4. VALUATION is a constant
source of confusion.
SPELL OUT:
Pre-money
Fully Diluted – Elaborate if Necessary
Option Pool Impact
DO NOT BE CREATIVE. AT ALL. EVEN A
LITTLE.
5. And I still haven’t found
what I’m looking for
Identify your investors, indicate
who’s committed and for how
much.
What gaps remain?
6. I love you more today
than yesterday
CUMULATING DIVIDENDS
Annual Rates of 6-8% are most common
7. That’s one for you,
nineteen for me
LIQUIDATION PREFERENCES
Non-Participating
Participating
Participating w/variations (caps,
multiples)
12. ANTI-DILUTION EXAMPLE
Weighted Average Anti- Full Ratchet Anti-
dilution: dilution:
Old Money goes from Old Money goes from
100,000 shares to 100,000 shares to
100,080 shares 500,000 shares
10% to 10.006% 10% to 35.712%
13. Because I told you before,
you can’t do that
VOTING, PROTECTIVE PROVISIONS
Consent of Preferred Needed to:
Reduce the Rights of Preferred
Shares
Do another Financing
14. If you want it, here it is, come and get it,
but you’d better hurry
‘cause it’s going fast
REDEMPTION RIGHTS
Present in most VC deals
Almost never exercised
Watch out for renegade investors
18. She’s my best friend’s girl –
she used to be mine
RIGHT OF FIRST REFUSAL/CO-SALE
Rarely contentious
19. You’re the reason I’m movin’ on
TAG/DRAG ALONG RIGHTS
Simplify Exit
Eliminate Appraisal Rights
20. Take another little piece
of my heart now, baby
FOUNDER VESTING; OPTION VESTING
21. I can’t get no satisfaction, and I tried…
CAPS ON TRANSACTION COSTS
Generally OK to cap the investor T/A
costs paid by the Company
Dangerous to cap Company T/A costs
22. And you know something is happening
here, but you don’t know what it is,
do you, Mr. Jones?
INFORMATION RIGHTS
23. If I catch you with another man,
that’s the end, little girl
NO SHOP CLAUSE