The Equity Kicker

NOVEMBER 9, 2016

a 1x non-participating preference share) and the company is successful enough to raise a couple of million or more the complexity and misalignment are more than manageable. Moreover, in the rare situation where investors offer a choice management almost always go for the higher valuation.

Liquidation Preference 122

Liquidation Preference Silicon Valley Participating Preferred Common Stock 122

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. This time I’ll break down week four of this season. BACK 9 DIPS.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

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?

Preferred Stock 28

Preferred Stock Stock Finance Participating Preferred 28

The Startup Lawyer

JANUARY 10, 2012

The amount of the liquidation preference is usually expressed as a multiple, with the most common liquidation preference being “1X non-participating.” Thus, if you see greater than a 1x preference and/or a ‘participating’ preference attached, know that your investor is just negotiating on price.

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. On the other hand, maybe we can move somewhere less rainy than London… One of the first pieces of startup advice I ever got was to “Never take money from a virgin investor.” What’s the dilution?

Term Sheet 31

Term Sheet Dilution Participating Preferred B2C 31

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. I liken it to participating preferred — which founders also do not typically understand until it is too late. Pro Rata Rights. The post WHAT ARE SUPER PRO RATA RIGHTS?

Preferred Stock 56

Preferred Stock Term Sheet Dilution Stock 56

Startup Company Lawyer

MARCH 14, 2010

In addition, I think that a “peace treaty&# between early-stage investors and startup companies on standard terms (at least at a term sheet level) is a step in the right direction. The primary rights in these documents, ranked in order of importance in my opinion are: Non-participating preferred liquidation preference.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Lightspeed Venture Partners

OCTOBER 1, 2012

There is a lot of momentum in startups. 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. When they work, they work fast.

Pre-Money Valuation 153

Pre-Money Valuation Valuation Participating Preferred Preferred Stock 153

The Startup Lawyer

JULY 13, 2011

While using these document sets can help reduce transaction costs and the time to close, a startup can run into trouble by trusting deal documents without verification. For example, a startup requested I review a set of financing documents produced by investor counsel.

Preferred Stock 68

Preferred Stock Liquidation Preference Participating Preferred Stock 68

The Startup Toolkit

NOVEMBER 4, 2011

Next, we check that we’re safe from any particularly onerous terms like participation preferred. On the other hand, maybe we can move somewhere less rainy than London… One of the first pieces of startup advice I ever got was to “Never take money from a virgin investor.” What’s the dilution?

Term Sheet 20

Term Sheet Dilution Participating Preferred B2C 20

Scott Edward Walker

NOVEMBER 26, 2017

Despite all the hype in the press (including with respect to the latest ICO craze), raising funds for your startup is still tough – particularly if you’re not located in San Francisco or Silicon Valley. The hard part, of course, is getting in front of “A” investors to pitch your startup. Tip #1: Get Warm Referrals to “A” Investors.

Term Sheet 63

Term Sheet San Francisco Founder Investment Bankers 63

ithacaVC

DECEMBER 14, 2011

Sometimes, after getting back the LP, the preferred holder then converts to common and gets its prorata share of proceeds left after all LP has been paid (this is called participating preferred). One final background point, a “liquidation event” is a sale of the company and typically NOT an IPO.

Liquidation Preference 49

Liquidation Preference LP Preferred Stock Liquidity Event 49

Both Sides of the Table

APRIL 14, 2010

Once you cross the threshold where their percentage ownership would be worth more than the value of their preference they “convert&# their preferred stock into common stock and take their proceeds pari passu (along side and on the same terms as you) with the common stock holder. But pass they will. Brain damage. Reputation.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

www.payne.org

SEPTEMBER 22, 2011

Startup Equity For Employees. 2 Stock Classes: Common and Preferred. The re-heating of the venture funded tech market has pushed a heat up of the hiring market, and Im getting more calls from friends asking for help understanding startup stock (equity) offers. Stock Classes: Common and Preferred. From Payne.org Wiki.

Equity 56

Equity Employee Vesting Preferred Stock 56

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. I know because I’ve been there. Tweet This Post Facebook.

Founder 329

Founder Liquidation Preference Term Sheet Participating Preferred 329

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 ). This is to make sure that the executive does not double dip (i.e., I recently was discussing a management carve out plan with another board member.

Management 49

Management Preferred Stock Participating Preferred Equity 49

Professor VC

JUNE 6, 2016

However, in my 25 years in the Silicon Valley startup ecosystem, I've experienced the VC corollary to the golden rule much more often: "He has the gold makes the rules!" I can just picture Mr. Rogers saying "Children, can you say participating preferred stock with an uncapped 3x liquidation preference and a full ratchet?"

Syndicate 28

Syndicate Syndication Cap Table Ratchet 28

Scott Edward Walker

APRIL 9, 2012

Venture capital funds, seed funds, super angels, angel groups, incubators, and “friends and family” are all playing the seed financing game and investing early in startups in an attempt to land the next Facebook. Why Can’t a Startup Issue Shares of Common Stock to Investors? Introduction We are in the golden age of seed financing.

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Professor VC

JULY 25, 2013

Startup outcomes tend to be very binary. Yes, there are a number of cases in the middle where having a senior or participating preference does make a difference in liquidation proceeds, but I argue that it does very little to overall returns in a diversified portfolio. Unfortunately, not everyone follows the KISS principle.

Term Sheet 46

Term Sheet Silicon Valley Syndicate Syndication 46

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. Well, I guess it’s a sign of the time.

Liquidation Preference 31

Liquidation Preference Venture Capital Post-Money Valuation Participating Preferred 31

Startup Company Lawyer

FEBRUARY 21, 2010

Due to aggregate liquidation preferences that may exceed the acquisition price in an M&A deal, common stock may be rendered worthless. If you can’t figure this out yourself, you should probably build a liquidation preference spreadsheet to model how liquidation preferences work depending on M&A transaction value.

Retention 31

Retention Liquidation Preference Employee Common Stock 31