Exit — How much am I really getting if my company is sold?

Hi all,

Many things have been written on VC exits, liquidation preference and stock options plans but I have not managed to find anything that quantifies exactly how much money a shareholder is going to receive in case the company is sold.

In this light, at JME VC we have done it ourselves.

In theory, the maths are straight-forward, but when you include liquidation preference clauses, down-rounds, and different classes of options it gets a bit messy. We have built an excel spreadsheet that takes into account all these issues and tells you the net proceeds you are going to receive.

In the spreadsheet, you just have to hardcode:

1) The share capital of the company (shares, options) + share/price and strikes;

2) The liquidation preference amount for each class of preferred shares;

3) The number of shares and/or options you hold;

4) The exit equity value

The model will then show the net proceeds you would get (pre-tax, as the amount of taxes to be paid depends on each specific case).

This file can be use by any shareholder of any company ie. Founder, VC, Employee, Business Angel, etc. We try to answer the following questions (among others):

- Founder > What are the quantitative implications of accepting a 1x or 2x liquidation preference clause?

- VC > My fund is a series A investor, at what level of valuation should I go for the liquidation preference and at what level do I want to convert into common?

- Employee > Is the compensation package the company offers me attractive or I will cash-in $0 from the options unless the company is sold at crazy valuations?

In the model, we present a company that has 3 rounds of financing (Seed/FF, Series A and Series B) and options with 3 different strikes. However, the model is also valid for companies, with one or two financing rounds and with zero to three types of options.

Let me know if the model has been useful for you and if you have any doubts/suggestions feel free to write me.

Hope you like it. Gracias!

p.s. We are working on a model for a company with Series C, D, etc. and with many more classes of options. So if you want a heads up once it is published write a comment below and I will be happy to share it with you in the future. -