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Liquidation Preference Calculation (English Version)

Liquidation Preference Calculation (English Version)

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Published by: api-3764496 on Oct 16, 2008
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07/08/2014

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Liquidation Preference Calculation Table V1.0
Finaning Round
$ Raised
Pre-$ Val
Series A
$5,000,000
$10,000,000
TRUE
2
3
Post-$ Cap Table
Management
67%
Investors
33%
Actual Distribution of Cash in Non-IPO Exit
Plain Vanilla Financing
Negotiated Financing
Participating Preferred
FALSE
Participating Preferred
TRUE
Preference Multiple
1
Preference Multiple
2
Preferred Return Cap
N/A
Preferred Return Cap
3
Exit Value
Management
Investors
Management
Investors
$ Out
% of Total
$ Out
% of Total
$ Out
% of Total
$ Out
% of Total
$5,000,000
$-
0%
$5,000,000
100%
$-
0%
$5,000,000
100%
$10,000,000
$5,000,000
50%
$5,000,000
50%
$-
0%
$10,000,000
100%
$20,000,000
$13,333,333
67%
$6,666,667
33%
$6,666,667
33%
$13,333,333
67%
$30,000,000
$20,000,000
67%
$10,000,000
33%
$15,000,000
50%
$15,000,000
50%
$40,000,000
$26,666,667
67%
$13,333,333
33%
$25,000,000
63%
$15,000,000
38%
$50,000,000
$33,333,333
67%
$16,666,667
33%
$33,333,333
67%
$16,666,667
33%
$60,000,000
$40,000,000
67%
$20,000,000
33%
$40,000,000
67%
$20,000,000
33%
$70,000,000
$46,666,667
67%
$23,333,333
33%
$46,666,667
67%
$23,333,333
33%
$80,000,000
$53,333,333
67%
$26,666,667
33%
$53,333,333
67%
$26,666,667
33%
$90,000,000
$60,000,000
67%
$30,000,000
33%
$60,000,000
67%
$30,000,000
33%
$100,000,000
$66,666,667
67%
$33,333,333
33%
$66,666,667
67%
$33,333,333
33%

Notes
1) Any cell in blue can be changed and the effect will roll through the model
2) Cell D4 must be either TRUE or FALSE

Participating
Pfd?
Preference
Multiple
Preferred Return
Cap

3) If the preference mutiple is 2 and the preferred return cap is 4,when exit value is between $40M-60M, the investore's return flat-lines at
$20M while management's return is increasing, hence the misalignment appears.
4) a. When exit value is less than preference bottom, the investors take all the money.
b. When shareing ratably with the holders of the Common Stock on a common equivalent basis, the investor get more than the

preference cap, they will convert pref A to common.
Draft: Sam GUI
Blog: Venture Capital Consultant
CalculationA Convert
A no conv, no cap
A no conv, cap
Post pref. asset
Part. Amount
$1,666,667
$5,000,000
$5,000,000
$-
$-
$3,333,333
$10,000,000
$10,000,000
$-
$-
$6,666,667
$13,333,333
$13,333,333
$10,000,000
$3,333,333
$10,000,000
$16,666,667
$15,000,000
$20,000,000
$6,666,667
$13,333,333
$20,000,000
$15,000,000
$30,000,000
$10,000,000
$16,666,667
$23,333,333
$15,000,000
$40,000,000
$13,333,333
$20,000,000
$26,666,667
$15,000,000
$50,000,000
$16,666,667
$23,333,333
$30,000,000
$15,000,000
$60,000,000
$20,000,000
$26,666,667
$33,333,333
$15,000,000
$70,000,000
$23,333,333
$30,000,000
$36,666,667
$15,000,000
$80,000,000
$26,666,667
$33,333,333
$40,000,000
$15,000,000
$90,000,000
$30,000,000
A Cap
$15,000,000
A Bottom
$10,000,000
$5,000,000
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$ 7 0 ,0 0 0 ,0 0 0
$ 8 0 ,0 0
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
5,000,000
10,000,000
13,333,333
15,000,000
15,000,000
16,666,667
20,000,000
2 3
,
3 3 3
,
3 3 3
2 6
,
6 6 6
Column I
Column G
$5,000,000
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$
7 0 ,0 0 0 ,0 0 0
$ 8 0 ,0 0 0 ,
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
100%
100%
67%
50%
38%
33%
33%
3 3 %
3 3 %
Column H
Column J

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