Venture Capital and the Finance of Innovation [Course number] Professor [Name ] [School Name] Chapter 8 Term Sheets.

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Presentation transcript:

Venture Capital and the Finance of Innovation [Course number] Professor [Name ] [School Name] Chapter 8 Term Sheets

Term Sheets – The Basics  Expropriation  Charter  Investor Rights Agreement  Rounds  Series A, Series B, etc.

Capitalization Table

Investors and Prices  $investment  Fully diluted share count  Proposed ownership percentage  Original purchase price (OPP)  Aggregate purchase price (APP)  Tranche

Post-Money Valuation Post-money valuation = price-per-share * fully- diluted share count. or Post-money valuation = $investment / proposed ownership percentage.

Pre-Money Valuation Pre-money valuation = post-money valuation - $investment. or Pre-money valuation = price-per-share * pre- transaction (fully diluted) share count. (But be careful in down rounds!)

Liquidation  Deemed liquidation event  Liquidation preference (2X, 3X, etc.)  Qualified public offering (QPO)

Dividends  Dividend Preference  Cumulative vs. non-cumulative dividends  Accrued cash dividends  Simple interest, compound interest  Stock dividends = Payment-in-kind (PIK) dividends

Restricted Stock & Registration Rights  Registration rights  Demand  S-3  Piggyback  Redemption rights  In-kind distributions  Rule 144, rule 144A  Qualified Institutional Buyers (QIBs)  Lockup restrictions

Other issues  Step vesting, cliff vesting  Right of first refusal, Right of first offer  Drag-along rights  Take-me-along = tag-along rights  Anti-dilution rights, down rounds  Pay-to-Play  No Shop