Lovin natural capitial liquidating


06-Feb-2018 14:38

We're five posts into this MBA Mondays series on Employee Equity and now we are going to start getting into details. Let's get into the issue of liquidation overhang.

We've laid out the basics but we are not nearly done. Everybody does it and nobody but the tax accountants understand it. When VC investors (and sometimes angels) invest in a startup company, they almost always buy preferred stock.

In that instance, they will take their money back and get

We're five posts into this MBA Mondays series on Employee Equity and now we are going to start getting into details. Let's get into the issue of liquidation overhang.We've laid out the basics but we are not nearly done. Everybody does it and nobody but the tax accountants understand it. When VC investors (and sometimes angels) invest in a startup company, they almost always buy preferred stock.In that instance, they will take their money back and get $1mm and you will get $7mm. The VCs are going to choose to take their money back in this situation because 75% of $55mm is roughly $41mm, less than their cash invested of $50mm.In its simplest (and best) form, preferred stock is simply the option to get your negotiated ownership or your investment back, whichever is more. The employees do the math and multiply 15% times $55mm and figure they are in for a $8mm payday. So the remaining $5mm is going to get split between the founders and employees.

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We're five posts into this MBA Mondays series on Employee Equity and now we are going to start getting into details. Let's get into the issue of liquidation overhang.

We've laid out the basics but we are not nearly done. Everybody does it and nobody but the tax accountants understand it. When VC investors (and sometimes angels) invest in a startup company, they almost always buy preferred stock.

In that instance, they will take their money back and get $1mm and you will get $7mm. The VCs are going to choose to take their money back in this situation because 75% of $55mm is roughly $41mm, less than their cash invested of $50mm.

In its simplest (and best) form, preferred stock is simply the option to get your negotiated ownership or your investment back, whichever is more. The employees do the math and multiply 15% times $55mm and figure they are in for a $8mm payday. So the remaining $5mm is going to get split between the founders and employees.

For the sake of this post, I am going to talk about a simple plain vanilla straight preferred stock.

There are all kinds of preferred stock and it can get really nasty.

mm and you will get mm. The VCs are going to choose to take their money back in this situation because 75% of mm is roughly mm, less than their cash invested of mm.

In its simplest (and best) form, preferred stock is simply the option to get your negotiated ownership or your investment back, whichever is more. The employees do the math and multiply 15% times mm and figure they are in for a mm payday. So the remaining mm is going to get split between the founders and employees.

For the sake of this post, I am going to talk about a simple plain vanilla straight preferred stock.

There are all kinds of preferred stock and it can get really nasty.

lovin natural capitial liquidating-63

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