4 ms·
Senior in liquidation preference to all other shares? They can do that?
by Eliezer 16y ago
Senior in liquidation preference to all other shares? They can do that?
- ghshephard 16y agoI'm presuming that sufficient voting representation of the other tranches are required to do so.
- slapshot 16y agoIt's reasonably standard. The last money in gets to be the first money out. It solves the problem of a startup taking money from a new investor and then immediately disbursing it to the old investors (or other similar shenanigans). The existing shareholders have to vote to approve the new round. They wouldn't do so unless they thought it overall worthwhile.
- aaronblohowiak 16y agoYet another reason for startup employees to not value equity as part of the compensation package. You can be offered 0.1% of a company at a $100M valuation, have it exit for $1B and be left with nothing for your trouble because of liquidation preferences & dilution.
- joezydeco 16y agoSo does that kind of confirm that the founders are already cashed out?
- SpikeGronim 16y agoNope. From what I've heard it is standard practice for later rounds to dilute the investors from previous rounds.
- joezydeco 16y agoWell, it looks like they cashed out. http://techcrunch.com/2010/12/30/groupon-insiders-345-million/ http://techcrunch.com/2010/12/30/groupon-insiders-345-millio...
- 3pt14159 16y agoIt could point to that. The founders wanting to take some home with them after a 6 billion dollar offer is likely. I'd pocket a cool $50mm. It would keep my head in the game, but it would definitely let me sleep better at night in case it turns out to be a trend, rather than a sustainable business.