In this first of a two part AlphaTakes video series, Matt Storms discusses the first half of the Series A Preferred Stock term sheet for an emerging technology company. He provides a summary of some of the key terms of the Series A term sheet, using National Venture Capital Association (“NVCA”) model document.
Here are the key takeaways from this video:
- The NVCA documents are great resources for understanding the Series A financing, but are fairly investor friendly.
- Typical preferred stock dividend provisions alternatives include the following:
- If and when paid to the common stock
- Accruing and cumulative
- If and when declared by the board
- Most common preferred stock liquidation preferences alternatives include the following:
- Non-participating preferred
- Participating preferred
- Participating preferred with a cap
- Preferred stock typically includes special voting rights, such as designating one or more members to the company’s board of directors and veto rights over certain company actions.