→ More on Liquidation Preferences Posted on December 16, 2010 by admin A long time ago I had asked a VC about what pre-money valuation he was planning to put in a term sheet he had promised to send over. But first, let’s look at pre-money valuation by liquidation preference. MORE
To this day I’m still surprised how few CEOs really understand the differences between 2x liquidation preference and a liquidation preference with a 2x cap. Or what “participating preferred&# stock is and how it can screw you. MORE
We continue our discussion of the Charter provisions with the liquidation preference, which is the most important economic term in the term sheet after the valuation because it establishes the relative rights of the investors and the common stockholders with respect to assets available for distribution when the company winds up its business. The model term sheet includes three alternative provisions for the liquidation preference. MORE
They are most likely (I don't know the terms of the Spotify deal so I am guessing) buying a Preferred Stock that gives them a liquidation preference (their money back or possibly plus some guaranteed return) in the event the company is sold at or below the valuation of their investment. I did a talk with Bill Werde at Billboard's FutureSound conference a few weeks ago. The entire talk is online (in two parts) here. MORE
To better understand the arguments for / against convertible equity I suggest you read my posts on those topics: Is convertible debt preferable to equity? ” And some seed stage investors told me, “I prefer not to fight over price now. million of liquidation preferences. MORE
The terms Liquidation preference: a very important clause… This story continues at The Next Web. Andrej Kiska is an Associate at Credo Ventures. If you haven’t read the first part on equity term sheets, I strongly recommend doing so before moving on. MORE
We continue our discussion of the Charter provisions with the liquidation preference, which is the most important economic term in the term sheet after the valuation because it establishes the relative rights of the investors and the common stockholders with respect to assets available for distribution when the company winds up its business. The model term sheet includes three alternative provisions for the liquidation preference. MORE
Liquidation Preferences : Every now and then you’ll see a liquidation preference in a convertible debt deal. It works the same as it does in a preferred stock deal – the investors get their money back first, or a multiple of their money back first, before any proceeds are distributed to anyone else. Convertible Debt convertible debt interest rate liquidation preferences pro-rata rights MORE
And that too usually when there is sufficient investor demand for the next round, i.e. the leverage needs to be in the company’s hand (rather than investors) for any type of founder liquidity to even be an option. There are several arguments against providing founder liquidity: 1) The money doesn’t go to the company, but into founders’ pockets : Yes, the money from founder liquidity does go to founders’ pockets, but that’s entirely the point. MORE
Depending on the delta between the price cap and the pre-money valuation of the qualified equity financing, the convertible note investors could receive a windfall in terms of liquidation preference. Most convertible notes have a price cap as a feature term. The Potential Problem Let’s say Series A investors invest at a pre-money valuation that [.]. Convertible Notes MORE
They can take their “preference” or right to take their cost (or cost + some extra) back first, before common shareholders get anything. Scenario 2 : Liquidation Preference. As you can imagine, they would only exercise this preference for modest exits. Even though the VCs own 30% of the company, they get 50% of the proceeds as a result of the preference. Scenario 3 : Participating Liquidation Preference. MORE
Most private company financings involve the use of preferred stock with liquidation preferences. These liquidation preferences give the investor a debt-like downside protection. MORE
I’ve seen every imaginable type of liquidation preference structure, pay-to-play dynamic, preferred return, ratchet, share/option bonus, option repricing, and carveout. I suffered through the next financing after implementing a complex structure, or a sale of the company, or a liquidation. Then use the down round to clean up your preference overhang. When I see a carveout being proposed these days, I know there’s a liquidation preference problem. MORE
A liquidation preference is exactly what it sounds like, priority treatment for certain stockholders upon the liquidation, sale, merger, IPO or dissolution of a company. It is a typical Series Preferred Stock right in venture financing transactions. The current financing market, as well as the structure of your prior Series Preferred rounds, will drive the type of liquidation preference you can negotiate for yourself. Series B Preferred. . MORE
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. They raised $2 million but when you add up all of the liquidation preferences if they convert at our proposed share price the total liquidation preferences would equal more than $7 million. MORE
There's also the aspect that the equity that you typically get as part of equity compensation is behind other equity in preference and thus effectively has lower value. MORE
We’ve updated our Foundry Group web site with the new Liquidation Preference beer photo. Foundry Group beer diversion i'm a vc liquidation preference websiteEveryone needs a diversion. MORE
ii) why are convertible notes issued instead of shares of common or preferred stock? If the noteholders invested $500,000 and the price per share of the Series A Preferred Stock were $1.00, the noteholders would convert the loan at an effective price of $0.50 MORE
Liquidation Preference is an important term when negotiating terms of an investment. The term can be made up of essentially two parts that dictates when and how much an investor may receive upon a liquidation, trade sell, or other non-IPO exit. revealed that the latest Series C holders were willing to compromise some on the Liquidation Preference in order to obtain a stake in the company. Liquidation Preferences can best be explained through an example. MORE
ii) why are convertible notes issued instead of shares of common or preferred stock? In the context of a seed financing, the debt typically automatically converts into shares of preferred stock upon the closing of a Series A round of financing. MORE
When you do a convertible note with a cap that converts into the next round of funding one of the unintended consequences is that if you’re successful and raise at a larger price than your cap the early angels often get “multiple liquidation preferences” on their dollars in. When that initial note converts in stead of $500,000 liquidation preference they would get $2.5 They get their full investment as a 1x liquidation preference. MORE
All of the deals had a liquidation preference of 1x or more. However, few of the deals went beyond a simple 1x non-participating preference share. I always wondered if companies were accepting multiple liquidation preferences in exchange for high valuations, but that was only the case in 3% of the deals analysed. Last May law firm Fenwick and West published an analysis of the 37 US unicorn deals that happened in the twelve months ending 31st March 2015. MORE
Liquidation Preference is an important term when negotiating terms of an investment. The term can be made up of essentially two parts that dictates when and how much an investor may receive upon a liquidation, trade sell, or other non-IPO exit. revealed that the latest Series C holders were willing to compromise some on the Liquidation Preference in order to obtain a stake in the company. Liquidation Preferences can best be explained through an example MORE
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.”. As an angel investor, I have never asked for a liquidation preference on conversion that is greater than the dollars I’ve invested. MORE
He initially invested about $7 million into the company, profiting $25 million in preferred stock and about $14 million with his common stock. There's an interesting TechCrunch post a while back on the amount of money different people made on the Google acquisition of Slide. MORE
I get a lot of heat every time I mention that I won't invest without a liquidation preference. The reason Fidelity, Founders Fund, and Mayfield got their money back is they had a liquidation preference. People say that it means I don't want to take a risk. I am happy to take a risk. We do it every time we make an investment. We lose money on some of them and I can live with losing money. It is the price you have to pay for the opportunity to make money. MORE
[link] I posted on my personal blog about why startups should be very concerned about liquidation preferences. Take a look and come back to comment. Filed under: Startups. MORE
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? The current usage of the word unicorn makes me tired. MORE
Down: Liquidation preference. Term Sheet board seat liquidation preference pro-rata terms VCAt the HBS VC Alumni event I was at last week (no – I didn’t go to HBS – I was a panelist) I heard a great line from a wise old VC who has been a VC about as long as I’ve existed on this planet. MORE
So my suggestion here is that (a) you accept the fact that in exchange for the 15K investment you are paying a 20K liquidation preference and 10% of the gross revenue, and that such payments and repayment will inure to the benefit of your investor and his estate, and (b) that you immediately go to a lawyer, and have the lawyer re-draft your agreement to supersede the home-grown one that you are now using. MORE
Here are the issues I have addressed to date: common mistakes dealing with VC’s valuation liquidation preferences stock options exploding term sheets and no-shop provisions anti-dilution provisions dividends Board control protective provisions drag-along provisions pay-to-play and pull-up provisions In today’s post, I examine conversion rights of investors. As many of you know, VC investors are typically issued shares of preferred stock, not common stock. MORE
@altgate Startups, Venture Capital & Everything In Between Skip to content Home Furqan Nazeeri (fn@altgate.com) ← Holiday Cards Year End Management Changes → The 3X Liquidation Preference Is Back! Let’s recap how expensive a 3x liquidation preference really is. MORE
Convertible vs. Participating Preferred. Liquidation Preferences. A few days ago I answered a question on AsktheVC about modeling cap tables. After a quick email conversation with Jeff Boardman (founder of LearnVC ), I realize I had left his product off the list. Jeff has done a nice job building a site that both models a cap table and provides a lot of information to empower entrepreneurs both with educational resources and software tools. MORE
Things like “ participating preferred stock &# in legalese unsurprisingly never actually call out, “hey, this is the participating preferred language.&# We got a3x participating liquidation preference with interest (not participating with a 3x cap, but 3x participating. MORE
Liquidation preferences are a common thing to see in a term sheet. Although many sites break down what liquidation preferences mean, I hardly see examples of each preference. I decided to break down the common liquidation preferences with examples for easy reference. Liquidation Preferences. A liquidation preference is the ability for the investors to take there money out before the money left over is divided among the shareholders. MORE
Continuing with the “No Mess” theme of commenting on things that give VCs pause, I thought it would be good to touch on liquidation preference. Specifically, “too much” liquidation preference (I will use “LP” for liquidation preference). As most of you probably know, LP is one of the fundamental economic attributes of preferred stock that preferred shareholders enjoy. MORE
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. I know how to structure around that to protect the founders from getting screwed on a multiple liquidation preference. This week. MORE
What Is A Liquidation Preference? Miscellaneous antidilution crowdfunding legal checklist liquidation preference no shop startup startups term sheetsBelow is a list of my top ten posts in 2011 based solely on pageviews. Indeed, I was inspired by Chris Dixon and his post of last night (which you should definitely check-out). Moreover, I’m publishing an eBook with Hyperink entitled The Startup Law Playbook , which should be available shortly. MORE
I discussed Change of Control, Reverse Vesting, and Liquidation Preferences in … Continue reading → Equity / Debt / Venture Funding You came, you pitched, you conquered. Congratulations! But do you know what to do once you’re asked to sign a term sheet? Let me say that first, you should have already retained a good startup lawyer. Most investors will expect this. MORE
Liquidation preferences have always seemed to be a case of having your cake and eating it too for investors. I’m guessing the original intent was strictly for downside protection. But it’s become a way for investors to guarantee a certain upside–risk mitigation at the expense of common. Put another way, it’s terms like these that value [.]. MORE
And that too usually when there is sufficient investor demand for the next round, i.e. the leverage needs to be in the company’s hand (rather than investors) for any type of founder liquidity to even be an option. There are several arguments against providing founder liquidity: 1) The money doesn’t go to the company, but into founders’ pockets : Yes, the money from founder liquidity does go to founders’ pockets, but that’s entirely the point. MORE
It turns out that ‘time bomb’ is the much maligned and, I suspect, little understood, liquidation preference. To be clear, liquidation preferences are sometimes used badly and founders should generally turn away from investors who ask for multiple liquidation preferences. However, most of the later rounds or companies raise feature simple 1x liquidation preferences and we’re fine with that. MORE
In most equity financing rounds, an investor will ask for (and get) a term called a liquidation preference. 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., The amount of the liquidation preference is usually expressed as a multiple, with the most common liquidation preference being “1X non-participating.” MORE
Liquidation Preference Related Topics The Equity Kicker
NOVEMBER 9, 2016
It turns out that ‘time bomb’ is the much maligned and, I suspect, little understood, liquidation preference. To be clear, liquidation preferences are sometimes used badly and founders should generally turn away from investors who ask for multiple liquidation preferences. However, most of the later rounds or companies raise feature simple 1x liquidation preferences and we’re fine with that.
The Startup Lawyer
JANUARY 10, 2012
In most equity financing rounds, an investor will ask for (and get) a term called a liquidation preference. 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., The amount of the liquidation preference is usually expressed as a multiple, with the most common liquidation preference being “1X non-participating.”
Recent Buzzes - VC Experts, Inc.
SEPTEMBER 6, 2011
Liquidation Preference is an important term when negotiating terms of an investment. The term can be made up of essentially two parts that dictates when and how much an investor may receive upon a liquidation, trade sell, or other non-IPO exit. revealed that the latest Series C holders were willing to compromise some on the Liquidation Preference in order to obtain a stake in the company. Liquidation Preferences can best be explained through an example.
Feld Thoughts
MAY 7, 2012
Down: Liquidation preference. Term Sheet board seat liquidation preference pro-rata terms VCAt the HBS VC Alumni event I was at last week (no – I didn’t go to HBS – I was a panelist) I heard a great line from a wise old VC who has been a VC about as long as I’ve existed on this planet.
VC Deal Lawyer
FEBRUARY 15, 2010
A liquidation preference is exactly what it sounds like, priority treatment for certain stockholders upon the liquidation, sale, merger, IPO or dissolution of a company. It is a typical Series Preferred Stock right in venture financing transactions. The current financing market, as well as the structure of your prior Series Preferred rounds, will drive the type of liquidation preference you can negotiate for yourself. Series B Preferred. .
Ask The VC
SEPTEMBER 29, 2011
Liquidation Preferences : Every now and then you’ll see a liquidation preference in a convertible debt deal. It works the same as it does in a preferred stock deal – the investors get their money back first, or a multiple of their money back first, before any proceeds are distributed to anyone else. Convertible Debt convertible debt interest rate liquidation preferences pro-rata rights
StartupCFO
OCTOBER 1, 2013
They can take their “preference” or right to take their cost (or cost + some extra) back first, before common shareholders get anything. Scenario 2 : Liquidation Preference. As you can imagine, they would only exercise this preference for modest exits. Even though the VCs own 30% of the company, they get 50% of the proceeds as a result of the preference. Scenario 3 : Participating Liquidation Preference.
Scott Edward Walker
APRIL 9, 2012
ii) why are convertible notes issued instead of shares of common or preferred stock? In the context of a seed financing, the debt typically automatically converts into shares of preferred stock upon the closing of a Series A round of financing.
K9 Ventures
NOVEMBER 21, 2011
And that too usually when there is sufficient investor demand for the next round, i.e. the leverage needs to be in the company’s hand (rather than investors) for any type of founder liquidity to even be an option. There are several arguments against providing founder liquidity: 1) The money doesn’t go to the company, but into founders’ pockets : Yes, the money from founder liquidity does go to founders’ pockets, but that’s entirely the point.
K9 Ventures
NOVEMBER 21, 2011
And that too usually when there is sufficient investor demand for the next round, i.e. the leverage needs to be in the company’s hand (rather than investors) for any type of founder liquidity to even be an option. There are several arguments against providing founder liquidity: 1) The money doesn’t go to the company, but into founders’ pockets : Yes, the money from founder liquidity does go to founders’ pockets, but that’s entirely the point.
Scott Edward Walker
DECEMBER 29, 2011
What Is A Liquidation Preference? Miscellaneous antidilution crowdfunding legal checklist liquidation preference no shop startup startups term sheetsBelow is a list of my top ten posts in 2011 based solely on pageviews. Indeed, I was inspired by Chris Dixon and his post of last night (which you should definitely check-out). Moreover, I’m publishing an eBook with Hyperink entitled The Startup Law Playbook , which should be available shortly.
A VC : Venture Capital and Technology
AUGUST 6, 2010
I get a lot of heat every time I mention that I won't invest without a liquidation preference. The reason Fidelity, Founders Fund, and Mayfield got their money back is they had a liquidation preference. People say that it means I don't want to take a risk. I am happy to take a risk. We do it every time we make an investment. We lose money on some of them and I can live with losing money. It is the price you have to pay for the opportunity to make money.
Constantly Learning
AUGUST 14, 2012
Liquidation preferences are a common thing to see in a term sheet. Although many sites break down what liquidation preferences mean, I hardly see examples of each preference. I decided to break down the common liquidation preferences with examples for easy reference. Liquidation Preferences. A liquidation preference is the ability for the investors to take there money out before the money left over is divided among the shareholders.
Altgate
DECEMBER 16, 2010
→ More on Liquidation Preferences Posted on December 16, 2010 by admin A long time ago I had asked a VC about what pre-money valuation he was planning to put in a term sheet he had promised to send over. But first, let’s look at pre-money valuation by liquidation preference.
Recent Buzzes - VC Experts, Inc.
SEPTEMBER 5, 2011
Liquidation Preference is an important term when negotiating terms of an investment. The term can be made up of essentially two parts that dictates when and how much an investor may receive upon a liquidation, trade sell, or other non-IPO exit. revealed that the latest Series C holders were willing to compromise some on the Liquidation Preference in order to obtain a stake in the company. Liquidation Preferences can best be explained through an example
charliecrystle.com
JULY 26, 2010
[link] I posted on my personal blog about why startups should be very concerned about liquidation preferences. Take a look and come back to comment. Filed under: Startups.
Scott Edward Walker
JUNE 9, 2011
Here are the issues I have addressed to date: common mistakes dealing with VC’s valuation liquidation preferences stock options exploding term sheets and no-shop provisions anti-dilution provisions dividends Board control protective provisions drag-along provisions pay-to-play and pull-up provisions In today’s post, I examine conversion rights of investors. As many of you know, VC investors are typically issued shares of preferred stock, not common stock.
Both Sides of the Table
MAY 30, 2015
When you do a convertible note with a cap that converts into the next round of funding one of the unintended consequences is that if you’re successful and raise at a larger price than your cap the early angels often get “multiple liquidation preferences” on their dollars in. When that initial note converts in stead of $500,000 liquidation preference they would get $2.5 They get their full investment as a 1x liquidation preference.
VC Ready Blog
JUNE 29, 2010
We continue our discussion of the Charter provisions with the liquidation preference, which is the most important economic term in the term sheet after the valuation because it establishes the relative rights of the investors and the common stockholders with respect to assets available for distribution when the company winds up its business. The model term sheet includes three alternative provisions for the liquidation preference.
Altgate
DECEMBER 18, 2008
@altgate Startups, Venture Capital & Everything In Between Skip to content Home Furqan Nazeeri (fn@altgate.com) ← Holiday Cards Year End Management Changes → The 3X Liquidation Preference Is Back! Let’s recap how expensive a 3x liquidation preference really is.
Feld Thoughts
FEBRUARY 9, 2016
I’ve seen every imaginable type of liquidation preference structure, pay-to-play dynamic, preferred return, ratchet, share/option bonus, option repricing, and carveout. I suffered through the next financing after implementing a complex structure, or a sale of the company, or a liquidation. Then use the down round to clean up your preference overhang. When I see a carveout being proposed these days, I know there’s a liquidation preference problem.
ithacaVC
DECEMBER 14, 2011
Continuing with the “No Mess” theme of commenting on things that give VCs pause, I thought it would be good to touch on liquidation preference. Specifically, “too much” liquidation preference (I will use “LP” for liquidation preference). As most of you probably know, LP is one of the fundamental economic attributes of preferred stock that preferred shareholders enjoy.
Scott Edward Walker
APRIL 22, 2012
ii) why are convertible notes issued instead of shares of common or preferred stock? If the noteholders invested $500,000 and the price per share of the Series A Preferred Stock were $1.00, the noteholders would convert the loan at an effective price of $0.50
Feld Thoughts
SEPTEMBER 9, 2015
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? The current usage of the word unicorn makes me tired.
charliecrystle.com
FEBRUARY 3, 2010
Liquidation preferences have always seemed to be a case of having your cake and eating it too for investors. I’m guessing the original intent was strictly for downside protection. But it’s become a way for investors to guarantee a certain upside–risk mitigation at the expense of common. Put another way, it’s terms like these that value [.].
Both Sides of the Table
SEPTEMBER 5, 2012
To better understand the arguments for / against convertible equity I suggest you read my posts on those topics: Is convertible debt preferable to equity? ” And some seed stage investors told me, “I prefer not to fight over price now. million of liquidation preferences.
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.”. As an angel investor, I have never asked for a liquidation preference on conversion that is greater than the dollars I’ve invested.
ArcticStartup
AUGUST 19, 2010
He initially invested about $7 million into the company, profiting $25 million in preferred stock and about $14 million with his common stock. There's an interesting TechCrunch post a while back on the amount of money different people made on the Google acquisition of Slide.
Both Sides of the Table
JULY 22, 2010
Things like “ participating preferred stock &# in legalese unsurprisingly never actually call out, “hey, this is the participating preferred language.&# We got a3x participating liquidation preference with interest (not participating with a 3x cap, but 3x participating.
The Equity Kicker
MARCH 3, 2016
All of the deals had a liquidation preference of 1x or more. However, few of the deals went beyond a simple 1x non-participating preference share. I always wondered if companies were accepting multiple liquidation preferences in exchange for high valuations, but that was only the case in 3% of the deals analysed. Last May law firm Fenwick and West published an analysis of the 37 US unicorn deals that happened in the twelve months ending 31st March 2015.
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. I know how to structure around that to protect the founders from getting screwed on a multiple liquidation preference. This week.
SoCal CTO
SEPTEMBER 27, 2011
There's also the aspect that the equity that you typically get as part of equity compensation is behind other equity in preference and thus effectively has lower value.
A VC : Venture Capital and Technology
DECEMBER 2, 2012
They are most likely (I don't know the terms of the Spotify deal so I am guessing) buying a Preferred Stock that gives them a liquidation preference (their money back or possibly plus some guaranteed return) in the event the company is sold at or below the valuation of their investment. I did a talk with Bill Werde at Billboard's FutureSound conference a few weeks ago. The entire talk is online (in two parts) here.
Early Growth Financial Services
DECEMBER 4, 2014
I discussed Change of Control, Reverse Vesting, and Liquidation Preferences in … Continue reading → Equity / Debt / Venture Funding You came, you pitched, you conquered. Congratulations! But do you know what to do once you’re asked to sign a term sheet? Let me say that first, you should have already retained a good startup lawyer. Most investors will expect this.
The Next Web
FEBRUARY 15, 2015
The terms Liquidation preference: a very important clause… This story continues at The Next Web. Andrej Kiska is an Associate at Credo Ventures. If you haven’t read the first part on equity term sheets, I strongly recommend doing so before moving on.
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. They raised $2 million but when you add up all of the liquidation preferences if they convert at our proposed share price the total liquidation preferences would equal more than $7 million.
Ask The VC
AUGUST 23, 2011
Convertible vs. Participating Preferred. Liquidation Preferences. A few days ago I answered a question on AsktheVC about modeling cap tables. After a quick email conversation with Jeff Boardman (founder of LearnVC ), I realize I had left his product off the list. Jeff has done a nice job building a site that both models a cap table and provides a lot of information to empower entrepreneurs both with educational resources and software tools.
Both Sides of the Table
JULY 25, 2011
To this day I’m still surprised how few CEOs really understand the differences between 2x liquidation preference and a liquidation preference with a 2x cap. Or what “participating preferred&# stock is and how it can screw you.
abovethecrowd.com
FEBRUARY 24, 2015
Most private company financings involve the use of preferred stock with liquidation preferences. These liquidation preferences give the investor a debt-like downside protection.
Gust
APRIL 16, 2014
So my suggestion here is that (a) you accept the fact that in exchange for the 15K investment you are paying a 20K liquidation preference and 10% of the gross revenue, and that such payments and repayment will inure to the benefit of your investor and his estate, and (b) that you immediately go to a lawyer, and have the lawyer re-draft your agreement to supersede the home-grown one that you are now using.
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