The Importance of Common Stock in Early Investors

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The company's raising 100 million it's at a billion dollar valuation was picking even numbers here and 20 million of that is going to go towards secondary 80 million is going to be primary goes into the company. There's a concept that comes up pari pasu maybe we could explain this and how it relates to early investors and early employees and the foundersYeah absolutely so if we if the buyer or investor in that situation buys directly from the employees they're going to buy common stock and common stock doesn't have all the bells and whistles that the preferred stock does because it doesn't have a liquidation preference. Sometimes investors will say I don't want to hold common stock because I want the downside

Today’s show:

Wilson Sonsini Partner Becki DeGraw joins Jason to kick off another series of Startup Legal Basics! In this episode, they break down secondary market transactions, including the evolution of secondaries (00:50), trends in the industry (3:16), critical aspects of Qualified Small Business (QSBS) stock(20:06), and much more!

Time stamps:

(00:00) Wilson Sonsini Partner Becki DeGraw joins Jason (00:50) The increased use of secondary markets (3:16) How companies staying private longer influenced the rise in secondaries (4:25) Determining how much founders should be allowed to sell (6:21) Spending more than a company is worth (9:26) The Pari-Passu concept explained and how it applies to early investors, founders, and employees (10:38) Who gets to sell pre-IPO (12:44) Off the cap table transactions and hypothetical scenarios (18:26) Tender offers and the NASDAQ secondary market (20:06) The critical aspects of qualified small business (QSBS) stock

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