Twitter | Pretraživanje | |
Afore Capital
1/ There's a lot of confusion out there about pro rata, which is probably one of the most misunderstood terms in the VC term-sheet. So here's a primer.
Investors at Sequoia, Haystack, Homebrew, Initialized Capital, and Afore explain the surprisingly complex reality of one of VC’s least…
Afore Capital Afore Capital @AforeVC
Reply Retweet Označi sa "sviđa mi se" More
Afore Capital 30. sij
Odgovor korisniku/ci @AforeVC
2/ So what is pro rata? Basically, it's an option, not an obligation, granted to investors to maintain their ownership percentage in a company through future fund-raising rounds.
Reply Retweet Označi sa "sviđa mi se"
Afore Capital 30. sij
Odgovor korisniku/ci @AforeVC
3/ Think of it like ordering pizza for a party when you don't know how many people might ultimately be coming. Pro rata is a way for you to retain your share of cheese and pepperoni, even if more friends show up later.
Reply Retweet Označi sa "sviđa mi se"
Afore Capital 30. sij
Odgovor korisniku/ci @AforeVC
4/ With the advent of angels and pre-seed, though, more and more investors are being granted pro rata, setting up complicated cap tables and leading to potential future showdowns between founders and their earliest supporters.
Reply Retweet Označi sa "sviđa mi se"
Afore Capital 30. sij
Odgovor korisniku/ci @garrytan @InitializedCap
5/ "The best investors earn pro rata by adding value to the company in ways besides capital," says of . And by earning that privilege, investors actually help protect themselves.
Reply Retweet Označi sa "sviđa mi se"
Afore Capital 30. sij
Odgovor korisniku/ci @semil @haystackvc
6/ Why? Because what's given can be taken away. "As newer investors come in with their own requirements and the cap table gets crowded, founders will oftentimes ask earlier investors to waive their pro rata rights for the good of the company," says of .
Reply Retweet Označi sa "sviđa mi se"
Afore Capital 30. sij
Odgovor korisniku/ci @AforeVC
7/ There's drawbacks to yanking pro rata: it can cause founders to suffer reputational damage, and potentially cause issues with future fundraising.
Reply Retweet Označi sa "sviđa mi se"
Afore Capital 30. sij
Odgovor korisniku/ci @mvernal @sequoia
8/ at puts it best: "It's your company and the cap table is one of the most important tools you have at your disposal for aligning the interests of founders, investors, employees, and advisors."
Reply Retweet Označi sa "sviđa mi se"
Afore Capital 30. sij
Odgovor korisniku/ci @hunterwalk @homebrew
9/ Likewise, investors need to be aware that sometimes, their pro rata option needs to be waived. "There may be stages of the company where making all the puzzle pieces fit in a funding require some creativity," explains of .
Reply Retweet Označi sa "sviđa mi se"
Afore Capital 30. sij
Odgovor korisniku/ci @mvernal @sequoia
10/ "In most cases, if I were a founder," of . "I would want to use each investment round as a way to thank those who have been helpful so far and create alignment with those who will be most impactful in the future."
Reply Retweet Označi sa "sviđa mi se"
Afore Capital 30. sij
Odgovor korisniku/ci @AforeVC
11/ The pro rata pizza party, in which everyone is vying for their slice, is changing. What do you think? Let us know by commenting on our post here:
Reply Retweet Označi sa "sviđa mi se"