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Why Dividends Matter

TheFunded.com Advice

Posted by fnazeeri on 2008-05-21

Tags: Negotiation Terms Dividends

PUBLIC:

Somehow when you see that little clause on the term sheet about an 8% dividend for the preferred shares, it doesn't seem that big of a deal at the time. But to put it in perspective, let's take a typical "success" story and see how that dividend affects the deal.

Imagine a scenario where a startup raises $14.5MM in 4 rounds (seed plus A, B and C) and that each round has the 8% compounding dividend paid on exit. Further, let's imagine the company sells for $75MM. Here's the cash flow:

[Once again, a table doesn't format here. Does anyone know how to insert a table using Textile or something similar" In the meantime you can go to http://www.altgate.com/ to see the table.]

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