As highlighted in Exhibit 1: Convertible Preferred Payout
Diagram (above), an investment in convertible preferred equity can
create a range over which the VC’s portion of the exit proceeds is
increasing while the proceeds to the entrepreneurs are flat (i.e.,
the entrepreneur doesn’t get any money, even though the total pool
of exit proceeds is increasing).
A) Why would this make sense?
B) Refer to Exhibit 1: Convertible Preferred Payout
Diagram (above). How would you characterise the inflection point in
the “Exit value to VC” line that occurs where zones B and C meet?
At what value will the line between zone B and C start to
increase?
As Highlighted In Exhibit 1 Convertible Preferred Payout Diagram Above An Investment In Convertible Preferred Equity 1 (100.27 KiB) Viewed 28 times
Enterprise value to be divided at exit Entrepreneur percentage Post-money valuation Exit value to VC Venture Capital investment VC percentage 1 Value of the enterprise А B С Legend: Enterprise value to be divided at exit Post-money valuation Venture Capital investment Exit value to VC
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