Hopefully between the prose and the spreadsheet, we have illuminated the cost of the compromise for founders and investors finding this middle ground of a “capping participation.”If not, at least you hopefully come away knowing that VentureSouth would never willingly...
Capped participating preferreds
Capped participating preferreds: the real impact 2: the grey zone
Following from the last post, there was a range of fairly attractive outcomes where the capped participation had an impact: let’s review the results from the grey zone.Grey zone: In the (C) grey zone, we have a moderately good result, but one where the capped...
Capped participation preferreds: the real impact part 1
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...
Capped participating preferreds: Are they unusual?
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...
Capped participating preferreds: source infomation
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...
Capped participating preferreds: introduction
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...