Gytenis Galkis on How to raise funding for business in Lithuania?Licensed Unicorn Hunter @ 70VenturesSome time ago
Liquidation Preference In my discussions and negotiations with Pre-Seed / Seed stage start-ups I get strong push from founders not to have liquidation preference right. In my opinion it is a must to have right for any start-up investor. Because as an investor, I’d at least want to get my money back before the founders share the remaining proceeds. An example explaining a one time non participation liquidation preference: Startup A receives an investment of EUR 100,000 from VC1 at a post-money valuation of EUR 1,000,000. VC1 owns 10%. Time pass, no new investment is received, 5 years in the founders receive an offer to sell 100% of the company for EUR 800,000. Founders are tired of running the business, they believe this is a good opportunity and agree to sell. If there would be no liquidation preference, the investor would get only EUR 80,000 (800,000 x 10%). It means that VC1 has lost EUR 20,000 while the founders have netted EUR 720,000 returns to their bank accounts. With a one time non-participating liquidation preference, the distribution would be as follows – VC1 gets its money back, the full EUR 100,000, while the remaining EUR 700,000 are distributed proportionately to the founder equity holdings. VC1 is no longer participating in the further distribution. However, if you have a one-time participating liquidation preference, this would mean that the VC1 shall participate proportionately in further distribution the EUR 700,000. Which end result in VC1 receiving EUR 100,000 and then also EUR 70,000 (700,000 x 10%). The image attached illustrates different variation of distribution based on different types of liquidation preferences.

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Justas JanauskasCEO @ Qoorio, Co-Founder @ Vinted, Angel Investor
Makes sense, yet I have never seen participating liq. preferences in my limited experience, just heard that they were popular some/many years ago. , what is your experience?
5 months ago
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Gytenis GalkisLicensed Unicorn Hunter @ 70Ventures
Neither did I see a participating Liquidation Pref., but this does not change that they exist :D I most commonly come across 1x non-participating Liquidation Preference. Sometimes there's some interest involved in the preference.
5 months ago
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Justas JanauskasCEO @ Qoorio, Co-Founder @ Vinted, Angel Investor
I have seen that some investors may come or may want to come with their liquidation preference being above the previous investors', like it was in SoundCloud case: https://www.youredm.com/2017/08/10/soundclouds-investors-dangerously-close-terminating-company-tomorrow/ And I have seen similar proposals by my eyes while being in Vinted.
5 months ago
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Jason BaselCEO @ EduOne, Adventurer
In heavily-unbalanced negotiations (like for me 6 years ago as a graduate starting my first company without so much as money for rent), a lot of VCs (in Africa, at least) insist on hearty liquidation preferences. I unwittingly signed a 3x +6% p.a. Escalating liquidation preference in the very beginning and went through a lot to unwind it years later
4 months ago
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Justas JanauskasCEO @ Qoorio, Co-Founder @ Vinted, Angel Investor
I guess such liq preferences will go away once the competition among VCs will increase in Africa, and founders will have more options to raise money from...
4 months ago
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Thomas DesimpelAngel Investor, Polyglot, Real Estate Investor
thx for your insights/sharing angel experiences. In my opinion there is no good or bad on this story. I understand the point of view of founders in pre-seed/seed stage: they think of already eventual future rounds (where in bigger rounds the VC's will ask liquid pref for themselves-waterfall Principe) and later VC's will re-write/force earlier SHA in my experience...and being an angel investor as well I also understand our own angle: always better with a non-participation liquid preference. What I see (and that makes sense from a founder point view) once there is finally a VC term sheet on the table with a nice valuation (smaller dilution) is that in negotiations both the new investors VC/ founders do everything in their force to take away these liquidation pref rights or at the very least make a waterfall (last round first...). Part of the game...
4 months ago
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Gabija GrušaitėAuthor of Stasys Šaltoka, Co-Founder of Qoorio & Vieta
This is very interesting!
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Marie MarksStartup Founder & VC Enthusiast // Obsessed with Deep ConversationsSome time ago
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Mangis
Good luck!
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Why paddle from Vilnius to Nida? It took 6 nights to get from Capital of Lithuania to one of the most beautiful parts of Lithuania - Nida. Backstory: Two good buddies are sitting in a party and discussing best trips of all time. Suddenly one of them offers to go kayaking. They both hype up and decide that half a year from now, they will go kayaking. But where? Of course they are too ambitious to go swim in boring lakes. They decide that paddling to Nida would be an awesome idea. Week before the trip: “Haha, are we seriously going to the trip?” “Of course! No more questions.” That’s it. Thats the only single conversation before starting to pack all the gear and making sure all of the documents are checked. Most painful experience: Well. It rained a lot one day. I mean hell of a lot. All of the clothes were soaked, the sleeping bag contained two glasses of cold water which even made it better.:) We had to sleep in soaked hammocks, obviously, it’s not the best idea. From 6 hours of sleep I only remember sleeping 30 minutes. That’s it. It was such a terrifying experience, I swear I thought, that I might get hypothermia. However, we survived the night and continued our journey. Best lesson: Well, hearing about the horrible night you might think that I became grateful for my warm sheets back in Vilnius. Yes, for a fact, I did, but surely that wasn’t the best lesson. While having to sit in the same kayak for a week with my friend, I spent a lot of time thinking and dreaming, which lead me to this conclusion - SOMETIMES you need to shut-up and be quiet. For real. Don’t bother talking and just enjoy the silence. That’s what i still regularly do in Vilnius - between work and sleep I spend some time in quiet. Just thinking and dreaming. However, we all learn different things, so if you want to hear more about my trips - hit me up! Would love to share more stories❤️

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Dominykas RimšaProduct & UX Designer
Hey , sounds like an awesome experience! Maybe you have your route set in google maps or somewhere else and could share it?
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