Startup Professionals Musings

SEPTEMBER 26, 2015

Investors typically demand preferred stock, to give themselves certain voting and liquidation privileges over later shareholders. Preferred shares are not possible with a limited liability corporation (LLC), so expect to convert to a C-corp to get an equity investment. Type of stock assigned to the investor.

Term Sheet 120

Term Sheet Demand Preferred Stock Liquidation Preference 120

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. Bookmark the permalink.

Liquidation Preference 31

Liquidation Preference Venture Capital Post-Money Valuation Participating Preferred 31

The Startup Lawyer

JUNE 9, 2010

The term sheet was pretty much a done deal, when the startup’s CEO demanded a salary of $25,000. The startup community focuses most of the term sheet discussion on liquidation preferences and anti-dilution , but startup CEO salary is nonetheless an important issue. The Importance of Startup CEO Salary.

Salary 99

Salary Term Sheet Liquidation Preference Liquidity Event 99

The Equity Kicker

DECEMBER 30, 2013

but she will most likely now be sitting behind a $25m liquidation preference and have taken on new investors who want to exit the company for at least $240m (to get 3x on their investment). Locking into arrangements that demand a high exit is a form of rigid business plan. Exits Startup general interest Venice Project'

Finance 129

Finance Liquidation Preference Valuation Harvest 129

Feld Thoughts

JUNE 2, 2015

Or, if you just want the paragraph, it’s: “If this note converts at a price higher than the cap that you have been given you agree that in the conversion of the note into equity you agree to allow your stock to be converted such that you will receive no more than a 1x non-participating liquidation preference plus any agreed interest.”.

Liquidation Preference 70

Liquidation Preference Cap Table Angel Investor Post-Money Valuation 70

Both Sides of the Table

FEBRUARY 14, 2016

The Laws of Supply & Demand. The most basic chart of microeconomics is a supply & demand curve. Demand represents a buyer and supply a seller. Some products are “inelastic” meaning when prices go up demand doesn’t fall much (think cigarettes, alcohol or even illicit drugs). goes into a startup.

Valuation 150

Valuation Down Round Startup Later Stage 150

abovethecrowd.com

APRIL 20, 2016

If you really want to liberate your own common shares and those of your employees, then you want to convert the preferred to common and remove both the control and the liquidation preference over your shares. For the most part, early investors in Unicorns are in the same position as founders and employees.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Scott Edward Walker

JULY 27, 2011

There are, however, certain formal procedural requirements that the stockholder must comply with, including making a written demand upon the corporation, “under oath” and stating a “proper purpose.” The board can either accept or reject the demand. Moreover, there are certain tricky evidentiary issues.

Delaware 49

Delaware Liquidation Preference Redemption Los Angeles 49

K9 Ventures

NOVEMBER 21, 2011

And that too usually when there is sufficient investor demand for the next round, i.e. the leverage needs to be in the company’s hand (rather than investors) for any type of founder liquidity to even be an option.

Founder 87

Founder Common Stock Preferred Stock Stock 87

K9 Ventures

NOVEMBER 21, 2011

And that too usually when there is sufficient investor demand for the next round, i.e. the leverage needs to be in the company’s hand (rather than investors) for any type of founder liquidity to even be an option.

Founder 84

Founder Common Stock Preferred Stock Stock 84

ithacaVC

APRIL 25, 2012

That demand will accelerate the relationship building and the valuation discussion. In my view, starting off a VC relationship by diving into perhaps the most critical economic term is kind of like, well, moving too fast on a first date. The exception is when you have a ton of interest (the VCs are just crawling over you).

Valuation 49

Valuation Pre-Money Valuation Liquidation Preference Preferred Stock 49

ithacaVC

MAY 1, 2013

The article states “When venture capitalists invest, they typically demand preferred shares that accrue a yearly dividend of about 8 percent. It is ONLY once the VC’s liquidation preference is cleared that the common stock held by founders and employees is worth anything. Here are a few other thoughts: 1.

Dividend 45

Dividend Liquidation Preference Common Stock Venture Capital 45

Spencer Fry

APRIL 17, 2017

What I worry about is the demand on every one of your potential customer’s attention and time. As a bootstrapper, you have nobody above you on the cap table (note: investors sit above you in their liquidation preference), so it’s your way or the highway. Competition is everywhere. Nobody can tell you what to do.

Bootstrapping 63

Bootstrapping Cap Table Liquidation Preference Cofounder 63

abovethecrowd.com

MAY 20, 2013

There are common stock, common options, and as many as three to five different layers of preferred stock, each with a specific liquidation preference. Basically, everyone uses loose finance arguments to over-inflate their own company’s valuation so that they can demand a bigger slice of the pie of the new company.

Merger 53

Merger Institutional Investors Liquidation Preference Preferred Stock 53

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.

Term Sheet 46

Term Sheet Silicon Valley Syndicate Syndication 46

Up and Running

MARCH 29, 2017

See Also: Demand Validation: How to Find Out If Customers Want to Buy Your Product. Here’s the problem I saw: As my agency grew, the projects got bigger (and so did my payroll, relentlessly rolling around every two weeks), but payments often got slower. Find your own magic. Over Christmas break, I started building ZipBooks.

Term Sheet 60

Term Sheet Venture Capital Liquidation Preference Valuation 60