The Three Types of Preferance Shares

If the amount specified by the participating or non-participating shareholder is paid to the preferred shareholders and then a certain amount is paid to the common shareholders, there will always be additional benefits that can be shared among the shareholders. Similar issues arise when considering whether a preferred shareholder should participate in the surplus of the company and whether the company has been liquidated, they can gain the share of the remaining profits.

Companies can issue two types of shares: preferred stock and common stock. Preferred stocks are usually the shares the investor wants to own, as investors give priority in the liquidation event. Common stocks are held by employees and those who stop participating in subsequent rounds and lose liquidation priorities. The premonit rating is the value the investor assigns to the company before the investment and the ex-post evaluation is merely the prepayment evaluation and the investment amount. When negotiating an evaluation, entrepreneurs should pay attention to how to deal with employee stock option pools in the term list. The fact that the option pool grows big before the offering is basically meant that new investors acquire a higher percentage of companies at the expense of their current shareholders. You have three choices: Reduce the size of the pool, ask another investor to reduce the ownership percentage (dilute with others), or ask for a higher rating

Equity Round or "Price Round" means that you and your investor agree to your company's assessment and issue new shares to these investors. This usually involves negotiations on additional terms such as priority of liquidation, rights to prevent dilution, seats of the Board of Directors. This is normally reserved for Round A because it is the most complicated (and thus the most time-consuming and expensive) of the three. And definitely involve a lawyer. Dilute. If you issue additional shares to a new shareholder, the existing shareholders will ultimately hold fewer shares than before. This is called dilution. For example, if we raised a million dollar round with an evaluation of $ 5 million (therefore, we offered new investors about 1 million dollars worth of shares), the new investors would be 16.7% ($ 1 million / $ 6 million) I own the company in. ) This will dilute the owner's existing stock by 16.7%