Assignment6-Trendsetter-PhucDang

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Seattle University *

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Finance

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May 29, 2024

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xlsx

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Uploaded by GeneralScorpionPerson1978

Entrepreneurial Finance Individual Assignment (50 points) 15 points 35 points Read "Term Sheet Negotiation for Trendsetter, Inc." and complete this assignment. On part one of this assignment, you are asked to create valuation tables based on information provided in the case. On part two of this assignment, you are asked to summarize the listed items on the two term sheets in your own words and evaluate the terms from the founders' persective. Capitalization Table Comparison
Term Sheet Negotiations for Trendsetter, Inc. Alpha Ventures, without releasing escrowed shares Pre-money Post-money # of shares value % ownership # of shares value % ownership Founders 4761905 $ 5,000,000 61.35% 4761905 $ 5,000,000 61.35% ESOP 3000000 $ 7,350,000 38.65% 3000000 $ 7,350,000 38.65% VC (Alpha) Total 7761905 $ 12,350,000 100% 7761905 $ 12,350,000 100.00% Alpha Ventures, with the escrowed shares released Pre-money Post-money # of shares value % ownership # of shares value % ownership Founders 4761905 $ 5,000,000 90.48% 4761905 $ 5,000,000 90.48% ESOP VC (Alpha) 501253 $ 500,000 9.52% 501253 $ 500,000 9.52% Total 5263158 $ 5,500,000 100.00% 5263158 $ 5,500,000 100.00% Mega Fund Pre-money Post-money # of shares value % ownership # of shares value % ownership Founders 4500000 $ 500,000 56.75% 4500000 $ 500,000 56.75% ESOP 2500000 31.53% 2500000 31.53% VC (Mega) 929889 11.73% 929889 11.73%
Total 7929889 $ 500,000 100.00% 7929889 $ 500,000 100.00%
Share Price $ 1.05 Share Price $ 0.95 Share Price $ 1.00
Assignment: Trendsetter, Inc. Term Alpha Ventures Comparison Amount $5,000,000 = Investors (who) = > Price per share > Thoroughly review the term sheets provided by Alpha Ventures and Mega Fund. Sum Ventures and Mega Fund, clearly identifying key terms and conditions. In Column C, (Wendy Borg and Jason Kushdog) in one term sheet compared to the other. Use the •">" if the term is better for the founders in the Alpha Ventures term sheet •"<" if the term is better for the founders in the Mega Fund term sheet •"=" if the term is equally favorable (or unfavorable) for founders in both term sheet •"???" if you are unsure or cannot determine the relative favorability The investors are Apha Ventures (investing $2.25 m), Silicon Valley Investors ($2.25 m) and other mutually agreeable investors ($0.5 m). Number of shares issued in Series A There are 4,761,905 shares issued in Series A. The price per share will depend on whether the Escrow share is released to the investors. With Escrow released the price per share is $0.95 and without the weighted average issue price is $1.05.
Security Type > > Liquidation terms > * The securities are series A convertible preferred stock. They can be changed from their initial form to common stock and in the event of liquidation, the holders will have a preference over the common stockholders. * Escrow shares. This type of security are held into a secure account pending the achievment of the 500,000 in revenues in FY 2000. Dividend information Since the preferred securities have noncumulative dividends, with an as-converted basis, there will be no obligations to pay past dividends. The security holders will be entitled to 8% dividend payment on outstanding preferred shares in priority over common shares. *In the event of a merger, reorganization, or other transaction in which control of the company is transferred, the preferred holders will receive an initial issuance pay price + declared and unpaid dividends on each share of series A preferred stock. *The preferred stock and common stock on an as-converted basis will be allocated until Series A preferred has received 3x the initial pay issuance price.
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