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).

Liquidation Preference 49

Liquidation Preference LP Preferred Stock Liquidity Event 49

Both Sides of the Table

FEBRUARY 23, 2015

I wrote this conundrum and the need to take charge of how the market define your skills in my much-read blog post on “ personal branding.” ” If you don’t create the message about yourself, the market will. And if you want to be a CEO one day you need the messaging to reflect that.

Technical Review 150

Technical Review Liquidation Preference Silicon Valley IP 150

Steve Blank

MARCH 16, 2016

For the first few years, your VCs want you to keep your head down, build the product, find product/market fit and ship to get to some inflection point (revenue, users, etc.). Or as with consumer deals, is the value is ascribed by the market? Step 6: Know the inflection points for an acquisition in your market.

Liquidity Event 120

Liquidity Event Founder Liquidation Preference Venture Capital 120

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.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Both Sides of the Table

SEPTEMBER 16, 2010

Markets like these are very kind to angel investors because you get taken out early and see a nice pop on your investment. I know some people think the whole market has been disrupted and startups and funding work differently these days. Total disruption on the funding market? This is actually the norm. I doubt it.

Cap Table 283

Cap Table Angel Investor Liquidation Preference Deal Flow 283

The Equity Kicker

OCTOBER 22, 2012

In today’s fast moving markets it’s often hard to know at the outset just how big your true opportunity is, and the smart play is not to let your investment get too far ahead of your current best guess outcome (note best guess , not best case ).

Liquidation Preference 134

Liquidation Preference Distribution Web Conversion 134

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. Can you imagine investing in the stock market where your price was determined at a future date and the better that company performed the HIGHER the price you paid for that investment.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

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

Gust

NOVEMBER 15, 2012

Parts of the answer are that (a) there are enormous regulatory requirements relating to secondary markets, and (b) there are no analysts tracking private company stocks.

Seed Stage 131

Seed Stage Hockey Stick Cap Table Liquidation Preference 131

Both Sides of the Table

FEBRUARY 15, 2016

It’s a very personal topic and I’d like to offer you a framework to decide for yourself, based on the following factors: How Long is it Taking to Raise Capital at Your Stage in the Market? Go hard and hope that the market will validate your innovation even if the price may be higher than the market may want to bear.

Burn Rate 150

Burn Rate Cap Table Valuation Software Review 150

Feld Thoughts

FEBRUARY 9, 2016

Once again, as we find ourselves in the middle of a significant public market correction, especially around technology stocks, there’s an enormous amount of noise in the system, as there always is. I suffered through the next financing after implementing a complex structure, or a sale of the company, or a liquidation.

Cap Table 70

Cap Table Down Round Liquidation Preference Founder 70

The Equity Kicker

JUNE 28, 2013

Otherwise the investors won’t make the multiple on their investment that they want and after liquidation preferences are paid the amount left for the entrepreneur may well also be disappointing. Company exits for £20m having raised £15m for 50% of the company in a 1x liquidation preference – the investor gets £17.5m

Liquidation Preference 116

Liquidation Preference Valuation Portfolio Operations 116

A Smart Bear: Startups and Marketing for Geeks

SEPTEMBER 8, 2010

Thoughts on marketing, technology commercialization and Silicon Valley startups by a high tech executive. Great basic guide on VC / Startup liquidation preferences: [link]. Beware the trappings of liquidation preference | VentureBeat. Thrice Around the Block: The Growth Mystique: A Silicon Valley Parable.

Liquidation Preference 216

Liquidation Preference Silicon Valley Startup Software 216

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. Cashflow projections? I’m not sure. I see that all the time.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Tim Keane

JANUARY 12, 2010

Bottom Up Market Sizing » January 12, 2010. Good investors use the valuation discussions to gauge the business savvy of the management team and to understand their ability to appreciate and deal with economic market forces that set values. Startups and angels: Along the way to success. times at 5 years and 11.39 here of 7.65 [2].

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

The Equity Kicker

MARCH 3, 2016

The headline finding was that the unicorn investors had significantly more downside protection than public market investors. 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. Median valuation: $1.6bn.

Liquidation Preference 60

Liquidation Preference Participating Preferred Valuation IPO 60

Both Sides of the Table

JANUARY 21, 2010

Consider it a sales & marketing expense for them. You need to know how liquidations preferences work. Most lawyers that work with startups are willing to work on a deferred payment schedule. They’ll only do this if they believe you’re a high potential team and are likely to raise money at some point.

Southern California 318

Southern California Silicon Valley IP Stock Options 318

Up and Running

MAY 21, 2015

They generally also get additional rights that common shareholders don’t get, such as anti-dilution protection, and liquidation preference (discussed further below). Liquidation preference. Whether that’s true or not depends in no small part on how the liquidation preference clause was negotiated with outside investors.

Covenant 60

Covenant Liquidation Preference Ratchet Dilution 60

Up and Running

AUGUST 17, 2015

Between my experiences as a management consultant, as well as my product and marketing roles at multiple tech companies, I felt that I had enough operational experience to make that leap sooner than later. C Corp versus LLC, non-competes, liquidation preferences, preferred versus common stock, and so on).

Entrepreneur 60

Entrepreneur Cofounder Angel Investor eCommerce 60

Altgate

OCTOBER 8, 2009

Raising Capital: 5 Reasons Convertible Debt Sucks HOT The Collapse of the VC Ecosystem & What It Will Look Like Post Recovery 10 Tips On Negotiating With VCs Dating…er…Fundraising Etiquette The Science & Art of Term Sheet Negotiation HOT How Liquidation Preferences Work HOT How Much Money Should I Raise?

Term Sheet 39

Term Sheet Technical Review Michigan Liquidation Preference 39

VC Cafe

OCTOBER 31, 2022

This is largely due to several major stock market crashes and global economic uncertainties. This is not meant to be a negative post, but rather a temperature check of today’s market environment and the levers founders can pull on to survive this period. It’s an investors market. billion in 538 deals.

Founder 173

Founder Technical Review Down Round Liquidation Preference 173

K9 Ventures

JUNE 5, 2015

So I mostly kept my opinion within a small closed group and let my LPs know that K9’s strategy was to *not* change our strategy despite the pressures of the market. Impact of Public Markets. If the public markets do hit a road bump or worse a sinkhole, what will happen? link] pic.twitter.com/XdQXNlIOZq.

Seed Stage 48

Seed Stage Venture Capital Early Stage Valuation 48

genylabs.typepad.com

SEPTEMBER 24, 2011

where your stock sits in the liquidity preference stack. what rights and preferences the founders and the other investors have. They had a great managment team, A list VCs, great technology, excellent sales traction and market leadership in a very exciting space. CRM Magazine: 2011 CRM Market Leaders. Good point.

Equity 40

Equity Technical Review San Jose Stock 40

David Teten

AUGUST 21, 2019

A company with that mindset is dramatically less risky, because it’s not dependent on the financing markets for continued viability. Borchers notes, “There are tons of good, short-term working capital products in the market already (factoring solutions, MRR loans, AR financing, etc.),

Revenue 60

Revenue Liquidation Preference Equity Cofounder 60

ithacaVC

SEPTEMBER 20, 2011

If the strike price is at or above fair market value (FMV), then the grant of the option is not a taxable event as the employee is getting nothing of immediate value. My reaction to this is “fine” That is risk worth taking perhaps particularly if you use the aggregate liquidation preference analysis mentioned above.

Liquidation Preference 49

Liquidation Preference Common Stock Stock Options Valuation 49

Up and Running

DECEMBER 30, 2015

Timing is everything for valuation, market, and team. Founders should pay attention to the liquidation preference in the term sheet to ensure it does not become detrimental to them in a less than favorable exit. Raising too early or too late. Both are horrible for your company. Evaluate when is the best time to raise money.

Due Diligence 84

Due Diligence Valuation Liquidation Preference Redemption 84

Both Sides of the Table

NOVEMBER 4, 2009

If you’re thinking about joining as the director of marketing, product management manager, senior architect, international business development lead, etc. BTW, this ignores liquidation preferences which actually mean you’ll earn less. I usually pull the old trick of answering a question with a question.

Stock Options 418

Stock Options Stock Liquidation Preference Option Pool 418

Both Sides of the Table

SEPTEMBER 28, 2013

A $1 trillion global market. The don’t understand VC liquidation preferences or multiple return expectations. The business concept was strong, we just needed to tweak it to adjust for market changes and we needed patience and resilience. Are tacking. It’s inefficient. Have the breakthrough technology.

Startup 417

Startup Dilution San Diego Stock Options 417

crowdSPRING Blog

MARCH 13, 2014

These posts and videos are about logo design , web design , startups, entrepreneurship, small business, leadership, social media, marketing, and more! The Essential Email Marketing Metrics You Should Be Tracking | Hubspot blog – crowdspring.co/1gY786G. Here are some of the links that I’ve liked and shared this past week!

Social Media 96

Social Media Small Business Design Media 96

Scott Edward Walker

APRIL 9, 2012

They are also typically granted certain additional economic rights (like Series A investors), such as pro-rata rights and a liquidation preference. In fact, in the Fenwick Survey , 9% of the preferred stock seed financings included a participating preferred liquidation preference (which is not founder friendly).

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Spencer Fry

APRIL 17, 2017

It wasn’t enough at the end of 2015 to have a working prototype and a handful of customers to somehow take over the market. If this is the case, you may find yourself starting all over with little revenue (if any), a 1-2 person team that might be consulting on the side to pay bills, and no marketing spend. Something has to give.

Bootstrapping 63

Bootstrapping Cap Table Liquidation Preference Cofounder 63

Both Sides of the Table

SEPTEMBER 6, 2010

That said, don’t complicate the topic – If you’re the founder of a company you likely know a lot about things like Liquidation Preferences and how they affect value allocations when the company is sold. I prefer percentages (e.g. Why do I feel this way?

Stock Options 294

Stock Options Stock Valuation Liquidation Preference 294

Scott Edward Walker

JULY 27, 2011

Introduction For the past few months, I’ve been discussing the rights of VC investors in connection with preferred stock financings, including the following: liquidation preferences anti-dilution provisions dividends Board control protective provisions drag-along provisions pay-to-play and pull-up provisions conversion rights redemption rights All (..)

Delaware 49

Delaware Liquidation Preference Redemption Los Angeles 49

Growthink Blog

MAY 23, 2011

Technical progress and market traction are much slower and cost a lot more than anticipated. A " black swan " investor appears out of the blue and backs the company - less impressed by the technology than by the talent, desire, and grit of the entrepreneur. There are a lot of dark, hard days.

Angel Investor 112

Angel Investor Venture Capital Sweat Equity Cram Down 112

Both Sides of the Table

SEPTEMBER 2, 2009

We could do more in 2010 with more VC investment; the doubling assumes only ratable increase in marketing spend to achieve profitability. However, without any liquidity at all for my cofounder and me, it makes more sense to grow more slowly and be profitable next year and stay there. >50% of our revenue in now viral.

Founder 329

Founder Liquidation Preference Term Sheet Participating Preferred 329

Startup Company Lawyer

JANUARY 31, 2011

Optional maturity conversion : into Series AA Preferred Stock based on a $5M valuation. Optional change of control/IPO conversion : into common stock at the lesser of (A) fair market value (based on change of control or IPO), or (B) $5M valuation. (Once again, I don’t know how to get a better deal than this.).

Preferred Stock 60

Preferred Stock Liquidation Preference IPO Common Stock 60

Venture Chronicles

AUGUST 23, 2013

To recap, here is the series thus far: 1) Hiring 2) Dynamic Org Structures 3) Product First 4) Marketing. An example of this is having a board member say “well you should just charge more” without first considering the competitive dynamics of a market, or the product and customer perspective on value.

Management 66

Management Startup Liquidation Preference Dilution 66