Your startup has been doing well and you think you’re just a couple of years away from an M&A exit event. You assume you’ll be able to sell the company for about $50mm, the industry average. But you need to raise $3mm now to fund you until then. You’ve received three term sheets, all with the same premoney valuation of $9mm: which one is best, from the standpoint of maximizing the amount of money you will receive from the target exit, and what key reason(s) makes this most favorable? VC Firm: 1.5x participating preferred, no cap Angel Group: Convertible debt, converting at 25% discount to exit value, $18mm conversion value cap Family Office: 3x simple preferred with a $15mm cap
Your startup has been doing well and you think you’re just a couple of years away from an M&A exit event. You assume you’ll be able to sell the company for about $50mm, the industry average. But you need to raise $3mm now to fund you until then. You’ve received three term sheets, all with the same premoney valuation of $9mm: which one is best, from the standpoint of maximizing the amount of money you will receive from the target exit, and what key reason(s) makes this most favorable? VC Firm: 1.5x participating preferred, no cap Angel Group: Convertible debt, converting at 25% discount to exit value, $18mm conversion value cap Family Office: 3x simple preferred with a $15mm cap
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