Company liquidation preference

Company liquidation preference
1. What type of stock do founders receive typically when the company is formed?
2. What type of stock do VCs typically receive when they invest?
3. If your pre-money valuation is $5M, and an investor makes a $1M investment, what is the post-money valuation? What percentage do you own after the investor invests?
4. What is a typical board composition?

5. Describe each of these four concerns that investors have related to a deal
a. Deal Economics

b. Investor Rights / Protection
c. Governance, Management & Control
d. Exit/Liquidity

6. What are founders’ concerns related to accepting an investment in their company?

7. Term sheets are not legally binding in most cases. What is their purpose?
8. What is the purpose of the option pool?

9. Why are dividends used in early stage funding? If an investor asked you for cash dividends, what are two alternatives that you might suggest?

10. Why are multiple liquidation preferences a concern for founders?

11. Describe three governance, management and control terms
12. What is an anti-dilution provision, and why is it important to investors?

13. What is the drag-along provision and when is it used?

14. What is a liquidation preference?

15. What are information rights? Why should they be a non-issue?

16. What do registration rights address?

17. Vesting Calculation
You are a founder of a company with a one year cliff, and monthly vesting for the ensuing three years (4 year total).
a) What percentage of your stock are you vested in if you leave the company after 8 months?

b) What percentage of your stock are you vested in if you leave the company after 18 months?

c) What percentage of your stock are you invested in if you leave the company after 54 months?