Driving Business Advantage

FOLEY HOAG LLP Driving Business Advantage Liquidation Preference - Take Aways ■ Having a preference is standard, but focus on trying to minimize participation and accruing dividends. ■ Understand how the preferences interplay so that everyone's incentives are aligned. It can get very complicated when multiple rounds are stacked up. In some cases you can have flat spots or even drastic jumps that create divergent incentives. ■ The early rounds set a precedent for later rounds, so early investors that are too greedy on terms may live to regret it (use this argument to your advantage in negotiating favorable terms in the early rounds). ■ Sometimes preference can be used to bridge a valuation gap, but again, worry about the precedent in that case. Generally not applicable in IPO © 2014 Foley Hoag LLP. All Rights Reserved. 28

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