Both Sides of the Table

MARCH 3, 2013

Obviously that barrier has been brought down with low-cost ability to capture, stream and distribute content over the Internet. We talked about Liquidation Preference, Voting Rights, and all of the other valuable terms crowd-funding investors don’t understand. “Online education is truly going to kill us.”

Bankruptcy 403

Bankruptcy Offshore Liquidation Preference Balance Sheet 403

Tim Keane

JANUARY 12, 2010

.   At the financial level , and assuming a harvest of the investment in the company without the need for further financing, two terms stand out as driving economics: the dividend and the liquidation preference. Second a liquidation preference and a participation.   First , dividends.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Startup Professionals Musings

JULY 3, 2014

These normally include what percentage of the company the investor now owns, how and when tranches of money will be delivered, and even how and when you can sell your own shares (liquidation preferences). Funding can be pulled, and future distributions withheld, if objectives are not met. Your time is no longer your own.

Term Sheet 237

Term Sheet Advisory Board Liquidation Preference Startup 237

ithacaVC

DECEMBER 14, 2011

Continuing with the “No Mess” theme of commenting on things that give VCs pause, I thought it would be good to touch on liquidation preference. Specifically, “too much” liquidation preference (I will use “LP” for liquidation preference). Ok, enough of the background.

Liquidation Preference 49

Liquidation Preference LP Preferred Stock Liquidity Event 49

Growthink Blog

JANUARY 24, 2011

One very popular "preferred right" or "preference" that adds very significant value to outside investors and is common in venture capital investments is a liquidation preference. The liquidation preference means what is sounds - namely that preferred stock holders with this right get all of their money back (i.e.

Preferred Stock 93

Preferred Stock Stock Common Stock Liquidation Preference 93

Startup Professionals Musings

FEBRUARY 3, 2018

These normally include what percentage of the company the investor now owns, how and when tranches of money will be delivered, and even how and when you can sell your own shares (liquidation preferences). Funding can be pulled, and future distributions withheld, if objectives are not met. Your time is no longer your own.

Term Sheet 140

Term Sheet Advisory Board Liquidation Preference Portfolio 140

Startup Professionals Musings

AUGUST 16, 2015

These normally include what percentage of the company the investor now owns, how and when tranches of money will be delivered, and even how and when you can sell your own shares (liquidation preferences). Funding can be pulled, and future distributions withheld, if objectives are not met. Your time is no longer your own.

Term Sheet 120

Term Sheet Advisory Board Liquidation Preference Angel Investor 120

Scott Edward Walker

JUNE 9, 2011

Optional conversion rights permit the holder to elect (not require) to convert its shares of preferred stock into shares of common stock, initially on a one-to-one basis. These rights are related to the investor’s liquidation preference.

Term Sheet 60

Term Sheet Conversion Rights Venture Capital Liquidation Preference 60

Growthink Blog

MAY 23, 2011

At the end of the period, all profits and proceeds are distributed to the various partners on a pre-determined split. Venture capital funds are usually 7 - 10 year partnerships whereby the general partners - the “VC” - manage the capital of the limited partners, usually institutions (endowments, pension funds, etc.).

Angel Investor 112

Angel Investor Venture Capital Sweat Equity Cram Down 112

Up and Running

MAY 21, 2015

They generally also get additional rights that common shareholders don’t get, such as anti-dilution protection, and liquidation preference (discussed further below). Liquidation preference. Whether that’s true or not depends in no small part on how the liquidation preference clause was negotiated with outside investors.

Covenant 60

Covenant Liquidation Preference Ratchet Dilution 60

Agile VC

APRIL 17, 2011

Distribution revenue is CPC and CPA. . Historically more revenue came from distribution/lead-gen (57% in 2007), but this tipped in 2008 though appears to be steady from 2009 to 2010 at about 58% advertising and 42% distribution. Kayak generates both distribution (i.e. liquidation preference, 6% accumulated dividend (1).

Pre-Money Valuation 113

Pre-Money Valuation Liquidation Preference Dividend Common Stock 113

Scott Edward Walker

DECEMBER 13, 2018

Accordingly, the deal may be a mere fiction designed to get funds into the startup to be distributed to its investors. Following the closing of the acquisition, the startup will be dissolved, and all of its assets (including the purchase price proceeds) will be distributed to its investors and stockholders, as discussed below.

Founder 45

Founder Merger IP Liquidation Preference 45

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

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. Cash distributions are what matter at the end of the day, bug big paper gains still make for good fundraising pitches.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Austin Startup

AUGUST 1, 2017

First, investors will sometimes be willing to take a higher valuation if it means getting a heavier liquidation preference. Should you accept a 3x liquidation preference with a $15MM valuation instead of a 1x preference at a $8MM valuation? If you’re confident you’ll get a huge exit, maybe.

Liquidation Preference 48

Liquidation Preference Common Stock Valuation Silicon Valley 48

Scott Edward Walker

JULY 7, 2011

Introduction This post originally appeared in the “ Ask the Attorney ” column I am writing for VentureBeat ; it is part of my ongoing series regarding venture capital term sheets. What Does a Redemption Rights Provision Look Like?

Term Sheet 49

Term Sheet Redemption Venture Capital San Francisco 49