A younger version of me and a younger version of this Youtube channel started this series called Startup Funding Explained.
We went through a theoretical company’s story while analyzing how the cap table evolved through various rounds of funding. Make sure to watch Parts 1 through 3 if you want to get a grip on that.
But if you are only in for the good stuff, that’s OK. This article will analyze a few exit scenarios for that theoretical company and how much money everyone does, or does not make.
Let’s look at the last version of the cap table:
- Founder 1 4,000,000 33.96%
- Founder 2 1,500,000 12.74%
- Friends & Family Investor 2,000,000 16.98%
- Employee 1 (OP1) 250,000 2.12%
- Employee 2 (OP2) 250,000 2.12%
- Convertible Note Investor 500,000 4.25%
- Option Pool #2 500,000 4.25%
- Series A Investors 2,777,778 23.58%
In a nutshell, here’s where the company is at,
- Raised a Seed Round of funding through a Convertible Note.
- Raised a Series A Round of Funding, which valued the company at $10MM.
- The investors on the Series A negotiated a liquidation preference that guarantees them 2x the capital invested.
- A Series A round probably had additional terms, but we are trying to keep it simple for Youtube purposes.
- We also had two option pools, the first one with a Strike price per share of $0.0312500 and the second one with a Strike price per share of $1.