For first-time founders, navigating the intricacies of venture capital term sheets can be daunting. One of the most crucial, yet often misunderstood, clauses is the Liquidation Preference. Definition Liquidation preference dictates the order and amount investors get paid when there’s an “exit event” for your company. An exit event, also known as a “liquidity event,”…
The Investment Amount (or “Raise Amount”) is the total capital the investors are committing to your company in a particular funding round. This is the money that will fuel your startup’s growth, allowing you to hire, develop products, and expand operations. The Equity Stake refers to the percentage of ownership the investor will receive in…
Valuation: Pre-Money vs. Post-Money Understanding your startup’s valuation is essential when engaging with investors. The terms “pre-money” and “post-money” valuation are fundamental to any term sheet and they directly impact your ownership stake. This guide aims to simplify these concepts, offer clear explanations, practical examples, and provide advice for founders. Definition Valuation refers to the…
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