What does the capped participation preference mean in practice?Time for the promised spreadsheet: this sheet lays out the returns for preferred shareholders in (1) a non-participating preference, (2) a (fully) participating preference, and (3) a capped participation...
Are capped participating preferreds unusual? Well, it is option #3 in the term sheet – people generally go with option 1 or 2! – and is slightly more complicated to explain to founders and syndicate partners – hence these posts. This extra difficulty makes it less...
Before we unleash the spreadsheet, though, let’s cover where the idea of capped participating preferreds comes from.The capped participating preference is not a VentureSouth innovation; it’s not even particularly novel or unusual. In fact, it’s an explicit option in...
On a few VentureSouth investments over this fall, we led the round (as we like to do) and agreed a term sheet that included a capped participating preference.As we have syndicated those investments with other angel investors and groups around the southeast, this term...
There are lots of other resources for exploring non-dilutive funding. While this is a bit outside of our remit at VentureSouth, we strongly encourage you to try them. The basic resources include:The SBIR/STTR website - https://www.sbir.gov/In SC, SCRA’s grant programs...
Thanks Tyler for yesterday’s comprehensive overview of SBIR/STTR grants. These awards are great in themselves, allowing experimentation to be tried, ideas to be tested, and potential to be commercialized. But they are also important because they can be leveraged:...
Guest post from Tyler Tatum, 3PhaseSC: Acquiring Federal (SBIR / STTR) Funding for Your Company You may have heard of a pot of money available from the federal government for research and development called Small Business Innovative Research (SBIR) or Small Business...
When a company sells newly-created shares to VentureSouth, the existing investors in the company get “diluted” – they own a smaller part of the overall “pie” of shares.Non-dilutive funding means money coming into a company that does not cause a similar dilution. It...
When a company “takes” money from an angel group or a venture capital fund, or those investors “bet” on a particular startup, there is (hopefully!) no theft and no gambling involved. These cliches are used to describe something less glamorous: a sale of shares in a...
The “default setting” for entrepreneurs raising capital is to propose a convertible note. If you know about VentureSouth and many other early stage investors, you might know our “default” response then would be “no thanks.” Following Matt’s definitive case against...