15.431  Entrepreneurial Finance

Clarification on Angel Terms in Final

I was asked by one of your colleagues to clarify one of the angel terms. Here is my clarification:

The assignment reads:
"The conversion would happen at a price that was the lower of (1) a 15% discount to the conversion price paid by the Series A investors or (2) the conversion price implied by a pre-money valuation of $2 million (the valuation “cap”). "

You may read this as:
"The conversion would happen at a price that was the lower of (1) a 15% discount to the conversion price paid by the Series A investors or (2) the conversion price implied by a pre-money valuation of $2 million applied to existing outstanding shares (the valuation “cap”).

Announced on 18 May 2014  2:14  p.m. by Yael Hochberg

Final with typos corrected uploaded to materials section.

Announced on 16 May 2014  8:30  p.m. by Yael Hochberg

Important: Typo #2 on the Final Assignment

The term sheet section titled "Securities" should read as follows:

Securities: Series A Convertible Preferred.
The investors will purchase a number of shares which will reflect a 40% ownership position on a fully diluted basis. Additional options representing 15% of the Company on a fully diluted basis will be set aside in a reserved share pool to help recruit a Chief Executive Officer and other employees for the company as per the hiring plan to be agreed upon by the investors and the founders.

In other words, disregard the reference to 5M shares in the term sheet. The investors should ultimately have an ownership stake reflecting 40% of the company, and you should calculate how many shares that represents for the cap table in question 7.

Announced on 16 May 2014  8:29  p.m. by Yael Hochberg

Important: Typo on the Final Assignment

Question 6 should begin with:

"How would your answer to Question 5 change if the VCs thought they could exit the company in 6 years for $300M......."

It instead accidentally says "Question 4".

Announced on 16 May 2014  8:22  p.m. by Yael Hochberg

Final recitation slides posted

Hi All,

Thanks for whoever showed up today to the recitation and we hope it was helpful. The slides are now available on stellar.

Best of luck with the exam,
Your TAs

Announced on 15 May 2014  3:06  p.m. by Elad Moshe Shoushan