Both Sides of the Table

SEPTEMBER 2, 2009

If a company has reached a level of success, has been around for a few years and you believe the company has potential to break out into a much bigger company then you should let the founders take money off of the table. Founders however are asked to take low salaries and never really get back the time they worked for free.

Founder 329

Founder Liquidation Preference Term Sheet Participating Preferred 329

Berkonomics

JANUARY 6, 2022

First, the marginal exit event: Sometimes the end game or sale of the company is not a happy event for the early investors, including the entrepreneur or the founders. Most sophisticated investors will take either a promissory note or preferred stock, both of which come before founder or management stock in a sale or liquidation.

Dividend 62

Dividend IRR Preferred Stock Participating Preferred 62

Scott Edward Walker

JUNE 9, 2019

Accordingly, I thought it would be helpful for founders to discuss these rights and to point out the problems they create for startups. This is a huge red flag and founders should push back very hard. In short, super pro rata rights are another example of investors trying to take advantage of inexperienced founders.

Preferred Stock 56

Preferred Stock Term Sheet Dilution Stock 56

The Startup Lawyer

JANUARY 10, 2012

A liquidation preference is the amount that must be paid to a preferred stock holder before any sale proceeds may be paid to the holders of common stock (i.e., founders, option holders, etc.).

Liquidation Preference 73

Liquidation Preference Pre-Money Valuation Participating Preferred Preferred Stock 73

The Startup Toolkit

NOVEMBER 4, 2011

Next, we check that we’re safe from any particularly onerous terms like participation preferred. The second is a tranched deal, which is always a bad compromise for founders. Looks good. Regarding structure, the first deal is a rolling round with committed lead investors. your website.

Term Sheet 31

Term Sheet Dilution Participating Preferred B2C 31

Startup Company Lawyer

MARCH 14, 2010

Founders Institute Plain Preferred Term Sheet (by WSGR – disclaimer, I represent the Founders Institute and was involved in drafting this document). The primary rights in these documents, ranked in order of importance in my opinion are: Non-participating preferred liquidation preference. Drag-along.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Early Growth Financial Services

FEBRUARY 3, 2015

This post by Ian Engstrand first appeared on Founders Workbench. From time to time on Founders Workbench we give a brief primer on common terms and issues in venture financings. Participating versus non-participating: what’s the difference? management). management).

Preferred Stock 28

Preferred Stock Stock Finance Participating Preferred 28

The Equity Kicker

JANUARY 25, 2016

We need a new disruptive capitalism that is designed for a much more mature internet market, one that can bring founders, investors, and employees together. I would summarise that as getting the fundamentals right – from great product, through unit economics to stakeholder alignment.

Venture Capital 60

Venture Capital Angel Investor Startup Participating Preferred 60

Lightspeed Venture Partners

OCTOBER 1, 2012

Many VCs won’t even consider an investment in a company where the founders are expressly looking to exit early. The company has been run as a hobby by the two founders, yet has made around $130k in profit, due in large part to very high gross margins. They want to see an opportunity for 10x or even 100x returns.

Pre-Money Valuation 158

Pre-Money Valuation Valuation Participating Preferred Preferred Stock 158

The Startup Toolkit

NOVEMBER 4, 2011

Next, we check that we’re safe from any particularly onerous terms like participation preferred. The second is a tranched deal, which is always a bad compromise for founders. Looks good. Regarding structure, the first deal is a rolling round with committed lead investors. your website.

Term Sheet 20

Term Sheet Dilution Participating Preferred B2C 20

Berkonomics

OCTOBER 1, 2015

Sometimes the end game or sale of the company is not a happy event for the early investors, including the entrepreneur or the founders. Most sophisticated investors will take either a promissory note or preferred stock, both of which come before founder or management stock in a sale or liquidation.

Dividend 48

Dividend Preferred Stock IRR Participating Preferred 48

The Equity Kicker

JULY 4, 2012

Fast forward twelve months and the founders are back in the same pub deciding to raise a Series B, but feeling older and wiser this time round. Nicholas and I want it to be a book we can be proud of and that means doing more than putting the blog posts back to back with an introduction and some nice cover art.

Venture Capital 107

Venture Capital Due Diligence Participating Preferred Dilution 107

Both Sides of the Table

APRIL 14, 2010

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. Liquidation preference is the amount of money that an investor gets paid before the common stock (e.g.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

Scott Edward Walker

APRIL 9, 2012

As a result, the pendulum has swung dramatically in the founders’ favor, and the issuance of convertible notes for seed financing has never been more prolific. ii) why are convertible notes issued instead of shares of common or preferred stock? Indeed, as a corporate lawyer for 18+ years, I have seen this development first-hand. (ii)

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Professor VC

JULY 25, 2013

I''m a strong believer in fairness (although my daughters may not agree) and investors and entrepreneurs working together as a team to create something valuable to all stakeholders (customers, employees, founders, investors). Their response was that we should be happy they didn''t ask for a participating preference on top of the seniority.

Term Sheet 46

Term Sheet Silicon Valley Syndicate Syndication 46

Altgate

DECEMBER 18, 2008

Let’s recap how expensive a 3x liquidation preference really is. Say you raise $8MM at $17MM pre-money ($25MM post) with a 3x participating preferred. But non-management employees and founders will be thrown table scraps and crushed down. You could probably find some pawn shops that offer cash more cheaply.

Liquidation Preference 31

Liquidation Preference Venture Capital Post-Money Valuation Participating Preferred 31

www.payne.org

SEPTEMBER 22, 2011

2 Stock Classes: Common and Preferred. 6 Founders / Restricted Stock. UPDATE: If youre a founder or near-founder, your equity terms are likely defined by the funding terms negotiated with the investors. Most venture-funded startups have different classes of stock: common and various flavors of preferred.

Equity 56

Equity Employee Vesting Preferred Stock 56

ConversionXL

MAY 31, 2016

Talia Wolf, Founder of Conversioner, calls this “shortcutting” , and there are several mobile-specific features that do an AMAZING job of shortcutting the conversion process. Furthermore, the same study found that an incredible 100% of participants preferred sites with sticky navigation bars, despite often not knowing why.

Mobile 48

Mobile Conversion Design Participating Preferred 48

ConversionXL

JULY 12, 2017

While there are many concrete definitions out there, I like how Peep Laja, founder of CXL, explained it in a past blog post … Peep Laja: “First of all, UI (user interface) is not UX (user experience). Which, if you’re in the ecommerce space, you’re undoubtedly interested in. What is user experience, exactly?

eCommerce 100

eCommerce Mobile Conversion Design 100

ConversionXL

JULY 12, 2017

While there are many concrete definitions out there, I like how Peep Laja, founder of CXL, explained it in a past blog post … Peep Laja: “First of all, UI (user interface) is not UX (user experience). Which, if you’re in the ecommerce space, you’re undoubtedly interested in. What is user experience, exactly?

eCommerce 95

eCommerce Mobile Conversion Design 95