Lovepop Cap Table PDF

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Summary

Cap table for case 2...

Description

Scenario 1: Accept Techstars

Scenario 2: Accept Founder.org

Convertible notes Item

Amount

Note

CN investment (3 investors)

$42,500

Common shares; Lower of valuation cap at $3m or 20% discount of post-money valuation

Techstars offer Item

Amount

CN investment

$100,000

Techstars shareholding Techstars investment Post money valuation Series A Item Series A shareholding Series A investment Post money valuation

6% $18,000 $300,000 Amount 20% $2,000,000 $10,000,000

CN conversion price Item Discounted valuation (+) Initial CN (+) Techstars CN Conversion price (+) Initial CN (+) Techstars CN # of converted shares (+) Initial CN (+) Techstars CN

Financing rounds: Founders CN (3 investors) Techstars (+) Techstars shares (+) Techstars CN Series A ESOP Total

Note Common shares; Lower of valuation cap at $3m or 20% discount of post-money valuation =F12/F11

Amount

Note 20% of post money 20% of post money

$3,000,000 $3,000,000

Since discount > val. cap Since discount > val. cap

1.4% 3.3%

=F7/F26 =F10/F27

Pre-seed round # of shares % stake 10,000,000 100.0% -

-

10,000,000

100.0%

Capital Table Seed round # of shares % stake 10,000,000 94.0% 638,298 10,638,298

6.0% 100.0%

Amount

CN investment (3 investors)

42,500

Founder.org offer Item

Amount

CN investment Series A Item Series A shareholding Series A investment Post money valuation

Note =F17/F18 -

$8,000,000 $8,000,000

Convertible notes Item

CN conversion price Item Discounted valuation (+) Initial CN (+) Founder.org CN Conversion price (+) Initial CN (+) Founder.org CN # of converted shares (+) Initial CN (+) Founder.org CN

Option Pool # of shares % stake 10,000,000 77.8% 182,126 1.4% 638,298 428,532 1,606,994 12,855,949

5.0% 3.3% 12.5% 100.0%

Series A # of shares % stake 10,000,000 62.2% 182,126 1.1% 638,298 428,532 3,213,987 1,606,994 16,069,936

4.0% 2.7% 20.0% 10.0% 100.0%

Financing rounds: Founders CN (3 investors) Founder.org Series A ESOP Total

$300,000

Amount 20% $2,000,000 $10,000,000

Amount

Case Question 1 As seen in the capital table on the left, after Series A, the founders will have 62.2% and 60.9% ownership if they chose to accept Techstars or Founder.org respectively. In both cases, they Note Common shares; Lower of valuation cap at $3m or 20% discount of post-money valuation Note Common shares; Lower of valuation cap at $3m or 25% discount of post-money valuation

Case Question 3 If I am the founder of Lovepop, from a financial standpoint, I will take the offer from Techstars. This is because I will be less diluted by Series A, although this would mean that I have to relinquish my equity stake early on in the seed round. However, more factors are to be examined before a firm decision can be made.

Note =Q14/Q15 -

The difference in shareholdings in both scenarios is negligibly small, hence it would boil down to my level of comfort of having another shareholder after seed round and also having a price tagged to my business at such early stage. Under normal circumstances, a rational founder would want to take up the offer by Founder.org, since the company has just went through a yearlong mentorship and taking up a convertible note allows them to fulfill their liquidity needs and focus on growth. However, it is also mentioned in the case that having Techstars' stamp of approval, it is an extremely good brand name with an exceptional exposure to investors. This is seemingly alluding to an underlying notion that Techstars will help to structure your company such that it is investor ready.

Note

$8,000,000 $7,500,000

20% of post money 25% of post money

$3,000,000 $3,000,000

Since discount < val. cap Since discount < val. cap

1.4% 10.0%

Case Question 2 Control refers to the extent of influence on the business that one holds. Often, the concept of control is intertwined with ownership, especially for small companies. In the case of Lovepop, purely on percentage stake basis, the founders retain control over the company. However, more information would be required on Series A before a sound and firm conclusion can be made. This is because Series A might include board seat or clauses which can sway the extent of influence of the 2 founders.

As the founder of Lovepop, if my passion is to provide a connection between cards and customers and I truly believe in my business model and product offerings, choosing Techstars might result in me having to change my business model or product offering, in order for it to satisfy investors. In this case, Techstars would be a less ideal option for me. By choosing Founder.org instead, I can receive the funding that I need and continue to pursue what I truly believe in. Moreover, I am still able to gain access to the network from the Founder.org mentorship program for the necessary guidance, and/or introducion to potential investors. Hence, based on quantitative and qualitative reasons, I will choose to go with Founder.org. While there is greater dilution in Series A, the magnitude of dilution is insignificant. Moreover, I am able to continue to drive my company down the path that I am passionate about and not being placed

=Q7/Q26 =Q10/Q27

Capital Table Pre-seed round Option Pool Series A # of shares % stake # of shares % stake # of shares 10,000,000 100.0% 10,000,000 76.1% 10,000,000 186,199 1.4% 186,199 1,314,348 10.0% 1,314,348 3,285,871 1,642,935 12.5% 1,642,935 10,000,000 100.0% 13,143,483 100.0% 16,429,354

% stake 60.9% 1.1% 8.0% 20.0% 10.0% 100.0%...