Price || Valuation

• $X for K% -> Valuation = X/K*100
• Premoney and Postmoney > VC: $5M at $20M -> 25% > E: $5M at $20M (+$5M) = $25M -> 20% » E: I assume you mean $20M in valuation

**fully diluted** : stock options reserved for employee

• List out all the hires in plan, and how the reserved stock will be used as an option <-> Options Pool

**warrants** : option to increase equity for the same valuation

• Try to avoid warrants unless there’s a bridge loan.

**BATNA** : best alternative to a negotiated agreement

Numbers:

  + Past performance (chart, graph)
  + Predictions of future revenue
  + Earning Before Interest -\
  + Taxes                   | } E.B.I.T.D.A
  + Depreciation            |/  
  + Amortization            /
  + Cash burn
  + Head Count

**DCF** : Discounted cash flow

Focus on what you can Control

Never take valuation personally. People are negotiating a deal to their advantage.

liquidation : $$$
IPO: Just another round of funding (JAROF)

Participation feature has a lot of impact at relatively low outcomes and less impact at higher outcomes.

Pay-to-Play

Avoid the scenario where VC has the right to force a recapitalization of the company if fellow investors bailed

Have an appropriate conversion to common stock for lack of follow-on investment

Vexting

Time contract: investor must not bail within X Years to keep full share.

Antidilution

Weighted average Antidilution: If newer price is lower, earlier price is reduced to the new lower price.

Ratchet-based Antidilution:

**NCP** : new conversion price
**OCP** : old conversion price
**CSO** : common stock outstanding
**CSP** : common stock purchasable
**CSAP**: common stock actually purchased
NCP = (CSO + CSP)/(CSO + CSAP) * OCP