1. Price (Valuation) vs. 2. Pay to Play
Price (Valuation): The amount of funding received in the round. Can be referred to in aggregate ($40M) or price per share ($6/Share). This can be used to determine pre/post money valuation.
Pay to Play: Investors will have the option to purchase their “pro rata” share in a future financing (i.e. Right of First Refusal), but if they choose not to participate (Pay), the remainder of their allotment of ownership will be converted from preferred to common stock (preventing them to Play).
C:V.’s Chief Term-ologist’s Take: Price looks to continue its hot streak in this competition but will be met with resistance by Pay to Play. In the end, we feel that Price should be able to advance on its ability to heavily impact all future rounds of a firm even though Pay to Play’s ability to allow only the truly committed investors to remain preferred shareholders should not be forgotten.
Outcome: Price advances to the Term Sheet Madness Finals! Get the scissors out! (Well, in this tournament, it’s probably more fitting to break out the pen/DocuSign link…)