say you receive a term sheet for a $1 million investment at a $3 million fully diluted pre-money valuation, and you’re kind of disappointed. One possibility is to negotiate a higher valuation and offer warrants (i.e., Home About Matt Client references Contact. 10,000,000.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

Berkonomics

MAY 22, 2014

Like most angel investors, I have preferences for the terms and conditions of investment and intend to negotiate with entrepreneurs on those terms, such as valuation, company structure, the makeup of the board of directors, liquidation preferences and others.

Early Stage 79

Early Stage Accredited Investor SEC Private Placement 79

ithacaVC

DECEMBER 13, 2013

The share price is calculated by taking the pre-money valuation and dividing it by the number of shares outstanding pre-money. So Share Price (SP) = Pre-Money Valuation (PMV) / Shares Outstanding (SO). That is normal for a pre-money % as it will drop down to about 10% post money depending on size of round and valuation.

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

Scott Edward Walker

JULY 7, 2011

A redemption right is another feature of preferred stock and permits the investors to require the company to repurchase their shares after a specified period of time; it is, in effect, a “put” right – that is, the investors may elect to put their shares back to the company. Redemption Rights What Are Redemption Rights?

Term Sheet 49

Term Sheet Redemption Venture Capital Preferred Stock 49

K9 Ventures

NOVEMBER 21, 2011

You raised a Series A round, a Series B round, and this year are just about to raise a big Series C round at a great valuation. If there is one piece of advice I would give to the founders of BST, it is to consider selling a part of their personal stock in the company at that stage.

Founder 87

Founder Common Stock Preferred Stock Stock 87

Startup Company Lawyer

JANUARY 31, 2011

Optional maturity conversion : into Series AA Preferred Stock based on a $5M valuation. Optional change of control/IPO conversion : into common stock at the lesser of (A) fair market value (based on change of control or IPO), or (B) $5M valuation.

Preferred Stock 60

Preferred Stock Liquidation Preference IPO Common Stock 60

K9 Ventures

NOVEMBER 21, 2011

You raised a Series A round, a Series B round, and this year are just about to raise a big Series C round at a great valuation. If there is one piece of advice I would give to the founders of BST, it is to consider selling a part of their personal stock in the company at that stage.

Founder 84

Founder Common Stock Preferred Stock Stock 84

Scott Edward Walker

SEPTEMBER 14, 2011

Introduction This post originally appeared in the “ Ask the Attorney ” column I am writing for VentureBeat ; it is part of my ongoing series regarding venture capital term sheets.

Term Sheet 76

Term Sheet Due Diligence Liquidation Preference Redemption 76

abovethecrowd.com

MAY 20, 2013

There are common stock, common options, and as many as three to five different layers of preferred stock, each with a specific liquidation preference. Private company valuation techniques are particularly specious (this contrasts with a public company that every day has a definitive market capitalization).

Merger 53

Merger Institutional Investors Liquidation Preference Preferred Stock 53

Startup Company Lawyer

FEBRUARY 21, 2010

I was speaking at an event last month to a group of CEOs and was surprised by the number of CEOs that were worried about the value of their common stock in a M&A transaction. Due to aggregate liquidation preferences that may exceed the acquisition price in an M&A deal, common stock may be rendered worthless.

Retention 31

Retention Liquidation Preference Employee Common Stock 31

thestartuplawyer.com

FEBRUARY 24, 2010

Contact The Startup Lawyer: Home Page About Contact FAQs Glossary Ryan Roberts Law: Home Page Social Networks: Facebook Twitter LinkedIn Flickr Delicious Digg Last.FM He obviously never launched a startup and got shafted by a co-founder. He obviously never launched a startup and got shafted by a co-founder. Leave a Reply Click here to cancel reply.

Cofounder 40

Cofounder Founder Preferred Stock Startup 40

abovethecrowd.com

FEBRUARY 24, 2015

An unprecedented 80 private companies have raised financings at valuations over $1B in the last few years. The size of these companies’ private valuations may be similar to a traditional public company valuation, but that is where the similarities begin and end. This was the recent case with the Box.com IPO.

IPO 40

IPO Liquidation Preference Valuation Technical Review 40

Both Sides of the Table

SEPTEMBER 8, 2012

It has both a “full rachet” and “multiple liquidation preferences.” We plan to raise at a $5 million pre-money valuation. That means they get a 50% discount to the round [25,000 shares of preferred stock at $1 / share and 25,000 warrants at $0.01 / share equals around $0.50 / share - a 50% discount].

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

Scott Edward Walker

JUNE 9, 2011

As many of you know, VC investors are typically issued shares of preferred stock, not common stock. Indeed, preferred stock, as the name suggests, is preferable to (and more valuable than) common stock because it grants certain key rights to the holders, one of which is a conversion right.

Term Sheet 60

Term Sheet Conversion Rights Venture Capital Liquidation Preference 60

Startup Company Lawyer

JANUARY 9, 2011

A logical alternative to convertible debt is a priced Series A preferred stock financing. Mark Suster does a good job analyzing whether convertible debt is preferable to equity , and concludes that convertible debt is better. This leads me to believe that there is a mini-bubble in the early stage financing universe.

Liquidation Preference 57

Liquidation Preference Finance Preferred Stock Common Stock 57

Board Effect

MAY 10, 2019

Such metrics can include an investor’s liquidation preference, option exercise windows and expiry dates, and shareholders’ fully diluted ownership percentages. Cap tables are throughout these negotiations to model potential pre- and post-money valuations. Liquidation Preferences.

Cap Table 40

Cap Table Liquidation Preference Dilution Liquidity Event 40

Professor VC

JUNE 6, 2016

I can just picture Mr. Rogers saying "Children, can you say participating preferred stock with an uncapped 3x liquidation preference and a full ratchet?" Some are able to offer better terms (pro-rata rights, lower valuation caps) than an individual could get. Well, maybe so after watching his middle finger salute.

Syndicate 28

Syndicate Syndication Cap Table Ratchet 28

www.paulgraham.com

APRIL 28, 2010

You give a startup money and they give you stock. 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. [

Angel Investor 63

Angel Investor Dilution Syndicate Syndication 63