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VENTURE CAPITAL BOOT CAMP June 3, 2009 Internet Week New York
Thank You!
Who is DFJ Gotham Ventures? Founding Date <ul><li>Est. 1999 </li></ul>Focus Sectors <ul><li>Digital Media </li></ul><ul><l...
 
Powerful and Growing DFJ Network 23 funds, >$6 billion in capital 150 professionals, 600 portfolio companies Unique access...
MarkPeterDavis.com <ul><li>VC Overview </li></ul><ul><li>Developing A Fundraising Strategy </li></ul><ul><li>Picking The V...
Who is Wilson Sonsini Goodrich & Rosati? <ul><li>Premier provider of value-added legal services to growth business enterpr...
WSGR Business Model
<ul><li>Founded in 1961 </li></ul><ul><li>Approximately 650 attorneys </li></ul>San Francisco Palo Alto San Diego Seattle ...
Select WSGR Clients
Agenda <ul><li>What is VC? </li></ul><ul><li>Is VC Right for You? </li></ul><ul><li>Forming the VC Backed Company </li></u...
<ul><li>What is VC? </li></ul>
VCs Make Investments in Startups
VCs Backed by Institutional Limited Partners  <ul><li>Endowments </li></ul><ul><li>Insurance companies </li></ul><ul><li>P...
Limited Partners Require Risk-Adjusted Returns
Returns are Generated Through Exits: M&A or IPO
<ul><li>Is VC Right for You? </li></ul>
Is Your Company “Fundable” by a VC? <ul><li>Strong management team </li></ul><ul><li>Large and growing market </li></ul><u...
“ Great for entrepreneurs to own 80%, not great for investors to own 20%”
Build standalone companies,  exit along the way
Other Sources of Risk Capital
Why is VC helpful?
Capital
Action Plan & Attack
Connections
Credibility
Governance
It’s a Marriage…
Reach for the Big Win
Shared Control – Shared Destiny
Fit
1%
<ul><li>Forming the VC Backed Company </li></ul>
Form of Legal Entity <ul><li>Sole proprietorship </li></ul><ul><li>Partnership </li></ul><ul><li>Limited partnership </li>...
The Corporation: Advantages <ul><li>“ Separate legal entity” </li></ul><ul><li>Perpetual life </li></ul><ul><li>Separation...
The Corporation: Disadvantages <ul><li>Separate tax payer – the “double tax” </li></ul><ul><li>LLCs, S-corps and partnersh...
Things to Consider When Incorporating <ul><li>Timing </li></ul><ul><li>Jurisdiction of incorporation </li></ul><ul><li>Boa...
<ul><li>Engaging the VC </li></ul>
Getting the Meeting Mutual Contact LinkedIn Cold Email Spam Most Effective Least Effective Direct Introduction
What is the objective of the first meeting?
Cross Chasm from Pitch to Conversation
What’s After the First Meeting? The Due Diligence Phase Meet The Team Company Materials Experts References Facilitate proa...
Presentation Materials <ul><li>Executive Summary </li></ul><ul><li>PowerPoint presentation </li></ul><ul><li>Financial pro...
What Should be Included in an  Executive Summary? <ul><li>Geographic location </li></ul><ul><li>Mission statement </li></u...
Explain what your company does  (in plain English)
Why is this needed? Why now?
Market Size  Addressable Market
Why are you better than your competition?
Be thoughtful about barriers
Being the first mover is not a barrier,  it’s an opportunity to create barriers
Common Barriers Scale Customer Captivity Information Technology IT Barriers
Don’t forget the jockey
What Should be Included in a Presentation? <ul><li>Geographic location </li></ul><ul><li>Mission statement </li></ul><ul><...
Answer First:  Start with an Investment Overview Slide <ul><li>Geographic location </li></ul><ul><li>Mission statement </l...
Describe your place in the ecosystem
Describe the path to success
Don’t forget the jockey
Be Ready with Back-Up Materials <ul><li>Market background </li></ul><ul><li>Technology background </li></ul><ul><li>Risk a...
Identify the Right VC
Embrace Pinball Effect
Summary <ul><li>Get in the door </li></ul><ul><li>Have a clear, simple pitch </li></ul><ul><li>Back it up with detailed st...
<ul><li>The Term Sheet </li></ul>
Principles of Valuation <ul><li>Valuation: how much the company is “worth” </li></ul><ul><ul><li>Pre-money valuation </li>...
The Employee Option Pool <ul><li>What is an option and an option pool? </li></ul><ul><li>The reserve amount is typically b...
Typical Option Grants <ul><li>A very general rule of thumb for a “mid-stage” technology start-up (i.e., post-Series A) </l...
Startup Company Valuation Model Example – Incorporation <ul><li>Founders A and B each purchase 2,000,000 shares of common ...
Startup Company Valuation Model Example – Establishment of Option Plan <ul><li>In order to attract employees, the company ...
Startup Company Valuation Model Example – Initial Financing Round <ul><li>The company completes a $4,000,000 venture capit...
Startup Company Valuation Model Example – Series B Financing Round <ul><li>The company completes a $10,000,000 Series B fi...
Typical Dilution Metrics Financing stage Amount Raised Dilution Seed – develop beta product, develop plan $50k - $1m 15-30...
Seed Financing Through Bridge Notes <ul><li>In seed round financings, the first investment is frequently done as a convert...
Preferred Stock Term Sheet <ul><li>Preferred stock </li></ul><ul><li>Valuation/option pool </li></ul><ul><li>Liquidation p...
Two class stock structure <ul><li>Preferred and common stock </li></ul><ul><ul><li>Common stock is generally used for comp...
Liquidation Preference <ul><li>Investors get a “Liquidation Preference” in the event of a liquidity event of the company <...
Liquidation Preference Example of Fully Participating Preferred (assumes $100m sale price and $25m invested) Shares % o/s ...
Dividends <ul><li>Accruing/non-accruing </li></ul><ul><li>Compounding/non-compounding </li></ul><ul><li>Payable on specifi...
Conversion <ul><li>Preferred stock convertible into common stock at option of holder, initially on one for one basis </li>...
Antidilution protection <ul><li>Conversion rate adjusts on certain events </li></ul><ul><ul><li>Proportionate in the event...
Board composition/Voting rights <ul><li>Companies are controlled by the board of directors </li></ul><ul><ul><li>Control o...
Other terms <ul><li>Redemption </li></ul><ul><li>Registration rights </li></ul><ul><li>ROFR/Co-Sale </li></ul><ul><li>Pree...
Q&A
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VC Bootcamp By DFJ Gotham Ventures and Wilson Sonsini Goodrich & Rosati

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Slides from the Venture Capital Bootcamp event hosted by DFJ Gotham Ventures and Wilson Sonsini Goodrich & Rosati at Columbia University on June 3, 2009. A video of the 3 hour event is available at www.dfjgotham.com.

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VC Bootcamp By DFJ Gotham Ventures and Wilson Sonsini Goodrich & Rosati

  1. VENTURE CAPITAL BOOT CAMP June 3, 2009 Internet Week New York
  2. Thank You!
  3. Who is DFJ Gotham Ventures? Founding Date <ul><li>Est. 1999 </li></ul>Focus Sectors <ul><li>Digital Media </li></ul><ul><li>Financial Technologies </li></ul><ul><li>E-Commerce </li></ul><ul><li>Mobile Technologies </li></ul><ul><li>Network Infrastructure </li></ul>Early Stage <ul><li>First institutional round </li></ul><ul><li>Nominal or no revenue </li></ul><ul><li>Demonstrable technology </li></ul>Global Presence <ul><li>Leverage DFJ Network </li></ul>Danny Schultz Mark Davis Ross Goldstein Thatcher Bell
  4.  
  5. Powerful and Growing DFJ Network 23 funds, >$6 billion in capital 150 professionals, 600 portfolio companies Unique access, insight and deal flow
  6. MarkPeterDavis.com <ul><li>VC Overview </li></ul><ul><li>Developing A Fundraising Strategy </li></ul><ul><li>Picking The VCs </li></ul><ul><li>Preparing Your Materials </li></ul><ul><li>The Pre-Fundraising Process </li></ul><ul><li>Getting The Meeting </li></ul><ul><li>The First Meeting </li></ul><ul><li>After The First Meeting </li></ul><ul><li>The Due Diligence Phase </li></ul><ul><li>Doing The Deal </li></ul>CHAPTERS
  7. Who is Wilson Sonsini Goodrich & Rosati? <ul><li>Premier provider of value-added legal services to growth business enterprises worldwide, as well as the public and private capital markets that finance them </li></ul><ul><li>Represent multi-billion dollar global enterprises as well as venture-backed start-up companies </li></ul><ul><li>Our track record: </li></ul><ul><ul><li>Represent more companies that receive venture financing than any other law firm </li></ul></ul><ul><ul><li>Advise more U.S. companies on their initial public offerings than any other law firm </li></ul></ul><ul><ul><li>Represent more technology companies in mergers and acquisitions than any other U.S. law firm </li></ul></ul><ul><ul><li>Advise more than 300 public and 3,000 private enterprises on issues of corporate law, securities, and corporate governance </li></ul></ul><ul><ul><li>Most frequently hired securities litigation firm in the country* </li></ul></ul><ul><ul><li>Over 100 patent infringement lawsuits successfully litigated throughout the U.S. over the last five years </li></ul></ul>
  8. WSGR Business Model
  9. <ul><li>Founded in 1961 </li></ul><ul><li>Approximately 650 attorneys </li></ul>San Francisco Palo Alto San Diego Seattle Austin New York D.C. Shanghai WSGR Footprint = Wilson Sonsini Goodrich & Rosati offices
  10. Select WSGR Clients
  11. Agenda <ul><li>What is VC? </li></ul><ul><li>Is VC Right for You? </li></ul><ul><li>Forming the VC Backed Company </li></ul><ul><li>Engaging with the VC </li></ul><ul><li>The Term Sheet </li></ul><ul><li>More Q&A </li></ul>
  12. <ul><li>What is VC? </li></ul>
  13. VCs Make Investments in Startups
  14. VCs Backed by Institutional Limited Partners <ul><li>Endowments </li></ul><ul><li>Insurance companies </li></ul><ul><li>Pension funds </li></ul><ul><li>Banks </li></ul><ul><li>Fund of funds </li></ul><ul><li>Family offices </li></ul><ul><li>High net worth </li></ul>
  15. Limited Partners Require Risk-Adjusted Returns
  16. Returns are Generated Through Exits: M&A or IPO
  17. <ul><li>Is VC Right for You? </li></ul>
  18. Is Your Company “Fundable” by a VC? <ul><li>Strong management team </li></ul><ul><li>Large and growing market </li></ul><ul><li>Viable model </li></ul><ul><li>Competitive advantage/ barriers </li></ul><ul><li>Realistic exit opportunities </li></ul>
  19. “ Great for entrepreneurs to own 80%, not great for investors to own 20%”
  20. Build standalone companies, exit along the way
  21. Other Sources of Risk Capital
  22. Why is VC helpful?
  23. Capital
  24. Action Plan & Attack
  25. Connections
  26. Credibility
  27. Governance
  28. It’s a Marriage…
  29. Reach for the Big Win
  30. Shared Control – Shared Destiny
  31. Fit
  32. 1%
  33. <ul><li>Forming the VC Backed Company </li></ul>
  34. Form of Legal Entity <ul><li>Sole proprietorship </li></ul><ul><li>Partnership </li></ul><ul><li>Limited partnership </li></ul><ul><li>Limited liability company </li></ul><ul><li>Corporation </li></ul>
  35. The Corporation: Advantages <ul><li>“ Separate legal entity” </li></ul><ul><li>Perpetual life </li></ul><ul><li>Separation of ownership from management </li></ul><ul><li>Fringe benefits (incentive stock options) </li></ul><ul><li>Familiarity </li></ul><ul><li>Limited liability </li></ul><ul><ul><li>Limited liability can be lost (“piercing the corporate veil”) </li></ul></ul><ul><ul><ul><li>Failure to observe corporate formalities </li></ul></ul></ul><ul><ul><ul><li>Commingling of assets and affairs </li></ul></ul></ul><ul><ul><ul><li>Undercapitalization </li></ul></ul></ul><ul><ul><ul><li>Deception </li></ul></ul></ul><ul><ul><li>Personal guarantees </li></ul></ul>
  36. The Corporation: Disadvantages <ul><li>Separate tax payer – the “double tax” </li></ul><ul><li>LLCs, S-corps and partnerships avoid the double tax, but have other limitations </li></ul><ul><ul><li>No stock options </li></ul></ul><ul><ul><li>Limits type/number of stockholders </li></ul></ul><ul><ul><li>Legal complexities; higher legal costs </li></ul></ul><ul><ul><li>No IPOs </li></ul></ul>
  37. Things to Consider When Incorporating <ul><li>Timing </li></ul><ul><li>Jurisdiction of incorporation </li></ul><ul><li>Board of Directors and Board of Advisors </li></ul><ul><li>Stock issuance to founders </li></ul><ul><ul><li>Vesting; acceleration </li></ul></ul><ul><ul><li>Rights of first refusal/co-sale </li></ul></ul><ul><ul><li>Consideration to be paid/tax implications </li></ul></ul><ul><ul><ul><li>Assignment of IP </li></ul></ul></ul><ul><ul><ul><li>Nominal cash payment </li></ul></ul></ul>
  38. <ul><li>Engaging the VC </li></ul>
  39. Getting the Meeting Mutual Contact LinkedIn Cold Email Spam Most Effective Least Effective Direct Introduction
  40. What is the objective of the first meeting?
  41. Cross Chasm from Pitch to Conversation
  42. What’s After the First Meeting? The Due Diligence Phase Meet The Team Company Materials Experts References Facilitate proactively!
  43. Presentation Materials <ul><li>Executive Summary </li></ul><ul><li>PowerPoint presentation </li></ul><ul><li>Financial projections </li></ul>Get the meeting Create interest Explain how
  44. What Should be Included in an Executive Summary? <ul><li>Geographic location </li></ul><ul><li>Mission statement </li></ul><ul><li>Product overview & pain point </li></ul><ul><li>Addressable market </li></ul><ul><li>Competitive landscape </li></ul><ul><li>Barriers to entry </li></ul><ul><li>Achievements to date </li></ul><ul><li>Projections </li></ul><ul><li>Capital needs & use of capital </li></ul><ul><li>Team bios </li></ul>1-2 Page Executive Summary
  45. Explain what your company does (in plain English)
  46. Why is this needed? Why now?
  47. Market Size Addressable Market
  48. Why are you better than your competition?
  49. Be thoughtful about barriers
  50. Being the first mover is not a barrier, it’s an opportunity to create barriers
  51. Common Barriers Scale Customer Captivity Information Technology IT Barriers
  52. Don’t forget the jockey
  53. What Should be Included in a Presentation? <ul><li>Geographic location </li></ul><ul><li>Mission statement </li></ul><ul><li>Product overview & pain point </li></ul><ul><li>Addressable market </li></ul><ul><li>Competitive landscape </li></ul><ul><li>Barriers to entry </li></ul><ul><li>Achievements to date </li></ul><ul><li>Projections </li></ul><ul><li>Capital needs & use of capital </li></ul><ul><li>Team bios </li></ul>15-20 Slide Presentation How
  54. Answer First: Start with an Investment Overview Slide <ul><li>Geographic location </li></ul><ul><li>Mission statement </li></ul><ul><li>Product overview & pain point </li></ul><ul><li>Addressable market </li></ul><ul><li>Competitive landscape </li></ul><ul><li>Barriers to entry </li></ul><ul><li>Achievements to date </li></ul><ul><li>Projections </li></ul><ul><li>Capital needs & use of capital </li></ul><ul><li>Team bios </li></ul><ul><li>How </li></ul>Based in New York Seeking to revolutionize… Customers lose $X per year $X billion addressable market Unique tech = better service Strong network effect barrier Live & generating revenue Projections: $XXXM in X years Seek: $X-XM for new market Thought leaders, 3 rd startup Detailed strategy
  55. Describe your place in the ecosystem
  56. Describe the path to success
  57. Don’t forget the jockey
  58. Be Ready with Back-Up Materials <ul><li>Market background </li></ul><ul><li>Technology background </li></ul><ul><li>Risk assessment </li></ul><ul><li>Competitive landscape </li></ul><ul><li>References </li></ul><ul><li>Potential industry/other experts </li></ul><ul><li>Other diligence materials </li></ul>
  59. Identify the Right VC
  60. Embrace Pinball Effect
  61. Summary <ul><li>Get in the door </li></ul><ul><li>Have a clear, simple pitch </li></ul><ul><li>Back it up with detailed strategy and tactics </li></ul><ul><li>Describe the path to success </li></ul><ul><li>Convince us that you are the one </li></ul>
  62. <ul><li>The Term Sheet </li></ul>
  63. Principles of Valuation <ul><li>Valuation: how much the company is “worth” </li></ul><ul><ul><li>Pre-money valuation </li></ul></ul><ul><ul><li>Post-money valuation </li></ul></ul><ul><li>Valuation is the #1 issue in the negotiation between the founder and the investor </li></ul><ul><li>Valuation influenced by market conditions and competition for the deal, amongst other factors </li></ul>
  64. The Employee Option Pool <ul><li>What is an option and an option pool? </li></ul><ul><li>The reserve amount is typically based on anticipated headcount growth </li></ul><ul><li>This time horizon is usually about as far as the CEO and the investors can reasonably foresee the future </li></ul><ul><li>The reserve amount is usually assessed and replenished with each financing </li></ul>
  65. Typical Option Grants <ul><li>A very general rule of thumb for a “mid-stage” technology start-up (i.e., post-Series A) </li></ul><ul><li>The median range for option pools is around 15-25% for early stage companies, depending on their headcount requirements. </li></ul>Position No. of Ees % of Capital Aggregate Equity CEO (1): 5 - 10% 7% CFO (1): 1 - 2% 1% VPs (2): 1 - 3% 8% Dir - level (6): < 1/2% 3% Others (?): < 1/4% 6% Total 25%
  66. Startup Company Valuation Model Example – Incorporation <ul><li>Founders A and B each purchase 2,000,000 shares of common stock at a purchase price of $0.001 per share </li></ul>Person # Shares % of Shares Value A 2,000,000 50% $2,000 B 2,000,000 50% $2,000 Total 4,000,000 100% $4,000
  67. Startup Company Valuation Model Example – Establishment of Option Plan <ul><li>In order to attract employees, the company establishes an option plan and reserves 1,000,000 shares for issuance under the plan </li></ul>Person # Shares % of Shares Value A 2,000,000 40% $2,000 B 2,000,000 40% $2,000 Option plan 1,000,000 20% $1,000 Total 5,000,000 100% $5,000
  68. Startup Company Valuation Model Example – Initial Financing Round <ul><li>The company completes a $4,000,000 venture capital financing round of Series A Preferred Stock at a purchase price of $1.00 per share, representing a $6,000,000 pre-money valuation. Option pool is increased to reflect 20% of the fully diluted capitalization. </li></ul>Person # Shares % of Shares Value A 2,000,000 20% $2,000,000 B 2,000,000 20% $2,000,000 Option plan 2,000,000 20% $2,000,000 Series A 4,000,000 40% $4,000,000 Total 10,000,000 100% $10,000,000
  69. Startup Company Valuation Model Example – Series B Financing Round <ul><li>The company completes a $10,000,000 Series B financing at a $30,000,000 pre-money valuation, at a purchase price of $2.75 per share. The option pool is set at 20% post financing. </li></ul>Person # Shares % of Shares Value A 2,000,000 13.75% $5,500,000 B 2,000,000 13.75% $5,500,000 Option plan 2,909,090 20% $8,000,000 Series A 4,000,000 27.5% $11,000,000 Series B 3,636,363 25% $10,000,000 Total 14,545,454 100% $40,000,000
  70. Typical Dilution Metrics Financing stage Amount Raised Dilution Seed – develop beta product, develop plan $50k - $1m 15-30% A – complete initial product, build initial team $1m-$5m 40-60% B – bring product to market, complete team $5m-$15m 25-35% C – expand sales and marketing, working capital for liquidity event $10m-$25m <20%
  71. Seed Financing Through Bridge Notes <ul><li>In seed round financings, the first investment is frequently done as a convertible bridge loan </li></ul><ul><ul><li>WSGR Entrepreneurs Report : 41% of seed financings were completed through the issuance of convertible bridge notes </li></ul></ul><ul><ul><li>One clear advantage of bridge note financing: no need to set valuation for the company </li></ul></ul><ul><li>Bridge loan terms </li></ul><ul><ul><li>Principal and interest automatically convert into the Series A Preferred </li></ul></ul><ul><ul><li>Will typically include warrant coverage in 10-30% range -or- a discount to the Series A Preferred price on conversion in the same range </li></ul></ul><ul><ul><li>Frequently provide for a cap or floor on conversion price </li></ul></ul>
  72. Preferred Stock Term Sheet <ul><li>Preferred stock </li></ul><ul><li>Valuation/option pool </li></ul><ul><li>Liquidation preference </li></ul><ul><li>Dividends </li></ul><ul><li>Conversion features </li></ul><ul><li>Antidilution protection (stock splits, price-based) </li></ul><ul><li>Voting rights </li></ul><ul><li>Board composition </li></ul><ul><li>Redemption </li></ul><ul><li>Registration rights </li></ul><ul><li>ROFR/Co-sale </li></ul><ul><li>Preemptive rights </li></ul><ul><li>Pay to play </li></ul><ul><li>Founder/employee vesting </li></ul><ul><li>Non-competes </li></ul><ul><li>Exclusivity </li></ul><ul><li>Expenses </li></ul><ul><li>Confidentiality </li></ul>
  73. Two class stock structure <ul><li>Preferred and common stock </li></ul><ul><ul><li>Common stock is generally used for compensatory purposes (i.e., as a form of payment to employees, board members, consultants, advisors and other service providers) and issued to founders at incorporation </li></ul></ul><ul><ul><li>Preferred stock is generally used for investment purposes and has many more rights, preferences and privileges than common stock </li></ul></ul><ul><ul><li>Common stock is typically “priced” at a lower price than preferred stock (i.e., for option granting purposes) </li></ul></ul>
  74. Liquidation Preference <ul><li>Investors get a “Liquidation Preference” in the event of a liquidity event of the company </li></ul><ul><li>“ Liquidity events” include M&A transactions </li></ul><ul><li>A typical liquidation preference would provide the investors their money back before any other stockholders receive any proceeds </li></ul><ul><ul><li>A “participating” liquidation preference entitles investors to their money back, plus the right to participate in the remaining amounts </li></ul></ul><ul><ul><li>Caps are often negotiated </li></ul></ul>
  75. Liquidation Preference Example of Fully Participating Preferred (assumes $100m sale price and $25m invested) Shares % o/s Liquidation preference Payment of remainder Total proceeds A 3,500,000 23.33% $3,000,000 $17,500,000 $20,500,000 B 4,000,000 26.66% $7,000,000 $20,000,000 $27,000,000 C 3,000,000 20.00% $15,000,000 $15,000,000 $30,000,000 Common (founders) 2,500,000 16.66% N/A $12,500,000 $12,500,000 Option pool 2,000,000 13.33% N/A $10,000,000 $10,000,000 Total 15,000,000 100.00% $25,000,000 $75,000,000 $100,000,000
  76. Dividends <ul><li>Accruing/non-accruing </li></ul><ul><li>Compounding/non-compounding </li></ul><ul><li>Payable on specified dates/payable “if, as and when” declared </li></ul><ul><li>Participating/non-participating </li></ul>
  77. Conversion <ul><li>Preferred stock convertible into common stock at option of holder, initially on one for one basis </li></ul><ul><ul><li>Automatically convert upon an IPO </li></ul></ul><ul><ul><ul><li>Typically size of deal and share price must exceed certain levels </li></ul></ul></ul><ul><ul><li>Automatically convert upon the vote of the particular series </li></ul></ul>
  78. Antidilution protection <ul><li>Conversion rate adjusts on certain events </li></ul><ul><ul><li>Proportionate in the event of stock splits </li></ul></ul><ul><ul><li>Price based antidilution upon a “down round” financing </li></ul></ul><ul><ul><ul><li>Weighted average protection: Conversion price is adjusted based on a formula that considers the number of new shares being issued compared to the shares outstanding and the price at which the new shares are issued </li></ul></ul></ul><ul><ul><ul><li>Full ratchet protection: Conversion price is adjusted so that the price per share is reset to the price per share in the new financing, regardless of the number of shares issued and the price at which they are issued. </li></ul></ul></ul><ul><ul><li>Provide for appropriate carveouts to antidilution protection (i.e., for option issuances, strategic warrants, etc.) </li></ul></ul>
  79. Board composition/Voting rights <ul><li>Companies are controlled by the board of directors </li></ul><ul><ul><li>Control over the board means control over the company </li></ul></ul><ul><ul><li>Typical board composition post Series A investment is two founders, two Series A investor representatives and one industry expert/independent </li></ul></ul><ul><li>Even if board approves, “protective provisions” require preferred holders to approve certain events, including: </li></ul><ul><ul><li>Change of control transactions </li></ul></ul><ul><ul><li>Amendments to charter/bylaws </li></ul></ul><ul><ul><li>Hiring/firing senior management </li></ul></ul><ul><ul><li>Issuing senior securities </li></ul></ul><ul><ul><li>Increasing size of the option pool </li></ul></ul><ul><ul><li>Incurring debt </li></ul></ul>
  80. Other terms <ul><li>Redemption </li></ul><ul><li>Registration rights </li></ul><ul><li>ROFR/Co-Sale </li></ul><ul><li>Preemptive rights </li></ul><ul><li>Last but not least, legal expenses! </li></ul>
  81. Q&A

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