Term Sheet: Conversion

In all the VC deals we’ve ever seen, the preferred has the right – at any time – to convert its stake into common. A more interesting term is the automatic conversion, especially since it has several components that are negotiable. In an IPO of a venture-backed company, the investment bankers will want to see everyone convert into common stock at the time of the IPO (it is extremely rare for a venture backed company to go public with multiple classes of stock – it happens – but it’s rare). The thresholds of the automatic conversion are critical to negotiate – as the entrepreneur; you want them lower to insure more flexibility while your investors will want them higher to give them more control over the timing and terms of an IPO. 


(Full Post: http://www.feld.com/wp/archives/2005/04/term-sheet-conversion.html


Brad Feld

Brad Feld has been an early stage investor and entrepreneur since 1987. He is currently a Managing Director at Foundry Group. Prior to co-founding Foundry Group, he co-founded Mobius Venture Capital and, prior to that, founded Intensity Ventures. Brad is also a co-founder of TechStars.

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Filed Under:
Collection: Funding
Category: Term Sheet Terms