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...
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...
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...