The Startup Lawyer

JANUARY 10, 2012

In most equity financing rounds, an investor will ask for (and get) a term called a liquidation preference. A liquidation preference is the amount that must be paid to a preferred stock holder before any sale proceeds may be paid to the holders of common stock (i.e., founders, option holders, etc.).

Liquidation Preference 73

Liquidation Preference Pre-Money Valuation Participating Preferred Preferred Stock 73

ithacaVC

APRIL 25, 2014

This cap table can be used by a pre-funded startup and then a financing can be layered in. The model includes a simple waterfall analysis using both participating and non-participating preferred (see line 44 and then columns M and O). In other words, it shows both pre-money and post-money very clearly.

Cap Table 79

Cap Table Preferred Stock Pre-Money Valuation Participating Preferred 79

The Startup Lawyer

JULY 13, 2011

I’ve done quite a few recent seed deals using various ‘standard’ seed financing docs ( Series Seed , TechStars Series AA , etc.). For example, a startup requested I review a set of financing documents produced by investor counsel. Ultimately, the deal document set was nothing like the well-known Series Seed set.

Preferred Stock 68

Preferred Stock Liquidation Preference Participating Preferred Stock 68

The Equity Kicker

MARCH 3, 2016

I think a bigger part of the explanation lies in deal dynamics – it’s easier for companies maximise valuation in private financing auctions than it is in IPOs. However, few of the deals went beyond a simple 1x non-participating preference share. Other protections were not that significant in number either.

Liquidation Preference 60

Liquidation Preference Participating Preferred Valuation IPO 60

Early Growth Financial Services

FEBRUARY 3, 2015

From time to time on Founders Workbench we give a brief primer on common terms and issues in venture financings. Participating versus non-participating: what’s the difference? This post by Ian Engstrand first appeared on Founders Workbench. management). management).

Preferred Stock 28

Preferred Stock Stock Finance Participating Preferred 28

Scott Edward Walker

JUNE 9, 2019

Over the past few weeks, two of my clients have received financing term sheets in which the investors requested super pro rata rights. Simply put, pro rata rights permit the investor to maintain its percentage ownership in subsequent financing rounds. Introduction. Pro Rata Rights.

Preferred Stock 56

Preferred Stock Term Sheet Dilution Stock 56

ithacaVC

DECEMBER 14, 2011

Sometimes, after getting back the LP, the preferred holder then converts to common and gets its prorata share of proceeds left after all LP has been paid (this is called participating preferred). The “no mess” LP issue relates to investors in later rounds of financing (typically Series C and beyond).

Liquidation Preference 49

Liquidation Preference LP Preferred Stock Liquidity Event 49

Scott Edward Walker

NOVEMBER 26, 2017

Indeed, this is critical in order to effectively negotiate any transaction (including a financing) – as every investment banker on Wall Street understands. As you begin to set-up investor meetings, the challenge now is to create a competitive environment and a sense of urgency.

Term Sheet 63

Term Sheet San Francisco Founder Investment Bankers 63

Professor VC

JULY 25, 2013

Yes, there are a number of cases in the middle where having a senior or participating preference does make a difference in liquidation proceeds, but I argue that it does very little to overall returns in a diversified portfolio. Angel Investors Silicon Valley term sheets venture financing venture capital'

Term Sheet 46

Term Sheet Silicon Valley Syndicate Syndication 46

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

www.payne.org

SEPTEMBER 22, 2011

Ive seen companies with $75m of preference, and very frustrated common stockholders that realize the company needs to get acquired for $100m or more for them to start making any money. (To To keep things simple, Ive omitted many details for preferred stock, such as "participating preferred" mechanisms.

Equity 56

Equity Employee Vesting Preferred Stock 56