{"id":1577,"date":"2019-12-19T00:00:00","date_gmt":"2019-12-19T00:00:00","guid":{"rendered":"http:\/\/www-staging.carta.com\/sg\/blog\/equity-rights-and-liquidation-preferences\/"},"modified":"2021-03-05T06:56:54","modified_gmt":"2021-03-05T06:56:54","slug":"equity-rights-and-liquidation-preferences","status":"publish","type":"post","link":"https:\/\/www-staging.carta.com\/sg\/blog\/equity-rights-and-liquidation-preferences\/","title":{"rendered":"What you need to know about equity rights and liquidation preferences"},"content":{"rendered":"\r\n<p>When it comes to equity, it\u2019s important to know what you\u2019re owed in the event of an exit or payout. The rules that govern these are called liquidation \u201crights and preferences.\u201d <br \/><br \/>Get these wrong and it could mean a <a href=\"https:\/\/medium.com\/help-me-heidi\/my-company-sold-for-100-million-and-i-got-zilch-how-can-that-be-f7be0563f1f8\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">harsh wake-up call<\/a>. Take it from entrepreneur and investor Michael Arrington: he raised $18 million for his first company Achex, sold it for $32 million, <a href=\"https:\/\/twitter.com\/arrington\/status\/1176985184287088640?s=21\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">and earned nothing except a big lesson<\/a> about venture capital liquidation preferences.<\/p>\r\n\r\n\r\n\r\n<p>When a private company exits, who gets paid what (and when) is primarily dictated by the following rights and preferences:<\/p>\r\n\r\n\r\n\r\n<strong><ol>\r\n<li>Original issue price<\/li>\r\n<li>Liquidation preference<\/li>\r\n<li>Liquidation multiplier<\/li>\r\n<li>Cumulative dividends<\/li>\r\n<li>Conversion ratio<\/li>\r\n<li>Participation<\/li>\r\n<\/ol>\r\n<\/strong>\r\n\r\n\r\n\r\n<p>Rights and preferences are typically referred to as either \u201cstandard\u201d or \u201cnon-standard.\u201d<\/p>\r\n\r\n\r\n\r\n<ul>\r\n<li><strong>Standard terms<\/strong> are more common and less dilutive to common stockholders when a company exits.\u00a0<\/li>\r\n<li><strong>Non-standard terms<\/strong> are less common and more dilutive to common stockholders when a company exits.\u00a0<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<p>A particular company\u2019s rights and preferences may include a mixture of standard and non-standard terms. We\u2019ll cover both standard and non-standard terms for each of the various rights and preferences, and how they can affect stockholder payouts in the event of an exit.<\/p>\r\n\r\n\r\n\r\n<h2>Original issue price<\/h2>\r\n\r\n\r\n\r\n<p>The original issue price (OIP) is the price at which investors purchased <a href=\"https:\/\/www-staging.carta.com\/sg\/blog\/common-stock-vs-preferred-stock\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"preferred shares (opens in a new tab)\">preferred shares<\/a>. This also dictates the investor\u2019s \u201cliquidation preference,\u201d which, under standard terms, typically equals the preferred share\u2019s OIP multiplied by the investor\u2019s outstanding number of preferred shares.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>When a company exits, preferred shares are typically required to be paid their liquidation preference before other equity holders. Investors may convert their preferred shares to common shares when they deem it to be more advantageous.<\/p>\r\n\r\n\r\n\r\n<h2>Liquidation preference<\/h2>\r\n\r\n\r\n\r\n<p>As mentioned earlier, a preferred shareholder\u2019s liquidation preference is typically paid out first as a result of seniority rights. Seniority rights ascribed to share classes will determine which share classes get paid out first.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>For example, let\u2019s say a Series B company exits via acquisition. Here\u2019s what might happen under standard and non-standard terms:\u00a0<\/p>\r\n\r\n\r\n\r\n<div id=\"footable_parent_6143\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui \">\n                <table data-ninja_table_instance=\"ninja_table_instance_0\" data-footable_id=\"6143\" data-filter-delay=\"1000\" aria-label=\"Rights &amp; Pref: Preference\"            id=\"footable_6143\"\n           data-unique_identifier=\"ninja_table_unique_id_1749009507_6143\"\n           class=\" foo-table ninja_footable foo_table_6143 ninja_table_unique_id_1749009507_6143 ui table  nt_type_legacy_table celled striped vertical_centered  footable-paging-right ninja_table_search_disabled ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                            <col class=\"ninja_column_2 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_investors \">Investors<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_standard_preference \">Standard<\/th><th scope=\"col\"  class=\"ninja_column_2 ninja_clmn_nm_non_standard_preference \">Non-standard<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"200\" class=\"ninja_table_row_0 nt_row_id_200\">\n            <td>Series B<\/td><td>Liquidation preferences are paid together<\/td><td>Paid out first<\/td>        <\/tr>\n            <tr data-row_id=\"201\" class=\"ninja_table_row_1 nt_row_id_201\">\n            <td>Series A<\/td><td>Liquidation preferences are paid together<\/td><td>Paid out second<\/td>        <\/tr>\n            <tr data-row_id=\"202\" class=\"ninja_table_row_2 nt_row_id_202\">\n            <td> Series Seed<\/td><td>Liquidation preferences are paid together<\/td><td>Paid out last<\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table>\n                    <style type=\"text\/css\" id='ninja_table_custom_css_6143'>\n                        #footable_6143  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                \n    \n    \n<\/div>\n\r\n\r\n\r\n\r\n<p>&nbsp;<\/p>\r\n\r\n\r\n\r\n<p>When a company&#8217;s exit value amounts to less than the combined liquidation preferences, common holders receive no payout. Meanwhile, investors holding preferred shares with seniority rights have added protection against downside exit scenarios.<\/p>\r\n\r\n\r\n\r\n<h2>Liquidation multiplier<\/h2>\r\n\r\n\r\n\r\n<p>An example of non-standard terms is when preferred shareholders have a \u201cliquidation multiplier.\u201d These terms allow investors to receive a \u201cmultiple\u201d of their liquidation preference before choosing to convert their preferred shares into common shares (when it\u2019s more lucrative).<\/p>\r\n\r\n\r\n\r\n<p>Assume an investor owns 1 million shares of Series A preferred with an OIP of $1.00. Under standard terms, their liquidation preference would be $1 million.<\/p>\r\n\r\n\r\n\r\n<p>However, if the Series A preferred shares have a liquidation multiplier of 2x, their liquidation preference would be $2 million.<\/p>\r\n\r\n\r\n\r\n<div id=\"footable_parent_7743\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui \">\n                <table data-ninja_table_instance=\"ninja_table_instance_1\" data-footable_id=\"7743\" data-filter-delay=\"1000\" aria-label=\"Rights &amp; Pref: Liquidation Multiplier( Duplicate )\"            id=\"footable_7743\"\n           data-unique_identifier=\"ninja_table_unique_id_640730993_7743\"\n           class=\" foo-table ninja_footable foo_table_7743 ninja_table_unique_id_640730993_7743 ui table  nt_type_legacy_table celled striped vertical_centered  footable-paging-right ninja_table_search_disabled ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                            <col class=\"ninja_column_2 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_preferred_shares_at_oip_of_1 \"> Preferred shares at OIP of $1<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_results_if_company_sells_for_1_million \"> Results if company sells for $1 million <\/th><th scope=\"col\"  class=\"ninja_column_2 ninja_clmn_nm_results_if_company_sells_for_2_million \"> Results if company sells for $2 million <\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"265\" class=\"ninja_table_row_0 nt_row_id_265\">\n            <td>1 million shares of preferred stock with 1x multiplier\n<br><br>\n1 million shares of common stock<\/td><td>Preferred receive $1 million\n<br><br>\nCommon stockholders receive nothing<\/td><td>Preferred receive $1 million<br><br>Common stockholders receive the other $1 million<\/td>        <\/tr>\n            <tr data-row_id=\"267\" class=\"ninja_table_row_1 nt_row_id_267\">\n            <td>1 million shares of preferred stock with 2x multiplier\n<br><br>\n1 million shares of common stock<\/td><td>Preferred receive $1 million\n<br><br>\nCommon stockholders receive nothing<\/td><td>Preferred receive $2 million<br><br>Common stockholders receive nothing<\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table>\n                    <style type=\"text\/css\" id='ninja_table_custom_css_6143'>\n                        #footable_6143  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_7743'>\n                        #footable_7743  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                \n    \n    \n<\/div>\n\r\n\r\n\r\n\r\n<p>&nbsp;<\/p>\r\n\r\n\r\n\r\n<p>Liquidation multipliers give investors additional protection against a company\u2019s downside exit scenarios, but as shown above, this comes at the expense of other equity holders.\u00a0\u00a0<\/p>\r\n\r\n\r\n\r\n<h2>Cumulative dividends<\/h2>\r\n\r\n\r\n\r\n<p>Dividends are a right associated with preferred stock. You can think of dividends like interest that accrues on debt. For preferred shares, dividends are either designated as cumulative or non-cumulative. Cumulative dividends are earned and accrue over time, whether or not it is declared by the board. Non-cumulative dividends accrue and are paid out at the discretion of the board. Typically, cumulative dividends accrue from the shares\u2019 issue date up until the company\u2019s exit. Any accrued dividends are added to the investor\u2019s liquidation preference upon a company\u2019s exit.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>Need an example? Let\u2019s again assume an investor purchases 1 million shares of Series A preferred stock with an OIP of $1.00. If these shares have a non-compounding cumulative dividend right of 5%, if the company were to exit in five years, the investor would be owed the liquidation preference of $1 million and $0.25 million of accrued dividends.<\/p>\r\n\r\n\r\n\r\n<p>Cumulative dividends are non-standard terms. Similar to the liquidation multiplier, cumulative dividends provide additional protection to investors in downside scenarios\u2014at the expense of common stockholders.\u00a0<\/p>\r\n\r\n\r\n\r\n<h2>Conversion ratio<\/h2>\r\n\r\n\r\n\r\n<p>Investors may elect to convert their preferred shares into common shares when it\u2019s more advantageous for them to do so. Here\u2019s an example of why:<\/p>\r\n\r\n\r\n\r\n<div id=\"footable_parent_6145\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui \">\n                <table data-ninja_table_instance=\"ninja_table_instance_2\" data-footable_id=\"6145\" data-filter-delay=\"1000\" aria-label=\"Rights &amp; Pref: Conversion Ratio\"            id=\"footable_6145\"\n           data-unique_identifier=\"ninja_table_unique_id_1798651219_6145\"\n           class=\" foo-table ninja_footable foo_table_6145 ninja_table_unique_id_1798651219_6145 ui table  nt_type_legacy_table celled striped vertical_centered  footable-paging-right ninja_table_search_disabled ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                            <col class=\"ninja_column_2 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_investor \">Investor<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_0_80_value_of_common_share_upon_exit \"> $0.80 value of common share upon exit<\/th><th scope=\"col\"  class=\"ninja_column_2 ninja_clmn_nm_0_90_value_of_common_share_upon_exit \"> $1.20 value of common share upon exit<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"195\" class=\"ninja_table_row_0 nt_row_id_195\">\n            <td>Investor with OIP of $1 and 1 million preferred shares<\/td><td>The investor would rather maintain their liquidation preference and receive a payout of $1 million<\/td><td> The investor would rather convert their preferred shares into common shares and receive a payout of $1.2 million<\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table>\n                    <style type=\"text\/css\" id='ninja_table_custom_css_6143'>\n                        #footable_6143  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_7743'>\n                        #footable_7743  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6145'>\n                        #footable_6145  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\nth.ninja_column_0.ninja_clmn_nm_investor.footable-first-visible {\r\n    color: transparent !important;\r\n}#footable_6145 thead tr th.ninja_column_0,#footable_6145 tbody tr td.ninja_column_0{ background-color: rgba(255, 255, 255, 0); }                <\/style>\n                \n    \n    \n<\/div>\n\r\n\r\n\r\n\r\n<p>&nbsp;<\/p>\r\n\r\n\r\n\r\n<p>The above example represents the preferred stockholder\u2019s payout assuming a standard conversion ratio of one-to-one. If the value of a common share at exit is higher than the liquidation preference (plus dividends accrued, if any) of your preferred shares, investors would convert their preferred shares into common stock.<\/p>\r\n\r\n\r\n\r\n<p>Under non-standard terms, the conversion ratio could be something other than one-to-one. For example, let\u2019s take the above scenario (i.e. investor with OIP of $1 and 1 million preferred shares) and assume the conversion ratio is three-to-one. In this scenario, investors would only convert their preferred shares into 3 million common shares if the value of one common share were $0.33 or more. In other words, the investor receives triple the amount of common shares upon exit so they would convert at a lower value of common.<\/p>\r\n\r\n\r\n\r\n<p>A non-standard conversion ratio allows investors to convert into common shares at a lower price. As a result, investors have the opportunity to participate in more of the company\u2019s upside potential. It also awards investors greater ownership in the Company in the event of an exit, as shown below.\u00a0<\/p>\r\n\r\n\r\n\r\n<div id=\"footable_parent_6146\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui \">\n                <table data-ninja_table_instance=\"ninja_table_instance_3\" data-footable_id=\"6146\" data-filter-delay=\"1000\" aria-label=\"Rights &amp; pref: 1 to 1\"            id=\"footable_6146\"\n           data-unique_identifier=\"ninja_table_unique_id_1929010200_6146\"\n           class=\" foo-table ninja_footable foo_table_6146 ninja_table_unique_id_1929010200_6146 ui table  nt_type_legacy_table celled striped vertical_centered  footable-paging-right ninja_table_search_disabled ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                            <col class=\"ninja_column_2 \">\n                            <col class=\"ninja_column_3 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_one_to_one_conversion_ratio \"> One-to-one conversion ratio<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_common \">Common<\/th><th scope=\"col\"  class=\"ninja_column_2 ninja_clmn_nm_preferred \">Preferred<\/th><th scope=\"col\"  class=\"ninja_column_3 ninja_clmn_nm_total \">Total<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"193\" class=\"ninja_table_row_0 nt_row_id_193\">\n            <td> Share count upon liquidation<\/td><td>1,000,000<\/td><td>1,000,000<\/td><td>2,000,000<\/td>        <\/tr>\n            <tr data-row_id=\"194\" class=\"ninja_table_row_1 nt_row_id_194\">\n            <td>Ownership percentage<\/td><td>50%<\/td><td>50%<\/td><td>100%<\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table>\n                    <style type=\"text\/css\" id='ninja_table_custom_css_6143'>\n                        #footable_6143  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_7743'>\n                        #footable_7743  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6145'>\n                        #footable_6145  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\nth.ninja_column_0.ninja_clmn_nm_investor.footable-first-visible {\r\n    color: transparent !important;\r\n}#footable_6145 thead tr th.ninja_column_0,#footable_6145 tbody tr td.ninja_column_0{ background-color: rgba(255, 255, 255, 0); }                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6146'>\n                        #footable_6146  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                \n    \n    \n<\/div>\n\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 20px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<div id=\"footable_parent_6147\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui \">\n                <table data-ninja_table_instance=\"ninja_table_instance_4\" data-footable_id=\"6147\" data-filter-delay=\"1000\" aria-label=\"Rights &amp; pref: 3 to 1\"            id=\"footable_6147\"\n           data-unique_identifier=\"ninja_table_unique_id_275608481_6147\"\n           class=\" foo-table ninja_footable foo_table_6147 ninja_table_unique_id_275608481_6147 ui table  nt_type_legacy_table celled striped vertical_centered  footable-paging-right ninja_table_search_disabled ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                            <col class=\"ninja_column_2 \">\n                            <col class=\"ninja_column_3 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_three_to_one_conversion_ratio \">Three-to-one conversion ratio<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_common \">Common<\/th><th scope=\"col\"  class=\"ninja_column_2 ninja_clmn_nm_preffered \">Preferred<\/th><th scope=\"col\"  class=\"ninja_column_3 ninja_clmn_nm_total \">Total<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"191\" class=\"ninja_table_row_0 nt_row_id_191\">\n            <td> Share count upon liquidation<\/td><td>1,000,000<\/td><td>3,000,000<\/td><td>4,000,000<\/td>        <\/tr>\n            <tr data-row_id=\"192\" class=\"ninja_table_row_1 nt_row_id_192\">\n            <td> Ownership percentage<\/td><td>25%<\/td><td>75%<\/td><td>100%<\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table>\n                    <style type=\"text\/css\" id='ninja_table_custom_css_6143'>\n                        #footable_6143  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_7743'>\n                        #footable_7743  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6145'>\n                        #footable_6145  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\nth.ninja_column_0.ninja_clmn_nm_investor.footable-first-visible {\r\n    color: transparent !important;\r\n}#footable_6145 thead tr th.ninja_column_0,#footable_6145 tbody tr td.ninja_column_0{ background-color: rgba(255, 255, 255, 0); }                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6146'>\n                        #footable_6146  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6147'>\n                        #footable_6147  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                \n    \n    \n<\/div>\n\r\n\r\n\r\n\r\n<p>&nbsp;<\/p>\r\n\r\n\r\n\r\n<h2>Participation<\/h2>\r\n\r\n\r\n\r\n<p>Participation is an economic benefit that allows preferred shareholders to receive additional proceeds on top of the liquidation preference without having to convert their preferred shares into common shares. In a liquidation scenario in which the proceeds are above the amount invested in the company, the preferred shareholders receive back their liquidation preference and then get to share in any remaining\u00a0 proceeds with the common stockholders pro-rata on an as-converted basis. Essentially, the preferred shareholders \u201cdouble dip\u201d in favorable exit scenarios. <br \/><br \/>In other words, if an investor commits $1 million, owns 15% of the company, and it subsequently sells for $2 million, they\u2019d receive:<\/p>\r\n\r\n\r\n\r\n<ol>\r\n<li>Their initial investment of $1 million (liquidation preference)<\/li>\r\n<li>An additional $150,000 ($1 million x 15%)\u00a0<\/li>\r\n<\/ol>\r\n\r\n\r\n\r\n<p>When investors are allowed to \u201cdouble dip\u201d like this, it can leave founders and employees feeling shortchanged.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>In the above example, we assumed full participation. There is also something referred to as capped participation. With capped participation rights, investors only participate in the \u201cremaining proceeds\u201d with common stockholders until they reach their cap, which is typically a multiple (e.g., 2x or 3x) of their liquidation preference.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>Here are some examples, assuming 1 million preferred shares with an $1.00 OIP and 1 million common shares:<\/p>\r\n\r\n\r\n\r\n<div id=\"footable_parent_6148\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui \">\n                <table data-ninja_table_instance=\"ninja_table_instance_5\" data-footable_id=\"6148\" data-filter-delay=\"1000\" aria-label=\"Rights and Pref: Company payout 2 million\"            id=\"footable_6148\"\n           data-unique_identifier=\"ninja_table_unique_id_1968591695_6148\"\n           class=\" foo-table ninja_footable foo_table_6148 ninja_table_unique_id_1968591695_6148 ui table  nt_type_legacy_table celled vertical_centered  footable-paging-right ninja_table_search_disabled ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                            <col class=\"ninja_column_2 \">\n                            <col class=\"ninja_column_3 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_payoutifcompanysellsfor2million \">Type<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_ninja_column_2 \">Payout if company sells for $2 million<\/th><th scope=\"col\"  class=\"ninja_column_2 ninja_clmn_nm_payouttopreferred \">Payout to preferred<\/th><th scope=\"col\"  class=\"ninja_column_3 ninja_clmn_nm_payouttocommon \">Payout to Common<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"188\" class=\"ninja_table_row_0 nt_row_id_188\">\n            <td><b>Non-participating preferred<\/b><\/td><td>(1) Preferred receive $1 million <p> (2) Common stockholders receive the other $1 million<\/td><td>$1 million<\/td><td>$1 million<\/td>        <\/tr>\n            <tr data-row_id=\"189\" class=\"ninja_table_row_1 nt_row_id_189\">\n            <td><b>Fully-participating preferred<\/b><\/td><td>(1) Preferred receive $1 million <p> (2) Preferred and common stockholders split the remaining $1 million based on ownership percentage on an as-converted basis<\/td><td>$1.5 million<\/td><td>$0.5 million<\/td>        <\/tr>\n            <tr data-row_id=\"190\" class=\"ninja_table_row_2 nt_row_id_190\">\n            <td><b>Participating preferred with a 2x participation cap<\/b><\/td><td>(1) Preferred receive $1 million <P> (2) Preferred and common stockholders split the remaining $1 million based on their ownership percentage on an as-converted basis<\/td><td>$1.5 million<\/td><td>$0.5 million<\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table>\n                    <style type=\"text\/css\" id='ninja_table_custom_css_6143'>\n                        #footable_6143  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_7743'>\n                        #footable_7743  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6145'>\n                        #footable_6145  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\nth.ninja_column_0.ninja_clmn_nm_investor.footable-first-visible {\r\n    color: transparent !important;\r\n}#footable_6145 thead tr th.ninja_column_0,#footable_6145 tbody tr td.ninja_column_0{ background-color: rgba(255, 255, 255, 0); }                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6146'>\n                        #footable_6146  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6147'>\n                        #footable_6147  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6148'>\n                        #footable_6148  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\nth.ninja_column_0.ninja_clmn_nm_payoutifcompanysellsfor2million.footable-first-visible {\r\n    color: transparent !important;\r\n}#footable_6148 thead tr th.ninja_column_0,#footable_6148 tbody tr td.ninja_column_0{ background-color: rgba(255, 255, 255, 1); }#footable_6148 thead tr th.ninja_column_1,#footable_6148 tbody tr td.ninja_column_1{ color: rgba(0, 0, 0, 1); }                <\/style>\n                \n    \n    \n<\/div>\n\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 30px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<div id=\"footable_parent_6149\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui \">\n                <table data-ninja_table_instance=\"ninja_table_instance_6\" data-footable_id=\"6149\" data-filter-delay=\"1000\" aria-label=\"Rights and Pref: Company payout 3 million\"            id=\"footable_6149\"\n           data-unique_identifier=\"ninja_table_unique_id_179478449_6149\"\n           class=\" foo-table ninja_footable foo_table_6149 ninja_table_unique_id_179478449_6149 ui table  nt_type_legacy_table celled vertical_centered  footable-paging-right ninja_table_search_disabled ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                            <col class=\"ninja_column_2 \">\n                            <col class=\"ninja_column_3 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_investor \">Type<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_payout_if_company_sells_for_3_million \">Payout if company sells for $3 million<\/th><th scope=\"col\"  class=\"ninja_column_2 ninja_clmn_nm_payout_to_preferred \"> Payout to Preferred<\/th><th scope=\"col\"  class=\"ninja_column_3 ninja_clmn_nm_payout_to_common \">Payout to Common<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"185\" class=\"ninja_table_row_0 nt_row_id_185\">\n            <td><b>Non-participating preferred<\/b><\/td><td> (1) Preferred foregos liquidation preference<P>(2) Common and preferred are paid out based on ownership percentage on an as-converted basis  <\/td><td> $1.5 million<\/td><td> $1.5 million<\/td>        <\/tr>\n            <tr data-row_id=\"186\" class=\"ninja_table_row_1 nt_row_id_186\">\n            <td><b>Fully-participating preferred<\/b><\/td><td> (1) Preferred receive $1 million<p>(2) Preferred and common stockholders split the remaining $2 million based on their ownership percentage on an as-converted basis<\/td><td> $2.00 million<\/td><td> $1.00 million<\/td>        <\/tr>\n            <tr data-row_id=\"187\" class=\"ninja_table_row_2 nt_row_id_187\">\n            <td><b>Participating preferred with a 2x participation cap<\/b><\/td><td> (1) Preferred receive $1 million<p>(2) Preferred and common stockholders split the remaining $2 million based on their ownership percentage on an as-converted basis<\/td><td> $2.00 million<\/td><td> $1.00 million<\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table>\n                    <style type=\"text\/css\" id='ninja_table_custom_css_6143'>\n                        #footable_6143  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_7743'>\n                        #footable_7743  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6145'>\n                        #footable_6145  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\nth.ninja_column_0.ninja_clmn_nm_investor.footable-first-visible {\r\n    color: transparent !important;\r\n}#footable_6145 thead tr th.ninja_column_0,#footable_6145 tbody tr td.ninja_column_0{ background-color: rgba(255, 255, 255, 0); }                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6146'>\n                        #footable_6146  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6147'>\n                        #footable_6147  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6148'>\n                        #footable_6148  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\nth.ninja_column_0.ninja_clmn_nm_payoutifcompanysellsfor2million.footable-first-visible {\r\n    color: transparent !important;\r\n}#footable_6148 thead tr th.ninja_column_0,#footable_6148 tbody tr td.ninja_column_0{ background-color: rgba(255, 255, 255, 1); }#footable_6148 thead tr th.ninja_column_1,#footable_6148 tbody tr td.ninja_column_1{ color: rgba(0, 0, 0, 1); }                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6149'>\n                        #footable_6149  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\nth.ninja_column_0.ninja_clmn_nm_investor.footable-first-visible {\r\n    color: transparent !important;\r\n}#footable_6149 thead tr th.ninja_column_0,#footable_6149 tbody tr td.ninja_column_0{ background-color: rgba(255, 255, 255, 1); }                <\/style>\n                \n    \n    \n<\/div>\n\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 20px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 20px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<div id=\"footable_parent_6150\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui \">\n                <table data-ninja_table_instance=\"ninja_table_instance_7\" data-footable_id=\"6150\" data-filter-delay=\"1000\" aria-label=\"Rights and Pref: Company payout 4 million\"            id=\"footable_6150\"\n           data-unique_identifier=\"ninja_table_unique_id_190129079_6150\"\n           class=\" foo-table ninja_footable foo_table_6150 ninja_table_unique_id_190129079_6150 ui table  nt_type_legacy_table celled vertical_centered  footable-paging-right ninja_table_search_disabled ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                            <col class=\"ninja_column_2 \">\n                            <col class=\"ninja_column_3 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_investor \">Type<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_payout_order_if_company_sells_for_4_million \"> Payout if company sells for $4 million<\/th><th scope=\"col\"  class=\"ninja_column_2 ninja_clmn_nm_payout_to_preferred \"> Payout to Preferred<\/th><th scope=\"col\"  class=\"ninja_column_3 ninja_clmn_nm_payout_to_common \"> Payout to Common<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"182\" class=\"ninja_table_row_0 nt_row_id_182\">\n            <td><b>Non-participating preferred<\/b><\/td><td>(1)  Preferred foregos liquidation preference<p>(2) Common and preferred are paid out based on ownership percentage on an as-converted basis.<\/td><td> $2.0 million<\/td><td> $2.0 million<\/td>        <\/tr>\n            <tr data-row_id=\"183\" class=\"ninja_table_row_1 nt_row_id_183\">\n            <td><b>Fully-participating preferred<\/b><\/td><td> (1) Preferred receive $1 million<p>(2) Preferred and common stockholders split the remaining $3 million based on their ownership percentage on an as-converted basis<\/td><td> $2.5 million<\/td><td> $1.5 million<\/td>        <\/tr>\n            <tr data-row_id=\"184\" class=\"ninja_table_row_2 nt_row_id_184\">\n            <td><b>Participating preferred with a 2x participation cap<\/b><\/td><td>(1) Preferred receive $1 million<p>(2) Preferred and common stockholders split the next $2 million based on their ownership percentage on an as converted basis<p>(3) Preferred reaches their cap and common stockholders receive the final $1 million<\/td><td> $2.0 million<\/td><td> $2.0 million<\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table>\n                    <style type=\"text\/css\" id='ninja_table_custom_css_6143'>\n                        #footable_6143  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_7743'>\n                        #footable_7743  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6145'>\n                        #footable_6145  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\nth.ninja_column_0.ninja_clmn_nm_investor.footable-first-visible {\r\n    color: transparent !important;\r\n}#footable_6145 thead tr th.ninja_column_0,#footable_6145 tbody tr td.ninja_column_0{ background-color: rgba(255, 255, 255, 0); }                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6146'>\n                        #footable_6146  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6147'>\n                        #footable_6147  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6148'>\n                        #footable_6148  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\nth.ninja_column_0.ninja_clmn_nm_payoutifcompanysellsfor2million.footable-first-visible {\r\n    color: transparent !important;\r\n}#footable_6148 thead tr th.ninja_column_0,#footable_6148 tbody tr td.ninja_column_0{ background-color: rgba(255, 255, 255, 1); }#footable_6148 thead tr th.ninja_column_1,#footable_6148 tbody tr td.ninja_column_1{ color: rgba(0, 0, 0, 1); }                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6149'>\n                        #footable_6149  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\nth.ninja_column_0.ninja_clmn_nm_investor.footable-first-visible {\r\n    color: transparent !important;\r\n}#footable_6149 thead tr th.ninja_column_0,#footable_6149 tbody tr td.ninja_column_0{ background-color: rgba(255, 255, 255, 1); }                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6150'>\n                        #footable_6150  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n#footable_6150 thead tr th.ninja_column_0,#footable_6150 tbody tr td.ninja_column_0{ background-color: rgba(255, 255, 255, 1); }                <\/style>\n                \n    \n    \n<\/div>\n\r\n\r\n\r\n\r\n<p>&nbsp;<\/p>\r\n\r\n\r\n\r\n<h2>Scenario modeling with Carta<\/h2>\r\n\r\n\r\n\r\n<p>Do you know what will happen when your company exits? It\u2019s important to be aware of investor rights and preferences, especially while fundraising. Carta\u2019s <a href=\"https:\/\/www-staging.carta.com\/sg\/scenario-modeling\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">scenario modeling<\/a> tool automatically calculates the payout to equity holders assuming standard and non-standard terms. It\u2019s an easy way for companies that are planning to fundraise to ensure they\u2019re in the driver\u2019s seat when the time comes to negotiate terms.<\/p>\r\n\r\n\r\n\r\n<p>Scenario modeling is included in Carta\u2019s Growth and Scale plans. <a href=\"https:\/\/www-staging.carta.com\/sg\/pricing\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"Learn more about our plans (opens in a new tab)\">Learn more about our plans<\/a> or <a href=\"https:\/\/www-staging.carta.com\/sg\/requestdemo\/?organization=PrivateMarket\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">talk to an expert<\/a>.\u00a0<\/p>\r\n\r\n\r\n<hr class=\"wp-block-separator\" \/>\r\n\r\n\r\n<p class=\"has-small-font-size\">DISCLOSURE: This communication is on behalf of eShares Inc., d\/b\/a Carta, Inc. (&#8220;Carta&#8221;). This communication is not to be construed as legal, financial or tax advice and is for informational purposes only. This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Carta does not assume any liability for reliance on the information provided herein.<\/p>\r\n","protected":false},"excerpt":{"rendered":"<p>When a private company exits, who gets paid what (and when) is primarily dictated by the following liquidation rights and preferences.<\/p>\n","protected":false},"author":117,"featured_media":2182,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[10,19],"tags":[17,5,169,170],"acf":[],"_links":{"self":[{"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/posts\/1577"}],"collection":[{"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/users\/117"}],"replies":[{"embeddable":true,"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/comments?post=1577"}],"version-history":[{"count":0,"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/posts\/1577\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/media\/2182"}],"wp:attachment":[{"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/media?parent=1577"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/categories?post=1577"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/tags?post=1577"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}