Recent Buzzes - VC Experts, Inc.

OCTOBER 18, 2011

What is the difference between Conventional Convertible Preferred (non-Participating Preferred) and Participating Preferred Stock ? How do these effect the outcome for investors when a non-IPO exit is about to happen? See for yourself in these simple examples

Participating Preferred 8

Participating Preferred IPO Preferred Stock Stock 8

A VC : Venture Capital and Technology

MAY 1, 2010

That's the case with the issue of the participating preferred. Yesterday, I came upon this tweet by  Vijaya Sagar Vinnakota :   So I clicked thru to the first link and found a post I had written about participating preferred in 2004.

Venture Capital 2

Venture Capital Participating Preferred Preferred Stock Term Sheet 2

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.

Liquidation Preference 29

Liquidation Preference Valuation Participating Preferred IPO 29

Early Growth Financial Services

FEBRUARY 3, 2015

Today, we’re tackling participating versus non-participating preferred stock, a fundamental economic term in VC deals that goes to the heart of the business agreement between investors and management in connection with a sale of the company. Participating versus non-participating: what’s the difference? This post by Ian Engstrand first appeared on Founders Workbench.

Preferred Stock 14

Preferred Stock Participating Preferred Common Stock Dividend 14

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.

Cap Table 69

Cap Table Dilution Ratchet Liquidation Preference 69

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.” Preferred Stock

Liquidation Preference 10

Liquidation Preference Participating Preferred Pre-Money Valuation Common Stock 10

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.

Liquidation Preference 64

Liquidation Preference Term Sheet Cap Table Redemption 64

The Startup Lawyer

JULY 13, 2011

The deal documents called the preferred stock “Series Seed&# shares but after opening up the documents I quickly realized the deal terms were NOT the same as those in the well-known Series Seed document set. For example, the well-known Series Seed has a 1x non-participating liquidation preference , while the version I reviewed had a 1x participating preference. Preferred Stock

Liquidation Preference 17

Liquidation Preference Participating Preferred Finance Preferred Stock 17

OnStartups

FEBRUARY 22, 2012

I know I should know this, but I have no idea what participating preferred means — and who should prefer it. Note: This is intended be a light-hearted piece that hits just close enough on some counts to (hopefully) be funny. Please don't take it too seriously. (Oh,

EC2 62

EC2 Architecture Stealth Vesting 62

ithacaVC

APRIL 25, 2014

The model includes a simple waterfall analysis using both participating and non-participating preferred (see line 44 and then columns M and O). The larger the preferred stock liquidation preference the larger the impact of participating preferred. Columns I and J are important as they show the % of preferred stock ownership compared only to preferred stock outstanding.

Cap Table 14

Cap Table Preferred Stock Pre-Money Valuation Participating Preferred 14

Inc Startups

AUGUST 2, 2012

’ Participating preferred is less common. Just three months ago, 51% of deals had participating preferred. Participating preferred is a way for investors to try to ensure they get their money back even if the company doesn’t have a great exit.

Participating Preferred 10

Participating Preferred Term Sheet Pre-Money Valuation Early Stage 10

Recent Buzzes - VC Experts, Inc.

OCTOBER 21, 2010

Participants in this recent round included Good Energies, Sail Ventures, Second Avenue Partners, Energy Capital Partners, and TIAA-CREF Green Building Technology fund. Liquidation Preference: Senior. Multiple of the Liquidation Preference: 1x. Participation Cap: 3x.

Liquidation Preference 22

Liquidation Preference Redemption Colorado Dividend 22

Inc Startups

NOVEMBER 5, 2013

Multiple Liquidation Preference When you decide to sell your company, or it''s otherwise liquidated, investors usually have the right to get their money back before the founders. But a multiple liquidation preference gives them much more--to the tune of 1.25 Yes, you need cash.

Liquidation Preference 8

Liquidation Preference Participating Preferred Preferred Stock Merger 8

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.

Liquidation Preference 5

Liquidation Preference Term Sheet Participating Preferred Preferred Stock 5

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. Liquidation Preference Per Share. . .

Liquidation Preference 3

Liquidation Preference Preferred Stock Participating Preferred Stock 3

The Equity Kicker

JANUARY 25, 2016

Most long term venture industry insiders prefer operating in a steady climate where companies don’t have to follow highly risky strategies just to stay competitive. I will look into redressing that balance, but my first thought is that because of current practices/trends towards non-participating preference shares and early founder/employee/angel investor liquidity this is the one front on which we’re not doing too badly.

Venture Capital 19

Venture Capital eCommerce Angel Investor Participating Preferred 19

ConversionXL

MAY 31, 2016

Furthermore, the same study found that an incredible 100% of participants preferred sites with sticky navigation bars, despite often not knowing why. Let’s talk about the collective pain in everyone’s marketing ass. Pretty much everyone’s mobile conversions suck. This isn’t a secret.

Mobile 36

Mobile Conversion Participating Preferred Design 36

Recent Buzzes - VC Experts, Inc.

AUGUST 31, 2011

Pari-Passu Liquidation Preference. Multiple of Liquidation Preference was more prevalent within the Non-Bay Area deals as well. Participating Preferred. in 12% of the deals, and of those, 83% had the penalty of "Conversion of Preferred Stock into Common Stock".

Liquidation Preference 13

Liquidation Preference Preferred Stock Recapitalization Silicon Valley 13

OnStartups

NOVEMBER 5, 2012

participation) in their deals to try to reach higher return levels, while the public folks will likely be more flexible. In order to protect themselves from that risk, they will ask for participating preferred stock that, for instance, will put a floor on their return of 2X. The following is a post from my friend and co-founder/CEO of HubSpot , Brian Halligan. HubSpot just closed its mezzanine round, so I thought I’d share some surprising things I learned during the process.

Mezzanine 43

Mezzanine Early Stage Valuation Equity 43

ConversionXL

MARCH 19, 2012

People don’t often know why they prefer something. Most of our preferences are learned and largely formed by social norms and expectations that producers have a strong hand in shaping. Now that has become what the consumer prefers. Why people prefer unlimited plans.

Arlington 45

Arlington Clickthrough Social Media Miami 45

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). To differentiate it from typical “Series A&# preferred stock, which comes with certain expectations with regard to rights. There is no real rule to what a particular series of preferred stock is called. Dividend preference. TheFunded released their “Plain Preferred&# term sheet in August 2009.

Term Sheet 26

Term Sheet Dilution Finance Liquidation Preference 26

Professor VC

JULY 25, 2013

In investment parlance, it strictly means that new classes of stock have equal rights with prior classes in terms of liquidation preference, voting rights, etc. Their response was that we should be happy they didn''t ask for a participating preference on top of the seniority.

Venture Capital 11

Venture Capital Syndicate Syndication Participating Preferred 11

thinkspace.com

SEPTEMBER 7, 2012

Is the preference structure for preferred shareholders at the startup you work at Standard Preferred or Participating Preferred? Call Us: +1-855-629-6200. About. Mission Statement. Locations. Our Team. Press. Community. Careers. Member Coordinator. Bookkeeper.

Equity 58

Equity Dilution Advisory Board Vesting 58

Recent Buzzes - VC Experts, Inc.

FEBRUARY 16, 2011

Liquidation Preference for the Current Round. Multiple of the Liquidation Preference: 1x; 2x; 3x; > 3x. Type of Preferred Stock. Participating Preferred. Capped Participating Preferred. By Erin Griffith, Contributing Editor. Groupon may have raised, like , a billion dollars , but that doesn't mean it'll rule discounted online commerce forever. Social shopping competitors are afoot. Take LivingSocial, the second largest player in group-buying.

Recapitalization 12

Recapitalization Liquidation Preference Dividend Valuation 12

ConversionXL

APRIL 23, 2013

If you’d like more people to take action, make the preferred actions ‘default’ Of course, this can be abused – like RyanAir makes buying travel insurance a default option and Vistaprint used to enroll people in their “membership” by default.

Web 61

Web Design Denmark Green 61

Berkonomics

OCTOBER 1, 2015

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. Further, preferred stock holders can be recipient of accrued dividends in a sale or liquidation.

Dividend 6

Dividend IRR Preferred Stock Sales 6

Lightspeed Venture Partners

OCTOBER 1, 2012

These are typically called “ participating preferred ” structures, and are quite uncommon in West Coast VC deals these days, although they were once more common a couple of decades ago, and are still seen in some East Coast deals.

Pre-Money Valuation 13

Pre-Money Valuation Valuation Participating Preferred Preferred Stock 13

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.

Common Stock 26

Common Stock Valuation Liquidation Preference Finance 26

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.

Venture Capital 43

Venture Capital Liquidation Preference Common Stock Dividend 43

Dshen

MAY 6, 2015

You can guarantee there are many preferences (see liquidation and participating preferences) in the distribution of exit capital.

Valuation 13

Valuation Portfolio Finance IPO 13

Lightspeed Venture Partners

OCTOBER 7, 2012

Week three’s breakdown covered topics like how hard momentum is to turn around, and how participating preferred stock works. I’ve been writing up reviews of this season’s Shark Tank pitches from a silicon valley VCs perspective.

Valuation 13

Valuation Pre-Money Valuation Due Diligence Preferred Stock 13

The Equity Kicker

JULY 4, 2012

The posts will assume very little, if any, prior knowledge and should be useful to everyone from newbies to the industry to those who have been around venture capital a fair bit and have a decent understanding, but are a bit hazy around the edges on some of the more detailed points e.g. ‘weighted average anti-dilution’ or ‘1x participating preference share’ I think the posts deliver pretty well on this objective, but our challenge now is to make them into a book.

Due Diligence 7

Due Diligence Participating Preferred Dilution Finance 7

ithacaVC

NOVEMBER 18, 2011

get both the carve out amount and the equity value; I guess double dipping is only for VCs that have participating preferred stock ). In my earlier post on management carve out plans (see it here ), I gave a detailed description of what these plans are and why boards of VC-backed companies often use them.

Equity 3

Equity Preferred Stock Participating Preferred Stock 3

Both Sides of the Table

SEPTEMBER 2, 2009

I took money with a 3x participating preferred liquidation preference with 8% compounded interest annually. Coupled with my participating preferred from 1999 and 2000 I had more than $55 million of liquidation preferences. This is part of my ongoing series “ Start Up Advice &# but I’d really like to call this post, “VC Advice.&#.

Venture Capital 17

Venture Capital Startup Liquidation Preference Warrant 17

YoungUpstarts

JUNE 4, 2015

According to an Avast survey of close to 200 Singaporeans, the Internet security solutions provider discovered that a whopping 86 percent of survey participants prefer to join unprotected Wi-Fi networks over secure ones that require a password.

Networking 3

Networking Participating Preferred Internet Naming 3

www.payne.org

SEPTEMBER 22, 2011

2 Stock Classes: Common and Preferred. Stock Classes: Common and Preferred. Most venture-funded startups have different classes of stock: common and various flavors of preferred. Preferred stock classes typically go to investors, and in some cases founders (usually where the founders have already invested some of their own money to build the company). By convention, preferred stock classes are lettered, increasing for each round of funding: Series A, Series B, etc.

Equity 24

Equity Vesting Stock Preferred Stock 24

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.

Participating Preferred 0

Participating Preferred Preferred Stock Dividend Stock 0

Recent Buzzes - VC Experts, Inc.

AUGUST 12, 2010

Participants in this round were Norwest Venture Partners and Sequoia Capital. Liquidation Preference: Pari Passu with other series of Preferred. Multiple of the Liquidation Preference: 1x. Type of Preferred Stock: Participating Preferred.

Liquidation Preference 1

Liquidation Preference Redemption Participating Preferred Dividend 1

Recent Buzzes - VC Experts, Inc.

APRIL 13, 2011

Investors in these financings also have deeper pockets with the ability to participate in later rounds. Financing Structure: Preferred Stock. Comment: Convertible notes were used more frequently in smaller financings, while preferred stock was more prevalent in larger financings. Below is the average size of investment for investors who invested at least $100,000, broken down by type of investor and between Preferred Stock financing and Convertible Note financing.

Preferred Stock 6

Preferred Stock Finance Venture Capital Liquidation Preference 6

Ask the Angels

FEBRUARY 8, 2011

In large measure, at least in organized angel groups and venture capital firms, due diligence work is done by deal leads and other participants in a very hands-on way. By Al Schneider.

Pre-Money Valuation 8

Pre-Money Valuation Due Diligence Early Stage Private Placement 8