Startup Professionals Musings

JULY 11, 2021

Angel and venture capital money always comes with ownership and management implications, starting with the obvious ones outlined in the term sheet for the deal. Progress milestones become management objectives. Investors will expect at least one seat on the board, and expect a board report from you each month on key items.

Term Sheet 433

Term Sheet Advisory Board Liquidation Preference Startup 433

Both Sides of the Table

MARCH 1, 2016

In bad markets, they can be wiped out by recaps and liquidation preferences unless they save enough reserves to protect their positions. But both seed investors and LPs alike agree that as long as these programs are managed sensibly, their existence is useful. The data itself bears out some of these fears.

Venture Capital 150

Venture Capital LP Silicon Valley Marketing 150

Life Beyond Code

SEPTEMBER 27, 2011

Once the $1 million revenue milestone is crossed, entrepreneurs find it easier to find additional customers, manage working capital, and access funding, whether it is credit or equity. This is where numerous ventures fail.

Programming 116

Programming Silicon Valley Bootstrapping Technical Review 116

www.founderinstitute.com

MARCH 2, 2010

The Lab manages the shared operational needs of its member organizations, allowing them to better focus on mission and execution. Participation" means that investors "double dip" by getting both their liquidation preference and their equity allocation. -

Term Sheet 40

Term Sheet Liquidation Preference Vesting San Diego 40

Both Sides of the Table

NOVEMBER 4, 2009

If you’re thinking about joining as the director of marketing, product management manager, senior architect, international business development lead, etc. BTW, this ignores liquidation preferences which actually mean you’ll earn less. My reply is usually, “is it time for you to earn or to learn?&#.

Stock Options 418

Stock Options Stock Liquidation Preference Option Pool 418

Tim Keane

JANUARY 12, 2010

Good investors use the valuation discussions to gauge the business savvy of the management team and to understand their ability to appreciate and deal with economic market forces that set values.   For individual angels and others investing their own money, this may be more fluid than for someone with responsibility for a managed fund.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Feld Thoughts

FEBRUARY 28, 2023

In addition, there are the managing directors as executive bodies. In the VC sector, it is common to introduce a third body in addition to the shareholders’ meeting and the management. The shareholders are represented there and usually have voting rights in proportion to their shareholdings.

Germany 175

Germany Liquidation Preference Option Pool Advisory Board 175

Altgate

OCTOBER 8, 2009

Raising Capital: 5 Reasons Convertible Debt Sucks HOT The Collapse of the VC Ecosystem & What It Will Look Like Post Recovery 10 Tips On Negotiating With VCs Dating…er…Fundraising Etiquette The Science & Art of Term Sheet Negotiation HOT How Liquidation Preferences Work HOT How Much Money Should I Raise?

Term Sheet 39

Term Sheet Technical Review Michigan Liquidation Preference 39

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). Progress milestones become management objectives.

Term Sheet 237

Term Sheet Advisory Board Liquidation Preference Startup 237

Both Sides of the Table

SEPTEMBER 6, 2010

Options are obviously a very important economic motivator for your first 3-5 employees and your most senior management team. Investors generally are not the people to reveal valuations to anybody – it is the business of the company and the CEO should manage this information. We had a lot of re-setting of expectations to do.

Stock Options 294

Stock Options Stock Valuation Liquidation Preference 294

Altgate

JANUARY 5, 2009

Share and Enjoy: This entry was posted in Current Affairs , Entrepreneurship , Green Business , Management , Startups , Technology , Venture Capital , Venture Debt and tagged top posts. Tips: $75 Killver VC Pitch Deck Not much to learn here. That’s actually about what I would have guessed had I not seen the Google Analytics numbers.

Technical Review 28

Technical Review Due Diligence Term Sheet Liquidation Preference 28

Up and Running

AUGUST 17, 2015

Between my experiences as a management consultant, as well as my product and marketing roles at multiple tech companies, I felt that I had enough operational experience to make that leap sooner than later. C Corp versus LLC, non-competes, liquidation preferences, preferred versus common stock, and so on).

Entrepreneur 60

Entrepreneur Cofounder Angel Investor eCommerce 60

genylabs.typepad.com

SEPTEMBER 24, 2011

where your stock sits in the liquidity preference stack. what rights and preferences the founders and the other investors have. They had a great managment team, A list VCs, great technology, excellent sales traction and market leadership in a very exciting space. management. what kind of stock you are getting.

Equity 40

Equity Technical Review San Jose Stock 40

Both Sides of the Table

JULY 19, 2011

This is the skilled bit that you can’t effectively manage. For one, due to the way liquidation preference work sometimes they have “flat spots&# which means that they might earn the exact same amount from a $40 million sale as they would from a $50 million sale. They’re also good at screening candidates.

Term Sheet 319

Term Sheet PR Liquidation Preference Stock Options 319

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

K9 Ventures

JUNE 5, 2015

Almost like boiling a frog the micro-VCs who started out as “super angels” (See my post from 2011 on Investor Nomenclature and the Venture Spiral ) writing $25K – $100K checks with personal money, are now managing funds which are $40M – $140M in size, some with multiple partners and are writing checks which are $750K – $1.5M.

Seed Stage 48

Seed Stage Venture Capital Early Stage Valuation 48

ithacaVC

FEBRUARY 23, 2011

A management carve out plan (MCOP) is a written obligation of the company that, in simple terms, provides that certain management members get a predetermined slice of proceeds when a company is sold. As the investors’ aggregate liquidation preference (ALP) increases typically the need for a MCOP also increases.

Liquidation Preference 55

Liquidation Preference Management Preferred Stock Dividend 55

Startup Professionals Musings

FEBRUARY 3, 2018

Angel and venture capital money always comes with ownership and management implications, starting with the obvious ones outlined in the term sheet for the deal. Progress milestones become management objectives. Investors will expect at least one seat on the board, and expect a board report from you each month on key items.

Term Sheet 140

Term Sheet Advisory Board Liquidation Preference Portfolio 140

Venture Chronicles

AUGUST 23, 2013

5) Board management: My point here is not about criticism of investors because at the end of the day what investors provide above all else is access to capital, and point in fact their motivation is ultimately pure, which is they are in it to make money. Entrepreneurship entrepreneurship Get Satisfaction management startup lessons Startups'

Management 66

Management Startup Liquidation Preference Dilution 66

Startup Professionals Musings

AUGUST 16, 2015

Angel and venture capital money always comes with ownership and management implications, starting with the obvious ones outlined in the term sheet for the deal. Progress milestones become management objectives. Investors will expect at least one seat on the board, and expect a board report from you each month on key items.

Term Sheet 120

Term Sheet Advisory Board Liquidation Preference Angel Investor 120

K9 Ventures

MARCH 23, 2011

It is in essence equivalent to being a Liquidation Preference that is typically seen in a preferred equity financing. Every first time founder needs to learn what it means to manage a board. Notes may have fewer rights associated with them, but they come with one big hammer. There are multiple issues at hand here.

Pre-Money Valuation 132

Pre-Money Valuation Valuation Equity Liquidation Preference 132

ithacaVC

APRIL 25, 2014

The model includes a simple waterfall analysis using both participating and non-participating preferred (see line 44 and then columns M and O). The larger the preferred stock liquidation preference the larger the impact of participating preferred. Dealing with VCs Management Startup Life'

Cap Table 79

Cap Table Preferred Stock Pre-Money Valuation Participating Preferred 79

Growthink Blog

MAY 23, 2011

Management has the wrong pedigree, is geographically undesirable, competes in the wrong industry, and/or has a business model that lacks "scalability credibility" with the venture community. . There are a lot of dark, hard days. There is considerable internal debate around whether or not to solicit and/or accept outside venture capital.

Angel Investor 112

Angel Investor Venture Capital Sweat Equity Cram Down 112

Professor VC

APRIL 1, 2010

I had a discussi on with another angel investor a few months ago and he was bragging about the deal he just struck that included a 3X participating liquidation preference. I take CFO roles in early stage companies and participate on the management team during the early financings and business model development phases.

Term Sheet 32

Term Sheet Angel Investor San Jose Venture Capital 32

ithacaVC

JUNE 29, 2018

I have posted a few times on management carve out plans (back in February 2011 and November 2011 ; wow, time flies!!). This typically results when the company has raised a lot of money and the preferred stock liquidation preference would absorb an out sized portion of the exit proceeds.

Management 40

Management Liquidation Preference Preferred Stock Dilution 40

Startup Company Lawyer

JANUARY 9, 2011

Tweaking convertible debt so that common stock (instead of preferred stock) is issued for the conversion discount in order to limit liquidation preference overhang. Convertible debt with a price cap preserves the investor’s “equity&# ownership, but gives the investor extra liquidation preference.

Liquidation Preference 57

Liquidation Preference Finance Preferred Stock Common Stock 57

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

Both Sides of the Table

DECEMBER 11, 2022

If they are private we still have fig leaves that cover us because some rounds might raise debt vs. equity or might fund with terms like multiple liquidation preferences or full-ratchets or convertible notes with caps. The tide has gone out. But this is still all about valuations and none of it is any fun anymore.

Valuation 466

Valuation San Francisco Ratchet Liquidation Preference 466

Both Sides of the Table

SEPTEMBER 2, 2009

The VCs basically have liquidity in management fees along the way, in the sense they get paid decently along the way. But the day after you’ll wake up and see yourself more as a manager than an owner. I took money with a 3x participating preferred liquidation preference with 8% compounded interest annually.

Founder 329

Founder Liquidation Preference Term Sheet Participating Preferred 329

Up and Running

DECEMBER 30, 2015

Founders should pay attention to the liquidation preference in the term sheet to ensure it does not become detrimental to them in a less than favorable exit. We now structure time for due diligence to manage expectations appropriately. – Carrie Rich, The Global Good Fund. Better yet, get legal counsel.

Due Diligence 84

Due Diligence Valuation Liquidation Preference Redemption 84

ithacaVC

SEPTEMBER 20, 2011

That means, assuming a 1X liquidation preference, that the common stock should be worth zero NOW simply based on the fact that the aggregate liquidation preference exceeds the M&A revenue multiples. Furthermore, it is in an industry where M&A transactions typically happen in the 3-4X revenue range.

Liquidation Preference 49

Liquidation Preference Common Stock Stock Options Valuation 49

Altgate

DECEMBER 18, 2008

@altgate Startups, Venture Capital & Everything In Between Skip to content Home Furqan Nazeeri (fn@altgate.com) ← The 3X Liquidation Preference Is Back! Share and Enjoy: This entry was posted in Management , Startups and tagged board , CEO , founder , startup , succession. ← The 3X Liquidation Preference Is Back!

Liquidation Preference 28

Liquidation Preference Management Venture Capital Founder 28

Feld Thoughts

JULY 14, 2015

It usually happens in a later round, when the company is in fact worth much less than the liquidation preference overhang and insiders use a pay-to-play and a low valuation to reset the preferences and the cap table. It’s not pretty, but it happens.

Recapitalization 70

Recapitalization Pre-Money Valuation Post-Money Valuation Angel Investor 70

Both Sides of the Table

FEBRUARY 14, 2016

The billions of dollars managed by mutual funds, hedge funds, insurance companies, university endowments, pensions, foundations, sovereign wealth funds and the like need to find returns for their money. Or down rounds might favor earlier-stage investors because the liquidation preferences of later stage investors get reduced.

Valuation 150

Valuation Down Round Startup Later Stage 150

ithacaVC

NOVEMBER 1, 2011

And we VCs know that a sale is not possible without the management team making an incredible effort. And we know that the options will be worthless unless our liquidation preferences are cleared. Last I checked, we VCs love it when a portfolio company is sold for a tidy profit.

Vesting 60

Vesting Pre-Money Valuation Liquidation Preference Stock Options 60

ithacaVC

MAY 4, 2011

Many terms of the Series C round are going to have more of an impact on the Series A and Series B holders than on the management team. So, prior to closing, the VCs themselves are negotiating just as much as management. Let’s say that the Series A liquidation preference (LP) is 1X and that the Series B LP is 1.5X.

Term Sheet 49

Term Sheet LP Ratchet Liquidation Preference 49

ithacaVC

MAY 1, 2013

It is ONLY once the VC’s liquidation preference is cleared that the common stock held by founders and employees is worth anything. Dealing with VCs Management' And I think that makes 100% sense. Yeah, I am a VC so you might think I am biased, but it really does make sense.

Dividend 45

Dividend Liquidation Preference Common Stock Venture Capital 45