November 21, 2003
More Venture Terms
Posted by Gordon Smith

A couple of weeks ago, I mentioned the Venture Vault from Testa, Hurwitz & Thibeault in Boston. Vic Fleischer recently alerted me to the West coast equivalent from Fenwick & West. I found a few surprises in the most recent quarter's numbers.

For example, well over half of all deals included a "senior liquidation preference" -- that is, a liquidation preference in which the new series of preferred was entitled to receive its distribution before another series of preferred. I thought that the number of pay-to-play provisions was also high (only 12% in the most recent quarter, but frequently as high as 20%). Finally, only a small number of financings included a redemption provision. In the most recent quarter, only 29%. This is in stark contrast to the research findings on this point, which find redemption provisions in a large majority of deals.

If all of this sounds like Greek to you, try this handy glossary of venture capital terms.

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