AIT Startup Lecture Series: Set up your Startup - C. Tsakona
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Transcript of AIT Startup Lecture Series: Set up your Startup - C. Tsakona
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Thurs
07 CO
LA
B
AIT
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WHO WE ARE
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TODAY
•CONVERTIBLE NOTE
•INVESTMENT TERM SHEET
•VALUATION & LIQUIDATION PREFERENCE
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CONVERTIBLE NOTES
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• IT IS A LOAN (SORT OF) • NO CURRENT VALUATION• SPEED, SIMPLICITY & COST
AT A GLANCE:
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CONVERTIBLE NOTE
CONVERTIBLE NOTE
“A document signed by a borrower promising to repay a loan under agreed-upon terms”
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INVESTOR’S OPTION
TAKE HIS MONEY BACK
CONVERT INTO SHARES
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BASIC TERMS
DISCOUNT
INTEREST
MATURITY DATE
FINANCING AMOUNT
CONVERSION OPTIONS
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CONVERSION OPTIONS
SALE OF THE COMPANY
VOLUNTARY CONVERSION
AUTOMATIC CONVERSION
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NEGOTIATIONS
YOU THE INVESTOR FINAL
INTEREST 5% 10% 8%
DISCOUNT 10% 30% 20%
CAP NO YES ?
MATURITY DATE
2 YEARS 1 YEAR ?
SALE 1X 2X 2X
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CONVERSION OPTIONS
AUTOMATIC CONVERSION
VOLUNTARY CONVERSION
SALE
QUALIFIED FINANCING
YES NO N/A
PREFERRED STOCK
YES (@discount) NO N/A
COMMON STOCK
NO YES N/A
LIQUIDATION PREFERENCE
N/A N/A YES (2X)
MONEY BACK NO YES & NO YES
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CAP – CASE STUDY
WITHOUT CAP WITH CAP
• Investor puts 100K• Investor estimates valuation at
4M• 9 months after Round at
20M valuation• Investor will have to buy his
shares with 20% discount at 20M valuation
• Investor puts 100K• Cap at 4M• Round at 20M• Investor buys his shares
based on the 4M valuation
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WITHOUT CAP
FOUNDERS INVESTOR
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END OF CONVERTIBLE NOTE
•BANKRUPTCY/CLOSING DOWN THE BUSINESS• COMPANY PAYS BACK AMOUNT WITH INTEREST• IF NO ASSETS INVESTOR GETS NOTHING
•FINANCING ROUND: INVESTOR SHARES
•EXIT: INVESTOR MONEY
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WHAT DOCUMENTS YOU ARE SIGNING
CONVERTIBLE NOTE
TERM SHEET
PURCHASE AGREEMENT
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THANK YOU
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Let’s Connect
[email protected]/in/tsakonaFacebook.com/ctsakonaTwitter.com/ctsakonawww.dimitrioulaw.com