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Accepting Outside Investors? Here Are 5 Things to Watch Out for in Your Contract

Up and Running

If, down the road, you decided to take on an additional investor, or sell new shares of the company at a discounted rate to employees or family and friends, then that investor’s total ownership percentage might fall below their 10 percent ownership. Liquidation preference. What’s the takeaway?

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Term-sheets and Valuations: Thinking about Negotiations - Startups.

Tim Keane

  In a bottom up approach, the forecast is built from actual user projections. A liquidation preference means that the investors receive their investment back (plus dividends) prior to a distribution of the proceeds to stockholders. .   And if they are built from the top down, they’re pretty much useless. [3]