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. When convertible debt first started being introduced as a “faster, cheaper way to get startups funded” they didn’t have pricing built into them.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Both Sides of the Table

SEPTEMBER 28, 2013

So as a startup CEO you constantly have to suspend disbelief. ” A startup CEO’s job is to absorb stress so the team doesn’t have to. Startups have to be optimists because no rational person would actually believe you could build Uber into the amazing company that it is today. We just need your $500,000!!”

Startup 417

Startup Dilution San Diego Stock Options 417

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 Professionals Musings

JANUARY 27, 2012

The price is the percent of ownership given to the investor, calculated as “investment/post-money valuation.” The pre-money valuation is company value today, while the post-money valuation is the pre-money valuation plus the investment amount. Liquidation preference. Seat on the board.

Term Sheet 223

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 223

Feld Thoughts

FEBRUARY 9, 2016

Mark Suster wrote a great post yesterday titled The Resetting of the Startup Industry. Much of it is very short term focused and, like a giant tractor beam, draws the conversation into a very short time horizon (as in days or weeks). But, as you raise more money at higher valuations, this will normalize.

Cap Table 70

Cap Table Down Round Liquidation Preference Founder 70

Startup Professionals Musings

SEPTEMBER 14, 2010

The price is the percent of ownership given to the investor, calculated as “investment/post-money valuation.” The pre-money valuation is company value today, while the post-money valuation is the pre-money valuation plus the investment amount. Liquidation preference. Seat on the board. Marty Zwilling.

Term Sheet 227

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 227

Scott Edward Walker

APRIL 22, 2012

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. and (ii) what happens if the maturity date is reached prior to the note’s conversion to equity?

Pre-Money Valuation 72

Pre-Money Valuation Finance Liquidation Preference Founder 72

Scott Edward Walker

APRIL 9, 2012

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. ii) what happens if the maturity date is reached prior to the note’s conversion to equity? price the round).

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

VC Cafe

OCTOBER 31, 2022

It’s a tough time for a lot of startup founders right now. Mature startups with proven business models and the potential to reach the public markets within a few years will be the safest place to park any new venture capital that comes into the ecosystem. Startups, Don’t Pin Your Hopes on VC Dry Powder ( Source ).

Founder 173

Founder Technical Review Down Round Liquidation Preference 173

The Startup Lawyer

JANUARY 10, 2011

Both sets of advice tend to ignore the gap between an investor’s expression of investment interest and your startup’s receipt of the term sheet. Term sheet purgatory can seem like is an eternity for a startup, although it may last from one week to over one month. And this has potential negative consequences for the startup.

Term Sheet 64

Term Sheet Pre-Money Valuation Liquidation Preference Option Pool 64

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

genylabs.typepad.com

SEPTEMBER 24, 2011

Planning, Startups, Stories. 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. Small Business Blogs. OReilly Radar.

Equity 40

Equity Technical Review San Jose Stock 40

Feld Thoughts

FEBRUARY 28, 2023

KG companies have decisive tax disadvantages for startups and are, therefore, rarely used in this area. 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 is usually done by adjusting the conversion price.

Germany 165

Germany Liquidation Preference Option Pool Advisory Board 165

Scott Edward Walker

SEPTEMBER 14, 2011

Once a startup has executed a term sheet, it has lost all of its negotiating leverage. What Are the Key Issues for Founders? Indeed, some very pro-entrepreneur investors, like Fred Wilson , do not require no-shop provisions (see rule #4 in Fred’s post “ Competing To Win Deals ”).

Term Sheet 76

Term Sheet Due Diligence Liquidation Preference Redemption 76

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

Hunter Walker

NOVEMBER 23, 2015

So we want someone who is a very solid engineer, who cares about customers, who wants to be in a startup environment, but who also has a strong sense of engineering quality and skill. I also did the obvious conversation about how it’s the starting line not the finish line. We test for both engineering skill and the softer skills.

Engineer 48

Engineer Liquidation Preference AJAX IPO 48

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.

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. Lost in this conversation are the dramatic differences between a high priced private round and an IPO. Conversely, these late stage private rounds have no such pageantry or process.

IPO 40

IPO Liquidation Preference Valuation Technical Review 40

Austin Startup

AUGUST 1, 2017

This is most clearly highlighted in the “unicorn” boom we all saw over the past few years, where founders raised very large rounds, with terms very onerous to the underlying common stock, hoping they could eventually justify billion dollar valuations to skeptical acquirers or public market investors. Angels/Seed Funds v.

Liquidation Preference 48

Liquidation Preference Common Stock Valuation Silicon Valley 48

Both Sides of the Table

SEPTEMBER 8, 2012

I recently wrote about my views that startups rounds should be priced. It has both a “full rachet” and “multiple liquidation preferences.” Here is what I recommend very often – privately – to startup entrepreneurs for angel funding. We plan to raise at a $5 million pre-money valuation.

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

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.

Liquidation Preference 57

Liquidation Preference Finance Preferred Stock Common Stock 57

Austin Startup

APRIL 1, 2017

They’ll focus on high-level issues like valuation, liquidation preference, and board composition (# of seats), and then prematurely check out once a term sheet is signed. Does the candidate regularly invest in other startups alongside your investors, perhaps as part of a seed fund, accelerator network, or other group?

Term Sheet 48

Term Sheet Institutional Investors Technical Review Lead Investor 48