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Term Shitee

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i) Some tipsii) Economicsiii) Controliv) BS

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Tips

i) Pee or get off the potii) Know what you wantiii) Have your materials readyiv) Be ready for due diligencev) Find the right investorsvi) Close!

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Price

Pre-money vs. Post-money

500k @ 2M pre-money = 20%500k @ 2M post-money = 25%

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Option pool

Case:20% option pool case at 2M pre-money

Founders’ pre-money valuation = 1.6M

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Liquidation preference

i) Full participation vsii) Capped participation vsiii) No participation

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Liquidation preference

500k at 2M pre-money – 20%i) 2x not participatingExit 1: 5M: Investors - 1M / F6S – 4MExit 2: 2M: Investors – 1M / F6S – 1M

ii) 2x full participatingExit 1: 5M: Investors - 1M / F6S – 4MExit 2: 1M: Investors – 1.2M / F6S – 0.8M

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Pay-to-Play

Automatically convert Preferred stock to Common stock

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Vesting

i) Cliffii) Vesting periodiii) Merger – single vs. double

trigger

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Other

i) Employee poolii) Antidilution

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Board

Standard composition of 5 person board:2 investors2 founders1 independent

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Protection rights

i) Change of terms of stockii) Issue new stockiii) Sell companyiv) Change bylawsv) Change boardvi) Pay dividendsvii) Borrow money

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Drags and Tags

i) Drag alongii) Tag along (explained)

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Q&A