Deeper dives and investor perspectives on the valuation, preference, and pro rata

Hopefully my series on investment termsheets has been giving you a user-friendly overview of the terms that, in some shape or form, you should expect to see. I’ve got a few more articles planned, going through the investor protections and powers as well as the terms relating to the actual transaction.

What I haven’t done is give opinions on what you should expect or accept.

I’ve focused on what a liquidation preference is, for example, not whether you should accept it if your investor wants a 2x participating preference on your round. There are two main reasons for this:


Your Investor, Dilution, and You

By David Willbe for Startup Grind

The aim of this series is to demystify the termsheet: to explain the jargon to watch out for, and give you practical examples and resources to understand what each term might mean for your business.

So far in the series, we’ve looked at the economic terms of the investment — first the valuation, and then the liquidation preference and waterfall. If you have a handle on those two areas then you can understand the value of an investor’s cash on its way in, and what it will be worth on its way out.

You…


This is the second entry in my series trying to demystify the termsheet: to explain the jargon to watch out for, and give you practical examples and resources to understand what each term might mean for your business.

In the first article, on Valuation, we unpacked one of the two key financial terms founders need to understand. This time we’ll look at the other, more complicated, one — the preferred return or liquidation preference, which is sometimes referred to as the “waterfall”. …


Investment termsheets to founders are like sports cars to teenage boys — the vast majority want one, but very few really understand how one works. The aim of this series is to demystify the termsheet: to explain the jargon to watch out for, and give you practical examples and resources to understand what each term might mean for your business.

I won’t be talking about what’s “market” or “standard”, as that varies so widely between stages, geographies, and types of investor. …

David Willbe

Lawyer, working with tech companies and investors at every stage

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