Feld Thoughts

FEBRUARY 28, 2023

Conversion right: In Germany, there is generally no conversion right entitling the holder of preferred shares to convert them into common shares at any time. This may not seem like a big deal at first glance, but it has extensive implications under various aspects, such as the structure of the liquidation preference.

Germany 165

Germany Liquidation Preference Option Pool Advisory Board 165

Feld Thoughts

JUNE 10, 2022

Rather, when you have a choice between a financing at a lower valuation and a financing with all kinds of crazy structure to try to maintain a previous valuation, negotiate the best price you can but do a clean financing with no structure. and a bunch of other things.

Down Round 162

Down Round Ratchet Liquidation Preference Participating Preferred 162

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

Feld Thoughts

JUNE 2, 2015

Or, if you just want the paragraph, it’s: “If this note converts at a price higher than the cap that you have been given you agree that in the conversion of the note into equity you agree to allow your stock to be converted such that you will receive no more than a 1x non-participating liquidation preference plus any agreed interest.”.

Liquidation Preference 70

Liquidation Preference Cap Table Angel Investor Post-Money Valuation 70

Feld Thoughts

SEPTEMBER 9, 2015

If private capital is no longer available in the future, these companies will seek a public offering or acquisition. As an investor, would I rather own 30% of a company that is acquired for $300m in cash that had only raised $10m or 2% of a company with a paper value of $1b and $200m of liquidation preferences?

Liquidation Preference 70

Liquidation Preference Burn Rate Balance Sheet .Net 70

Feld Thoughts

JULY 14, 2015

It usually happens in a later round, when the company is in fact worth much less than the liquidation preference overhang and insiders use a pay-to-play and a low valuation to reset the preferences and the cap table. and the investors, who put up $1m in a convertible note, get 0.1%. Sure – it happens.

Recapitalization 70

Recapitalization Pre-Money Valuation Post-Money Valuation Angel Investor 70