Tim Keane

JANUARY 12, 2010

It also assumes the entire value of the investment is captured for investors at a sale of the company in the time specified in the term-sheet. This results in a range of sale prices; in this example from $118.6MM to $21MM.   In most cases, the preferred dividend is paid before any dividend is paid to the common.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Scott Edward Walker

APRIL 9, 2012

ii) why are convertible notes issued instead of shares of common or preferred stock? Part 3 will cover certain special issues, such as (i) what happens if the startup is acquired prior to the note’s conversion to equity? (ii) ii) what happens if the maturity date is reached prior to the note’s conversion to equity?

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Up and Running

DECEMBER 1, 2015

Typically, employers that offer employees equity compensation will do so in the form of common stock, preferred stock, or stock options. Conversely, very junior employees have relatively little influence over the company, so their equity grants should be correspondingly much smaller, if at all.”.

Equity 60

Equity Employee Stock Options Vesting 60

The Startup Lawyer

FEBRUARY 13, 2012

Conversely, if you are raising a small convertible note round (sub $100k), then a couple extra interest points may not be that material. The convertible note interest should also accrue until the note converts into equity or is paid out at the sale of the company.

Preferred Stock 73

Preferred Stock Dividend Equity Stock 73

Gust

OCTOBER 21, 2011

For convertible notes, the only liquidity event we need be concerned with is an acquisition of the startup in the near future, before the maturity date; otherwise, the notes will convert to equity of one kind or another, and the eventual sale of that equity (in a public offering, acquisition, or private sale) is a different subject for another day.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Startup Company Lawyer

JANUARY 31, 2011

Automatic conversion: on a $1M equity financing with no conversion discount and no price cap , provided that the transaction documents provide for a right to purchase a pro rata share of future financings. (I Optional equity conversion: on other equity financings with no conversion discount and no price cap.

Preferred Stock 60

Preferred Stock Liquidation Preference IPO Common Stock 60

Startup Company Lawyer

JANUARY 9, 2011

A logical alternative to convertible debt is a priced Series A preferred stock financing. Mark Suster does a good job analyzing whether convertible debt is preferable to equity , and concludes that convertible debt is better. This leads me to believe that there is a mini-bubble in the early stage financing universe.

Liquidation Preference 57

Liquidation Preference Finance Preferred Stock Common Stock 57

Hunter Walker

SEPTEMBER 29, 2022

All the preferred stock is pari passu and behaving honorably in the best interest of the company? Conversely, if you’re not a good picker, it’s difficult to overcome that, even if you had perfect timing on secondary sales. We’re aligned with the founders and the rest of the cap table until we aren’t.

Venture Capital 127

Venture Capital Cap Table LP Equity 127

Scott Edward Walker

MAY 15, 2012

What Happens If a Startup is Acquired Prior to the Note’s Conversion to Shares of Preferred Stock? As discussed in part 1 , in the context of a seed financing, a convertible note is a loan that typically automatically converts into shares of preferred stock upon the closing of a Series A round of financing.

Finance 64

Finance Founder Accredited Investor Preferred Stock 64

Scott Edward Walker

JUNE 9, 2019

For example, if an investor owns 20% of the equity of a startup on a fully-diluted basis following the closing of a Series A round, it will have the right to purchase 20% of the shares of the preferred stock issued in the subsequent Series B round.

Preferred Stock 56

Preferred Stock Term Sheet Dilution Stock 56

Berkonomics

JANUARY 6, 2022

First, the marginal exit event: Sometimes the end game or sale of the company is not a happy event for the early investors, including the entrepreneur or the founders. 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.

Dividend 62

Dividend IRR Preferred Stock Participating Preferred 62

ithacaVC

DECEMBER 13, 2013

So, yes, you can fix, but I can safely say that the founder who ended up with options (to avoid tax issues) would have rather had actual stock instead (better tax treatment upon sale typically). QUESTION #3: What if Founder X and Founder Y issued themselves some sort of preferred stock instead of common stock?

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

Berkonomics

OCTOBER 1, 2015

Sometimes the end game or sale of the company is not a happy event for the early investors, including the entrepreneur or the founders. 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.

Dividend 48

Dividend Preferred Stock IRR Participating Preferred 48

Tim Keane

APRIL 12, 2006

Fewer investors will take common stock in early stage transactions. Debt with some sort of conversion provides greater risk abatement in that debt comes “due” at some point if the conversion terms aren’t met. Preferred Stock is the most usual form of investment today.

Entrepreneur 60

Entrepreneur Valuation Sweat Equity Common Stock 60

Startup Company Lawyer

JANUARY 11, 2010

As I have written previously , I think that convertible notes with even large conversion price discounts (e.g. For example, typical provisions in a company-friendly pre-Series A convertible bridge note financing may include a 20% conversion discount from the Series A price and a 2x return on a sale of company.

Angel Investor 39

Angel Investor Valuation Bridge Financing Preferred Stock 39

www.vccafe.com

MARCH 11, 2013

GetSatisfaction - conversations between companies / customers. turn customer feedback into sales and relationships. SaaS Sales Team Compensation â?? Preferred Stock Purchase Agreement. Startups For Sale. support, knowledgebase tool for your site. SnapEngage â?? live chat integrates with your apps.

Software Review 53

Software Review Technical Review Israel Startup 53