Two Questions: Standard Pref Equity Terms in Venture + Where / How to Model Pref?
Wondering if there are any
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Insights on what standard terms are for pref in Series A - D
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Templates for how to model issuing a pref shares security
Thanks!
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Economic Terms
-1x non participating liquidation preference (ranking senior to existing pref)
-Broad based weighted average anti dilution
-Pro data rights
-Drag and tag rights
-Co-sale rights (sometimes)
-I have seen terms like cumulative dividends that convert as part of the liquidation pref - but pretty rare and generally for early stage venture deals
Control & Protective Terms
-Reserved matters/negative control provisions (no change to pref, changes to foundational legal docs, fundamental change to business)
-Other various operational investor consent matters (hiring and firing, budget approval etc). These generally drop away at later stages.
-Founder controls (vesting, good leaver/bad leaver provisions, non-compete and non-solicit). C. 18 month founder non-compete is standard - in geos where enforceable.
-Board directors (standard info rights too)
-Typical warranties
(Investor majority consents generally 50-75% of pref holders)
Obviously a decent amount of variation based on geography, stage, vertical, and competitiveness of the deal. Check out NVCA and BVCA standard terms online for a benchmark and some templates.
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