Both Sides of the Table

SEPTEMBER 18, 2014

At an accelerator … Me: Raising convertible notes as a seed round is one of the biggest disservices our industry has done to entrepreneurs since 2001-2003 when there were “full ratchets” and “multiple liquidation preferences” – the most hostile terms anybody found in term sheets 10 years ago. And so forth.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

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. That’s called a traditional equity investment. Mr. Wonderful, by contrast typically makes his investment in the form of Debt Securities With Warrants.

Covenant 60

Covenant Liquidation Preference Ratchet Dilution 60

The Startup Toolkit

JANUARY 10, 2017

Investors can delay until you’re desperate and then ratchet the terms. A friend had an amicable breakup with a cofounder who wanted to leave and gave him a full extra year of vested equity as a token of goodwill for all his hard work. But because they have equity, cofounder screwings are different.

Cofounder 20

Cofounder Technical Review Vesting Ratchet 20

The Equity Kicker

NOVEMBER 20, 2015

They had a ‘ratchet’ which repriced their investment in the event of a down round to give them a 20% return. I say that because investors in the $6bn round in Square have still made money on the deal.

IPO 60

IPO Matching Ratchet Valuation 60

Gust

SEPTEMBER 17, 2014

Me: Raising convertible notes as a seed round is one of the biggest disservices our industry has done to entrepreneurs since 2001-2003 when there were “full ratchets” and “multiple liquidation preferences” – the most hostile terms anybody found in term sheets 10 years ago. But lawyers will charge much more for equity.” And so forth.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Growthink Blog

APRIL 25, 2011

Its very charter utterly excludes the notion of fostering development, opting instead for a one-way ratchet that can only lead to longer, more costly development cycles with no improvement in real safety for efficacy.” “Our Our outlook is solely dependent on the FDA. We are doing well in Europe, but the processes for the U.S.

Silicon Valley 69

Silicon Valley Ratchet Private Equity Startup 69

Tim Keane

JANUARY 12, 2010

The investors and the entrepreneurs are – or should be – aware that the price of the company’s equity is set by the market – in simplest terms, what an informed buyer is willing to pay.   Note that this applies only to earl stage Series A-type equity financings and assumes no cash dividends are paid to investors.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

abovethecrowd.com

APRIL 20, 2016

Examples of dirty terms include guaranteed IPO returns, ratchets, PIK Dividends, series-based M&A vetoes, and superior preferences or liquidity rights. I get that you want to grow and I want you to grow, but let’s internally finance that growth by spending gross margin dollars rather than new dilutive dollars of equity.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40