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When you see deals like this it is often not reported what liquidation preferences or other the investor is getting. E.g. If Hedge Fund X puts in a $20M invest
by adamt 16y ago
When you see deals like this it is often not reported what liquidation preferences or other the investor is getting.
E.g. If Hedge Fund X puts in a $20M investment for 1% it might seem expensive, but not if they have a 3x liquidation preference that guarantees them a profit on any trade sale above $20m in value, and most likely on an IPO.
Similarly it helps LinkedIn set a price point with any future IPO plans.
- Sukotto 16y agoI'm unfamiliar with this kind of math. Would someone please walk me through the steps here to understand what this actually means?
- burningout 16y agoHe means that if linkedin would be sold for 60 million, they would get the first 60 million. Then afterwards the normal shareholders are served until the initial ratio is reached.
- LiveTheDream 16y agoWhat burningout said (broadly); also here are some posts I found helpful about the topic: http://www.avc.com/a_vc/2010/05/an-evolved-view-of-the-participating-preferred.html http://www.avc.com/a_vc/2010/05/an-evolved-view-of-the-parti... http://www.gabrielweinberg.com/blog/2010/05/liquidation-preference-my-case-for-2x-non-participating.html http://www.gabrielweinberg.com/blog/2010/05/liquidation-pref... http://www.feld.com/wp/archives/2004/08/to-participate-or-not-participating-preferences.html http://www.feld.com/wp/archives/2004/08/to-participate-or-no...
- deleted 16y ago[deleted]
- wheels 16y agoThese are not new shares being issued, so, correct me if I'm wrong, but any liquidation preferences that are attached to this purchase would be at the original valuation, not the new one.