Trendsetter Negotiation

Pick Alpha Ventures

Securities Dividends Key Person Insurance

● Convertible Preferred ● Nonculmilative ● Company offers life

Stock and Escrowed dividend does not insurance for Wendy
Shares
cause financial Borg and Jason Kushdog
stress
● No penalty if the
company suspend
the payment
● More flexibility with
cash flow
 Differences
Alpha Ventures
● Amount and Securities: Convertible
Preferred Stock and Escrowed Shares
● Dividend: Noncumulative dividends
● Liquidation: as-converted until the
preferred stock received 3 times the initial
issuance price Conversion: Initial
conversion rate 1:1
● Anti Dilution Provisions: protection on
issuances
● Co-sale rights
● First Refusal
Mega Fund
● Amount and Securities:
Convertible Participating Preferred Stock
● Dividends:
Accruing cumulative dividends
● Liquidation:
Stocks being distributed ratably among all
holders of Common and Series A Preferred
Until Series A stock paid in full.
● Redemption
● Conversion: Series A Purchase Price/
conversion price of the Series A Preferred
 Similarity
Investment amount
Use weighted average anti-dilution
Information rights
Registration rights
Voting rights
Preemptive rights
Conversion and automatic conversion
Negotiation with VC

Liquidation redemption Anti Dilution

Investors may request to Negotiate with the year of Generalized weighted

set a liquidation priority the redemption. average method
multiple.
If companies want to compared to the
Investors may also require reduce the impact of
participation priority redemption rights, they can
Narrow weighted average
coordinate with investors method
to postpone the payment
of the redemption price.
Merge
Alpha:
Liquidation happens when
● Control of the Company
transferred
● Merger, reorganization or
other transaction will be
Liquidation
Mega:
Liquidation happens when
● merge , or reorganization in a
single transaction ora sales
related to company’s assets
or the acquisition
● Above actions contain more
than 50% of company’s
assets
IPO
Alpha:
● No co-sale rights
● When automatic conversion
deduction should exceed
commissions
● Registration rights
○ begin before 3 years from
closing or 6 month after IPO
○ Full cutback on unlimited
piggyback registration rights
Mega:
● Registration rights
○ Begin before 3 years from
closing or 6 month after IPO
○ Full cutback on unlimited
piggyback registration rights
More aspects in considering the VC

1. Whether the investor has the same business goal with you?

2. Don’t spend too much time to negotiate with one VC,

you may lose the advantage among your competitors

3. Does the investor have more business resource can be used?

Thank you !