Austin Startup

JULY 6, 2018

More traditional and comprehensive programs often require 5–8% of common stock, but often provide between $20K and $100K up-front as well. In much the same way that entrepreneurs’ own personalities set the culture for their companies, the creators and managers of accelerators heavily influence both their “online” and “offline” culture.

Dilution 48

Dilution Startup Technical Review Equity 48

ithacaVC

FEBRUARY 23, 2011

A management carve out plan (MCOP) is a written obligation of the company that, in simple terms, provides that certain management members get a predetermined slice of proceeds when a company is sold. As the investors’ aggregate liquidation preference (ALP) increases typically the need for a MCOP also increases.

Liquidation Preference 55

Liquidation Preference Management Preferred Stock Dividend 55

Startup Company Lawyer

JANUARY 9, 2011

Tweaking convertible debt so that common stock (instead of preferred stock) is issued for the conversion discount in order to limit liquidation preference overhang. Note: A better way to make convertible debt identical to a seed financing is to have the convertible debt convert into its own series of preferred stock.

Liquidation Preference 57

Liquidation Preference Finance Preferred Stock Common Stock 57

K9 Ventures

MAY 14, 2011

The institutional funds typically manage a relatively large pot of capital (~$300M or higher per fund, with multiple funds running). <$50K in aggregate. Common Stock. Convertible Note or Preferred Stock. Convertible Note or Preferred Stock. Preferred Stock. Preferred Stock. Lots, 20-100.

Preferred Stock 125

Preferred Stock Seed Stage Incubator Early Stage 125

ithacaVC

SEPTEMBER 20, 2011

That means, assuming a 1X liquidation preference, that the common stock should be worth zero NOW simply based on the fact that the aggregate liquidation preference exceeds the M&A revenue multiples. Tough to argue that it is not reasonable. Worth some thought and discussion.

Liquidation Preference 49

Liquidation Preference Common Stock Stock Options Valuation 49

ithacaVC

JANUARY 24, 2013

Let’s assume the following: Common Stock outstanding: 3,400,000 shares owned by the founders. 62,000 of convertible debt outstanding with $13,700 of aggregate interest accumulated, which also converts as well in the qualifying round. It can get painful so make sure to manage your expectations.

Valuation 53

Valuation Balance Sheet Option Pool Dilution 53

Startup Company Lawyer

FEBRUARY 21, 2010

I was speaking at an event last month to a group of CEOs and was surprised by the number of CEOs that were worried about the value of their common stock in a M&A transaction. Due to aggregate liquidation preferences that may exceed the acquisition price in an M&A deal, common stock may be rendered worthless.

Retention 31

Retention Liquidation Preference Employee Common Stock 31