Valuation : Startup ABC is valued at $20 million pre-money (before the investment). With the entire $5 million investment, the post-money valuation is $25 million. Equity : VC firm XYZ receives 12% of the company's equity ($3 million divided by $25 million) in Series A preferred stock. The other investors collectively receive 8% ($2 million divided by $25 million), leaving the founders and employees with the remaining 80%. Board seats : XYZ receives one seat on ABC's board of directors, giving it a say in major strategic decisions. Liquidation preferences : The Series A preferred stock comes with a liquidation preference, meaning that if there's a sale or company failure, series A investors will receive their initial investment back before the common stockholders (founders, employees, future outside shareholders). Milestones and tranches : If the company attains certain milestones, such as revenue targets or product launch dates, the funding may be released in tranches.
Buying a stock as quickly as you'd post an Instagram photo.
Deal Sourcing Best Practices.
How do you develop a strong investment thesis?
Put most simply, VC is a category of private market investment and financing. A VC firm raises capital (i.e., money) from investors, often referred to as Limited Partners (LPs). The firm uses that capital to fund promising startups they have determined as likely to have high growth potential in an emerging category.
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