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Early in the Equity Financing workflow, you will have an opportunity to enter the new stock class which is being created in your financing, and identify your incoming investors, so you can visualize post-closing ownership.
The information entered on this screen will be used to generate your financing documents. As the workflow progresses, you will have an opportunity to review the documents in detail prior to their execution.
The pie charts at the top of the page show the pre- and post-money ownership. The chart will update as you enter new information on this screen. This modeling tool helps you understand the impact of your fundraise by letting you visualize the effects of the deal on the table.
Enter the details of all new stock classes being created as a result of this financing. The amount of the investment and the liquidation preference will be requested. You can do this by clicking on the "Add New Class" button and adding information pertaining to that security. (To learn a bit about how the cost per share of the new class is calculated, you can read our blog post here!)
Anti Dilution Optionality
Dilution refers to the decrease of a shareholder’s ownership percentage in a company due to an increase in the number of outstanding shares. Essentially, this increase in shares automatically reduces the shareholder's ownership in the company.
Anti-dilution is negotiated by investors as a protection against dilution in a company should there be a "down round" (ie. the price of stock in a subsequent financing is lower than the price of the prior round's stock). There are three different options here: full ratchet, no price based anti-dilution, and weighted average anti-dilution.
Liquidation Preferences & Stack
Liquidation preferences determine how preferred stock investors get paid when your company exits. These preferences are generally the amount invested times the liquidation multiplier.
There are three different options when it comes to setting the liquidation preferences for a stock class in the Next Round Planner: full participating preferred, non participating preferred, and participating preferred with a cap.
Fully participating stock means that holders of the new preferred stock class get their liquidation preference (the payments that are paid to them before anything is available for distribution to common stockholders) and then they also get to share any of the proceeds that are left over, with the common stockholders.
Participating preferred with a cap means that holders of the new stock class are paid their liquidation preference preferentially (meaning before common stockholders are paid) and then they also get to share any of the proceeds that are left over, with the common stockholders, until an aggregate of X times the original investment is reached.
Non participating preferred stock means that the holders of the new stock class only get paid their preferential amounts or decide as a class to convert to common stock; they don’t get to take their preference and participate. Depending on the exit amount they will choose the option that gives the larger payout.
The liquidation stack refers to the order in which shareholders are paid proceeds from a sale. Click the "Modify Liquidation Stack" to reorder the stock classes.
Employee Option Pool
The existing Employee Stock Incentive Plan pool size will be shown by default. After you enter a new stock class, you will have the option to edit this target post-money pool size (by clicking the edit icon next to the percentage). Changes to the pool size can be specified using one of three calculation methods:
- Number of additional shares – Enter a specific number of shares to be added to the current pool.
- Target total percentage – Enter the percentage you'd like to have allocated to the entire employee option pool at the conclusion of the financing.
- Target unallocated total percentage – Enter the target percentage you'd like to have available for the employee option pool after financing, above and beyond any previously used pool shares.
If you've already amended your existing Stock Incentive Plan(s) or created a new plan, you should run the appropriate workflows to capture that information in Shoobx before completing your equity financing.
Enter new investors and investment details into the Investors table.
To add a new investor, click the "Add Investor" button. If the investor is already associated with your company in Shoobx, you can select that user or you may create a new user. If the investment is being made through a firm, a fund, or a family trust, then enter the investor as an entity and then enter the name of the contact person there who will be coordinating the investment.
Once the investor appears in the table, click "Add Investment" to enter the investment amount for each stock class in which they will be purchasing shares.
You will also have an opportunity to make updates to your new investors later in the workflow.
Debt & Alternatives
If the company has any convertible debt or alternatives, such as SAFEs, they will be indicated in the last section, and you may indicate whether they will convert in the financing. This will instruct Shoobx to calculate any interest that's accrued on Convertible Notes, and will take into account valuation caps and discount percentages, if applicable. Click the Custom box if you wish to override the default conversion mechanism defaults.
Questions? Consult your lawyer for advice specific to your company. Don't hesitate to reach out to email@example.com if you have any questions.