Startup Company Lawyer

MARCH 14, 2010

The primary rights in these documents, ranked in order of importance in my opinion are: Non-participating preferred liquidation preference. The liquidation preference would not apply in this situation, and any distribution to stockholders would trigger the dividend preference. Co-sale rights.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Altgate

DECEMBER 18, 2008

@altgate Startups, Venture Capital & Everything In Between Skip to content Home Furqan Nazeeri (fn@altgate.com) ← Holiday Cards Year End Management Changes → The 3X Liquidation Preference Is Back! Let’s recap how expensive a 3x liquidation preference really is. Bookmark the permalink.

Liquidation Preference 31

Liquidation Preference Venture Capital Post-Money Valuation Participating Preferred 31

Startup Professionals Musings

SEPTEMBER 26, 2015

Perhaps they're way off in their valuation (usually far too high), or paralyzed by fear at seeing the other terms, because they have no idea what's normal, and what's worth a fight to the death (their startup's). In very early startups, which have no valuation, the term sheet may specify a convertible note.

Term Sheet 120

Term Sheet Demand Preferred Stock Liquidation Preference 120

Growthink Blog

JANUARY 24, 2011

One very popular "preferred right" or "preference" that adds very significant value to outside investors and is common in venture capital investments is a liquidation preference. The liquidation preference means what is sounds - namely that preferred stock holders with this right get all of their money back (i.e.

Preferred Stock 93

Preferred Stock Stock Common Stock Liquidation Preference 93

Both Sides of the Table

SEPTEMBER 6, 2010

We set our sites on our IPO price and then worked back to our current valuation and showed potential employees what we thought they could earn (with all legal caveats) if the company was successful. If Ventro was worth $8 billion on $2 million of sales surely a paltry $1 billion would suffice. I prefer percentages (e.g.

Stock Options 294

Stock Options Stock Valuation Liquidation Preference 294

Up and Running

MAY 21, 2015

All the other sharks typically make a traditional equity investment; for example they’ll invest $100,000 at a $1,000,000 business valuation, and take 10 percent of the business. They generally also get additional rights that common shareholders don’t get, such as anti-dilution protection, and liquidation preference (discussed further below).

Covenant 60

Covenant Liquidation Preference Ratchet Dilution 60

www.readwriteweb.com

DECEMBER 29, 2011

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. You have a business to run and more importantly don't forget one of the first principals of any sales process: "time kills deals".

Cap Table 47

Cap Table Term Sheet Liquidation Preference Technical Review 47

VC Cafe

OCTOBER 31, 2022

But even in the seed market the bar could get higher: I wouldn’t be surprised to see valuations drop and for VCs to have rising expectations about the level of traction they expect to see before funding. Tiger, Softbank and other crossover funds are slowing down significantly and valuations overall are down significantly.

Founder 173

Founder Technical Review Down Round Liquidation Preference 173

Scott Edward Walker

APRIL 9, 2012

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 valuation of the startup is thus unnecessary; and, if there is no valuation, there are no problems of dilution, taxes and option pricing.

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Berkonomics

MAY 22, 2014

The sale of equity in private companies is regulated by the Securities Act of 1933, which requires that the company either register with the SEC or meet one of several exemptions (Regulation D). Bill Payne has been actively involved in angel investing since 1980, funding over 50 companies and mentoring over 100 more.

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

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

K9 Ventures

MARCH 23, 2011

Since the financing would likely happen in short order, there was no need to have a valuation cap in the note. The founders’ interest is to maximize the valuation of the company at the time of a follow-on financing, thereby minimizing founder dilution. Notes may have fewer rights associated with them, but they come with one big hammer.

Pre-Money Valuation 132

Pre-Money Valuation Valuation Equity Liquidation Preference 132

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

Scott Edward Walker

AUGUST 31, 2011

At what valuation and on what terms? Which financing sources should they consider? Accordingly, in the context of negotiating your term sheet, a good startup lawyer will sit down with you and walk you through all of the key legal provisions in the term sheet to make sure you fully understand their ramifications.

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

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. Guerilla tips for raising venture capital | VentureBeat – crowdspring.co/P6hM3O.

Social Media 96

Social Media Small Business Design Media 96

Both Sides of the Table

SEPTEMBER 8, 2012

It has both a “full rachet” and “multiple liquidation preferences.” ” If you remember the three rules of sales : it’s. We plan to raise at a $5 million pre-money valuation. They share in liquidation preferences pari passu and they vote as a single class. why buy anything?

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

abovethecrowd.com

APRIL 20, 2016

One key to this population growth has been the remarkable ease of the Unicorn fundraising process: Pick a new valuation well above your last one, put together a presentation deck, solicit offers, and watch the hundreds of million of dollars flow into your bank account. By January of 2016, that number had ballooned to 229.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Startup Company Lawyer

JANUARY 9, 2011

Tweaking convertible debt so that common stock (instead of preferred stock) is issued for the conversion discount in order to limit liquidation preference overhang. Convertible debt with a price cap preserves the investor’s “equity&# ownership, but gives the investor extra liquidation preference.

Liquidation Preference 57

Liquidation Preference Finance Preferred Stock Common Stock 57

ithacaVC

NOVEMBER 1, 2011

When a VC prices an investment transaction, it normally treats all options as “outstanding” for purposes of determining the number of shares outstanding (in order to divide into the pre-money valuation to determine a share price). And we VCs know that a sale is not possible without the management team making an incredible effort.

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. [ The valuation determines how much stock you get.

Angel Investor 63

Angel Investor Syndicate Syndication Dilution 63