The Equity Kicker

DECEMBER 30, 2013

Nassim Taleb is one of the most visionary thinkers in modern finance. 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). Thanks to Josh March for the pointer. Griffin puts it this way: 7.

Finance 129

Finance Liquidation Preference Valuation Harvest 129

Gust

SEPTEMBER 17, 2014

Me: Raising convertible notes as a seed round is one of the biggest disservices our industry has done to entrepreneurs since 2001-2003 when there were “full ratchets” and “multiple liquidation preferences” – the most hostile terms anybody found in term sheets 10 years ago. It’s like we need a finance 101 course for entrepreneurs.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Tim Keane

JANUARY 12, 2010

For angel groups, the distinction between groups and VCs on this issue is dwindling, especially as angel groups do bigger rounds of financing.   Note that this applies only to earl stage Series A-type equity financings and assumes no cash dividends are paid to investors. Second a liquidation preference and a participation.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

abovethecrowd.com

APRIL 20, 2016

Why the Unicorn Financing Market Just Became Dangerous…For All Involved. All Unicorn participants — founders, company employees, venture investors and their limited partners (LPs) — are seeing their fortunes put at risk from the very nature of the Unicorn phenomenon itself. By January of 2016, that number had ballooned to 229.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Austin Startup

AUGUST 1, 2017

TL;DR: In a market that has historically idolized huge, splashy financings and exits, an increasing number of entrepreneurs are realizing that everyone else’s definition of success — particularly among certain large VCs — isn’t necessarily aligned with their own. And large checks require very large exits to achieve good returns.

Liquidation Preference 48

Liquidation Preference Common Stock Valuation Silicon Valley 48

Both Sides of the Table

SEPTEMBER 6, 2010

We set our sites on our IPO price and then worked back to our current valuation and showed potential employees what we thought they could earn (with all legal caveats) if the company was successful. Options are obviously a very important economic motivator for your first 3-5 employees and your most senior management team.

Stock Options 294

Stock Options Stock Valuation Liquidation Preference 294

genylabs.typepad.com

SEPTEMBER 24, 2011

I wont bother going into details on start-up financing terms ( see this post for an overview of typical VC terms) except to say if you dont know and understand: the firms cap table and valuation. where your stock sits in the liquidity preference stack. what rights and preferences the founders and the other investors have.

Equity 40

Equity Technical Review San Jose Stock 40

ithacaVC

DECEMBER 13, 2013

They are typically pretty simple: (i) shares owned by founders and (ii) shares authorized for issuance in a stock option pool, some of which may be issued to employees already and some of which will be available for future issuance. S0, being able to clearly state how many options you want to grant at the time of the financing is KEY.

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

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

techcrunch.com

FEBRUARY 25, 2010

As Mark Suster recently noted , employees will never see a big payday at most startups unless the company shoots for the moon. The remaining 95 employees split 7%, each earning $27,000. Unlike the founders, the employees have to wait until their grants vest, working at a company no longer of their choosing for two years.

Liquidation Preference 63

Liquidation Preference Founder Option Pool Acquisition 63

ithacaVC

MAY 1, 2013

It must be paid out before the common shares, which are typically held by the founders and other employees.” The article also states that “But venture capital investments are structured to ensure that the venture capitalists are paid before founders and employees.” The dividend goes unpaid until the company is sold.

Dividend 45

Dividend Liquidation Preference Common Stock Venture Capital 45

ithacaVC

FEBRUARY 23, 2011

The MCOP can serve a critical role as founders and other management team members are diluted down by rounds of financing or if their equity is not in the money. As the investors’ aggregate liquidation preference (ALP) increases typically the need for a MCOP also increases. A few key points to consider: 1.

Liquidation Preference 55

Liquidation Preference Management Preferred Stock Dividend 55

Scott Edward Walker

DECEMBER 13, 2018

We had a busy 2018, including closing several significant M&A transactions and financings. We have also recently handled a few “acquihires” (or “acqui-hires”) — which is a somewhat unique transaction, with a host of unusual issues. Are There Any Other Suggestions In Connection with Acquihires?

Founder 45

Founder Merger IP Liquidation Preference 45

dondodge.typepad.com

JANUARY 15, 2011

Community is more powerful than money or technology » August 11, 2007 How much equity for investors and employees? How much equity should I grant to early employees? It isnt always possible to have a competitive bidding situation at each financing round so here are some guidelines for funding sources and percentages.

Equity 40

Equity Employee Dilution Valuation 40

K9 Ventures

NOVEMBER 21, 2011

If they have, then there is no reason the founders shouldn’t get some liquidity of their own. 2) Fairness to other early employees in the company : This is a very critical and important point, that is often overlooked by founders. I believe this is something that needs to be determined on a company-by-company basis.

Founder 87

Founder Common Stock Preferred Stock Stock 87

Venture Chronicles

AUGUST 23, 2013

Managing for growth vs. managing for margin enters the discussion because investors want to manage cash efficiently while also proving the growth capability of the company in order to get to the next stage of financing. I also want to talk about shareholder interests and the Board members positions are, typically, preferred shareholders.

Management 66

Management Startup Liquidation Preference Dilution 66

K9 Ventures

NOVEMBER 21, 2011

If they have, then there is no reason the founders shouldn’t get some liquidity of their own. 2) Fairness to other early employees in the company : This is a very critical and important point, that is often overlooked by founders. I believe this is something that needs to be determined on a company-by-company basis.

Founder 84

Founder Common Stock Preferred Stock Stock 84

Both Sides of the Table

FEBRUARY 14, 2016

Social networking finally came of age connected the planet and leading to enormous wealth creation for Facebook employees and investors. Smart phones finally took off leading to enormous wealth creation for Apple employees and investors but also helped propel Google, Facebook, Twitter, Instagram, Snapchat, WhatsApp and others.

Valuation 150

Valuation Down Round Startup Later Stage 150

www.mattbartus.com

DECEMBER 9, 2012

I just worked on a financing for a company that received a term sheet from a group of VCs at a $7 million pre-money valuation. I've just seen many startups unhealthily focus on the valuation versus things such as the liquidation preference or board control. Employees, Advisors & Consultants (12). Matt Bartus.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

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. Angel Investors Silicon Valley term sheets venture financing venture capital' Startup outcomes tend to be very binary.

Term Sheet 46

Term Sheet Silicon Valley Syndicate Syndication 46

Austin Startup

APRIL 1, 2017

out of state VCs Don’t rush a term sheet In assessing financing terms and interacting with their lead investors, most founders instinctively focus on two core things: economics and control. The wrong way to define “independent” is simply as “not an investor or employee.” And, broadly speaking, that is correct.

Term Sheet 48

Term Sheet Institutional Investors Lead Investor Technical Review 48