Pay to Play - Launchopedia

A term in VC financing that requires investors to participate in future down-valuation financings of the company, or else suffer punitive consequences (such as getting their Preferred stock converted into Common stock). One reason why investors keep some dry powder on hand.⁷

Negative Control Provisions

Golden Rule

Tony Lettich

Tony Lettich has previous Business Analysis, Business Valuation, M&A, and Venture Capital experience and currently serves as the Managing Director of The Angel Roundtable and a Partner in Sheehan, Lettich M&A Advisory. He is also a co-founder of FundingSage, which provides valuable information, tools and resources to entrepreneurs seeking to launch and build startups.

Definitioner

Venture Capital / Venture Capitalist

Valuation

The process of establishing the value or worth of an asset or a company. Factors impacting company valuation include it's market, management, technology, assets, capital structure and prospective future cash flows. ⁶

Dry Powder

Money held in reserve by a venture fund or angel investor in order to be able to make additional investments in a company.⁷

Preferred Stock

A class of ownership that has a higher claim on assets than Common Stock. In the event of Liquidation, preferred stock shareholders have priority over earnings and assets and generally earn dividends, but forego voting rights.²
A class of capital stock that may pay dividends at a specified rate and that has priority over common stock in the payment of dividends and the liquidation of assets. Many venture capital investments use preferred stock as their investment vehicle. This preferred stock is convertible into common stock at the time of an IPO.³
This is a type of corporate share where the holders can exercise more rights, preferences, and privileges than those with common stocks. It is often issued by private corporations or enterprises that have not gone public yet. Both angel investors and venture capitalists prefer to invest with preferred stock because of the superior rights and protective provisions associated with these shares.⁴

Common Stock

A class of ownership that has lower claims on earnings and assets than Preferred Stock. It is riskier to own common stock because in the event of Liquidation, common stock shareholders are the last to claim rights to assets.²
A unit of ownership of a corporation. In the case of a public company, the stock is traded between investors on various exchanges. Owners of common stock are typically entitled to vote on the selection of directors and other important events and in some cases receive dividends on their holdings. Investors who purchase common stock hope that the stock price will increase so the value of their investment will appreciate. Common stock offers no performance guarantees. Additionally, in the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock.³
This term represents a constituent in corporate ownership. People who own shares of common stock (common stockholders) often have voting rights in their company’s decision-making matters and executive board of elections. Through company dividends and capital appreciation of corporate assets, common stockholders can also share in their company’s financial success.⁴

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