An often overlooked aspect of funding is liquidation preference. Investors usually ensure they get liquidation preference when an exit happens. This means that they first get to take out the money that they had put in, and the remaining is then split up according to the equity share. This is the reason why if a company sells for a valuation lesser than the previous round's valuation, employees usually end up with nothing.
@@lernik4 Investors don't usually sell their shares in subsequent rounds. So this is mostly applicable to exits. That said, it all depends on the specific terms that an investor is offering. Always ensure your lawyer goes over and explains the terms to you. First time founders often get a raw deal, and investors are known to even include 2x or 3x liquidation preference in the terms. This means that they first take out two or three times their money on exit, and only then the remaining gets divvied up.
And if you get into account they sometimes slip wording that means the liquidation preference clause is participative (aka 'double dip') it gets pretty scary. We had a startup that almost got choked in Series A because of that.
Wow. I love this ❤❤❤ I have a similar version of this - I call it the Equity Distribution Calculator - that I've typically shared with my (startup) coaching clients to help them understand equity and dilution in general, and visualize how their present equity holdings could change in the future. Perhaps I should create a video too...🤔 Great job, Slidebean! More elbow grease... 💪
This is by far the best video I've seen on this topic. Super simple thorough and clear explanation. Going to try the spreadsheet template now. Thank you Slidebean!
Hey Caya, thanks v much for the helpful video, but I noticed the template from the website looks different than the one in the video. Could you provide the link to the the template that looks like the one in the video?
Insanely helpful video - thank you! Quick question; what is the rationale behind the 7x multiplier (new capital request * 7) in your pre-money valuation cell?
Can you answer this quick question.. I noticed when you were playing with the numbers in series A and series B only the percentages dropped for the founders and not the seed investors or series A investors. Can you explain why ? Great video btw and extremely appreciative of the immense value being given will check out more of your stuff
I apologize, but it seems that the template provided in the link does not precisely match the one featured in the video. I would be grateful if you could kindly share the exact template showcased in the video for reference. Your assistance in this matter is highly appreciated.
I have a query about employee stock option, Suppose a startup gave their employees stocks as bonus, but even after over 20 years, the company doesn't have any intention to go for ipo or similar stuff, it's a profitable completely self-bootstrapped company that never needed any kind of funding, and their plan is to keep the business in the family. Can those stocks ever be redeemed?
@@TiberiuMusat then how? The management didn't do the buyback when all employees asked for. Stocks are literally useless as the company is going to stay private forever.
So i guess this happens based on the company valuation at that particular point of time as in the type of funding they have or had by that time. The total exceeding value of the company based on the investment that company already possess, your ESOPS will be valued then you’ll get your amount.
@@AbhinavKulshreshtha At some point they will do stock buybacks or at least start paying dividends. Until then, you might be able to use your stock as collateral for a loan.
The video shows pre-money valuation as an input variable but the version on the website as of 6/22/24 shows post-money valuation as the input variable instead.
If you are investing in yourself, then you never lack wealth. the best investment is , investing in you .anyway liked your videos . a fellow creator~~~
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An often overlooked aspect of funding is liquidation preference. Investors usually ensure they get liquidation preference when an exit happens. This means that they first get to take out the money that they had put in, and the remaining is then split up according to the equity share. This is the reason why if a company sells for a valuation lesser than the previous round's valuation, employees usually end up with nothing.
Really? That's super important then.
Is it only true when the entire company gets sold/acquired, or also for each new round of investment?
@@lernik4 Investors don't usually sell their shares in subsequent rounds. So this is mostly applicable to exits. That said, it all depends on the specific terms that an investor is offering. Always ensure your lawyer goes over and explains the terms to you. First time founders often get a raw deal, and investors are known to even include 2x or 3x liquidation preference in the terms. This means that they first take out two or three times their money on exit, and only then the remaining gets divvied up.
@@shreyassubramaniam438 thank you
That’s scary
And if you get into account they sometimes slip wording that means the liquidation preference clause is participative (aka 'double dip') it gets pretty scary. We had a startup that almost got choked in Series A because of that.
FFFFIINNAALLLLYY A video that reeeaally really explain this valuation process in a way we can truly understand! Gratitude :)
We're glad you liked it Pietra!
Love the breaking bad / Saul references… so much!
Wow. I love this ❤❤❤
I have a similar version of this - I call it the Equity Distribution Calculator - that I've typically shared with my (startup) coaching clients to help them understand equity and dilution in general, and visualize how their present equity holdings could change in the future.
Perhaps I should create a video too...🤔
Great job, Slidebean! More elbow grease... 💪
Super helpful video 👌
I have a bunch of your financial templates already - your spreadsheet level is deeply impressive 😁
Thanks Simon! We're glad to help you out anytime!
This was really helpful. I never got the valuation concept.Pre and Post valuations along with the shares. This was really beautifully broken down.
This is by far the best video I've seen on this topic. Super simple thorough and clear explanation. Going to try the spreadsheet template now. Thank you Slidebean!
Hey caya and slidebean team u re doing amazing work for educating us 👍great explaination thank you 😊
Glad we could help!
I want to see you guys at 1 million subs
Would definitely love to see that too 😂
Thank you unconditionally for this gem 🙏🏿
Caya has a unique and excellent way of making what others make complex seem simple.
🫶🏽🫶🏽
- Caya
Thank you caya and slidbean team you helped me a lot, you deserve equity as co-founders in my startup ❤️
Hope you know, Caya, that there's a special place in heaven reserved for you. Much love & respect man!
Super helpful. Really appreciate it!
thanks for the lesson. but wow, I had to rewatch SO MANY times.
Wow this was so helpful, thanks guys
Thanks for the video and template. This is very helpful.
Amazing video and great spreadsheet. you have an amazing presentation style.
This was really well explained. Thank you ❤
Hey Caya, thanks v much for the helpful video, but I noticed the template from the website looks different than the one in the video. Could you provide the link to the the template that looks like the one in the video?
did you ever receive the spreadsheet from the video? The download is still different
Thank you Caya, much appreciated.
You guys are so awesome
YOU are awesome!
Insanely helpful video - thank you!
Quick question; what is the rationale behind the 7x multiplier (new capital request * 7) in your pre-money valuation cell?
Amazing video! Thank you very much!
Amazing content, very valuable video. Thank you
Thank you so much. This was much needed.
Can you answer this quick question.. I noticed when you were playing with the numbers in series A and series B only the percentages dropped for the founders and not the seed investors or series A investors. Can you explain why ? Great video btw and extremely appreciative of the immense value being given will check out more of your stuff
this is an updated version of that video, maybe it’ll help explain it better:
ruclips.net/video/4WaJD0MF4q4/видео.htmlsi=zG92xuCilkhatFks
Thanks again, shared at the right time, keep up the good work.
Dear Jose,
Your videos are useful and explain some concepts very well.
Hopefully we can work on projects together in the future.
I realise that I've totally misunderstood what the dilution of shares actually meant before this video.
When you founded Slidebean with 10.000.000 shares how did you valuate your single share price?
That is fantastic information, thank you so much
Great video but the cap table in the video and the download are different. Do you have a link to the cap table in your video?
I apologize, but it seems that the template provided in the link does not precisely match the one featured in the video. I would be grateful if you could kindly share the exact template showcased in the video for reference. Your assistance in this matter is highly appreciated.
Really helpful, thanks!!
Wonderful content!
I swear I'll re-watch this video until I fully comprehend it LoL
Really insightful
Thanks for sharing!
how about the revenues generated by the company, are they going to be giving out as dividends to the shareholders or what?
awesome thank you!
I have a query about employee stock option, Suppose a startup gave their employees stocks as bonus, but even after over 20 years, the company doesn't have any intention to go for ipo or similar stuff, it's a profitable completely self-bootstrapped company that never needed any kind of funding, and their plan is to keep the business in the family. Can those stocks ever be redeemed?
Yes, but not on the public markets.
@@TiberiuMusat then how? The management didn't do the buyback when all employees asked for. Stocks are literally useless as the company is going to stay private forever.
So i guess this happens based on the company valuation at that particular point of time as in the type of funding they have or had by that time. The total exceeding value of the company based on the investment that company already possess, your ESOPS will be valued then you’ll get your amount.
@@AbhinavKulshreshtha At some point they will do stock buybacks or at least start paying dividends. Until then, you might be able to use your stock as collateral for a loan.
The video shows pre-money valuation as an input variable but the version on the website as of 6/22/24 shows post-money valuation as the input variable instead.
found the error. cell J88 was using the wrong equation.
Thank you for this information. It helps, for further assistance and cost who do I contact?
Hi Marilyn- you can start here:
slidebean.com
yo but why is there 12 green blocks when the investor only bought 11. vid was almost perfect
If you are investing in yourself, then you never lack wealth. the best investment is , investing in you .anyway liked your videos . a fellow creator~~~
This is a great video
Is there a particular person I can talk with?
Tq so much bro❤
I dont get how the strike price is calculated (the forumla in the sheet is very complicated). Anyone can help me for that?
Thanks!
Please make a video of laundering money with Los pollos hermanos as an example.
Thanks for the template!
Ok but can you explain WHY the company had to create new shares? Every vid I've watched on this topic hasn't explained that.
In part, because selling shares someone already is terribly inefficient.
Great vedio sir it is very much helpful to understand the validation of startup👌
where can I get the cap table template for free?
Gracias
How can we use this if our first round is using SAFE notes? I'm trying to do it but it's not working, any help?
You didn't link the stock option video brother!
yep
when you are pre IPO wouldn't you only talk about equity in terms of percent and not shares? this just confused me more
lost
lost
The file link does not work when I got it in email :(
Not getting anymore notifications?
so you're basically using double instead of float )
What movie is that at 0:17?
Great Work. Thanks
I love you
Can I start my startup with 100m shares?
Or is that illogical?
You could. It may be too many (since you’ll need to issue more as new investors come).
- Caya
u should make a channel in spanish
Que madre, ya cometí mis primeros mil errores jaja
I will bootstrap mine to death.
what are you building?
@@babatundeololade6765 a coffin maker probably
cap table template is not getting downloaded. its saying signup, even when i am signed in
Here; app.slidebean.com/documents/d2pjmigpfso11wk31ujc170z
Great video, but please don't mumble words.
thanks Caya. i only wish this channel was started in 2016 🥲