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Pitchbook Capitalization Table

Transcript: Capitalization Tables Overview Overview Capitalization Tables Ownership History Liquidation Preferences Preferred Stock Participating vs. Non-Participating Review What is a Cap Table? Display the ownership stakes in a company all in one place Or Display the history of stocks issued by a company Thank you for your time. Are there any questions? Ownership Table Ownership Table Ownership Table Q3 vs Q4 YoY You can quickly see What types of stocks each has as well as How Much of that stock and percent of Ownership While most Cap Tables you encounter will be more complex than this example, the information will be the same: Stakeholders on the x-axis Series of stock issued along the y-axis Depending on the company and even departments within a company other pertinent columns may be included Complexity Complexity The universality of the program means Cap Tables can be easily provided to third parties Learning basic Excel formulas can save you time and effort in analyzing Cap Table data Excel Excel Use the legal name of each shareholder Even if everyone knows the good-natured CEO as "Jack" still record his legal name (in this case John) that is used on the stock, bonds, or options Do not clutter a cap table with extra notes Tips Tips Say you have several series of stock issued and bylaws state that for a certain vote you need 3/4 of Series A & B holders to approve. You may be tempted to merge these into one column for future use Be cautious! Tangling the information is easy, but if you ever need to UN-tangle it, that is much harder! Simplification Simplification History Table A Cap Table can also be used to display the features of a particular stock series and how it compares to all the other issues of stock for the company Cap Table History Example Example Stock Information Stock Information Almost all of the important terms found in the stock information revolve around how Dividends will be allocated Dividends are a portion of a company's earning that it distributes to shareholders Does not have to be in cash Property, greater stock options Dividends Dividends Dividend Rights Dividend Rights As the yellow line highlights, Series G stocks will benefit from company dividends Yes! Yes! Recall that on our first Cap Table our three founders all had common stock while the investors held Series A & B stock (both Preferred Stocks) It is fundamental to understand the difference between preferred stock and common stock Liquidation Rights Liquidation Rights When venture capitalist put up capital in a business they are almost always compensated in Preferred Stock If the company is ever liquidated (i.e., bankrupt, sold, or even merged): preferred stock holders receive dividends BEFORE common stock holders Preferred Stock Preferred Stock Example Example In our example, underlined in red, Series G is Pari Passu Latin for "equal footing" It is possible for there to even be a heirarchy among preferred stocks as to who gets their dividends first. In this example, since a Series G holder is on "equal footing" he or she would get dividend payments at the same rate as any other preferred stock Pari Passu Pari Passu Preferred stocks have two classes: Non-participating: Only receive the intial preferred dividends Participating: Receives the initial preferred dividends Those shares then ALSO count as common stock and the holder gets a share of the remaining dividends as well Non-Participating vs. Participating Non-Participating vs. Participating Examples Examples Non-Participating Non-Participating Steve invests $100 million for half of StartupABC He receives his shares as Non-participating preferred shares, 1x liquidation preference What happens if ABCStartup does pretty well and is sold for $600 million, or three times its initial value? Sell Price Sell Price Steve receives: $300 million (half of the new valuation) Actual Dividends Common stock holders receive: a split the remaining $300 million based on # of shares each has Participating Participating Sabrina invests $100 million for half of StartupXYZ She receives her shares as Participating preferred shares, with a 1X liquidation preferrence What happens if XYZStartup does not do so well and is sold for $150 million, losing 50 million in the process? Sell Price Sell Price Sabrina receives: $125 million. Actual Dividends Common stock holders receive: $25 million With a 1X liquidation preferrence Sabrina ensured her $100 million initial investment from any liquidation event before common stock holders As her shares are participating so she now owns half the common stock AFTER she has taken her initial slice Sabrina takes half of the remaing $50 million and ends up with $125 million while all other common stock holder split the remaining $25 million How? How? Preferred stock gives VCs an added level of security in their investment. Their liability is significantly decreased when they know they will be paid out first Commonly their liquidation preference will be 1X, or equal to their Cap

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