The Equity Kicker

JANUARY 25, 2016

Startups everywhere will need to adjust their fundraising strategies and good investors will be helping them to adjust quickly – it’s much less painful that way. In his post The end of the big venture formula Danny Crichton put it like this: What’s needed is a sustainable approach to startup growth and venture capital.

Venture Capital 60

Venture Capital Angel Investor Startup Participating Preferred 60

Lightspeed Venture Partners

OCTOBER 1, 2012

There is a lot of momentum in startups. The entrepreneur said no right away, said that it was too much equity, and replied, “I’m not begging for anything, I’m offering something” This was characterized by the show’s producers as arrogance, and Daymond agreed. When they work, they work fast.

Pre-Money Valuation 158

Pre-Money Valuation Valuation Participating Preferred Preferred Stock 158

The Equity Kicker

NOVEMBER 9, 2016

a 1x non-participating preference share) and the company is successful enough to raise a couple of million or more the complexity and misalignment are more than manageable. Moreover, in the rare situation where investors offer a choice management almost always go for the higher valuation.

Liquidation Preference 122

Liquidation Preference Silicon Valley Participating Preferred Common Stock 122

Both Sides of the Table

APRIL 14, 2010

Once you cross the threshold where their percentage ownership would be worth more than the value of their preference they “convert&# their preferred stock into common stock and take their proceeds pari passu (along side and on the same terms as you) with the common stock holder. The list goes on. Legacy deals have “hair.&#.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

ithacaVC

NOVEMBER 18, 2011

Recall from the prior post that an executive’s allocation from the carve out pool is normally reduced by the value of that executive’s equity (if any) at the time of the change of control triggering the carve out payment. This is to make sure that the executive does not double dip (i.e.,

Management 49

Management Preferred Stock Participating Preferred Equity 49

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? What is a Convertible Note?

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Professor VC

JULY 25, 2013

Startup outcomes tend to be very binary. Yes, there are a number of cases in the middle where having a senior or participating preference does make a difference in liquidation proceeds, but I argue that it does very little to overall returns in a diversified portfolio. Unfortunately, not everyone follows the KISS principle.

Term Sheet 46

Term Sheet Silicon Valley Syndicate Syndication 46

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