Introduction

Interested in automating your next equity financing? Contact your Customer Success Manager to learn more.

Early in the Equity Financing workflow, you will have an opportunity to enter the new stock class 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.

Ownership

The pie charts at the top of the page show the pre- and post-money ownership. The chart will update as you update the information on this page. This modeling tool helps you understand the impact of your fundraise by letting you visualize the effects of the deal on the table. Hover your cursor over the pie chart to see detailed numbers.

Stock Classes

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. Click Add New Class and enter the details of the new class of stock.

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 generally negotiated by investors, and acts as a protection against dilution in a company should there be a down round (i.e. the price of stock in a subsequent financing is lower than the price of the prior round's stock). There are three different options: full ratchet, no price based anti-dilution, and weighted average anti-dilution.

Liquidation Preferences

Liquidation preferences determine how preferred stock investors get paid when your company exits. These preferences are generally the amount invested times the liquidation multiplier.

When adding a new stock class there are three different options for the Liquidation Preference:

Fully participating: The holders of the new preferred stock class receive 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: The holders of the new preferred 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: The holders of the new preferred 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 likely choose the option that gives the larger payout.

Liquidation Stack

The liquidation stack refers to the order in which shareholders are paid proceeds from a sale. Click 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 by clicking Modify employee option pool.

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 can run the appropriate workflows to capture that information before completing your equity financing.

Investors

Enter new investors and investment details into the Investors table.

To add a new investor, click Add Investor. If the investor is already associated with your company, 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 the Edit icon to enter the investment type and amount for the new 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 the workflow to calculate any interest that's accrued on Convertible Notes, and will take into account valuation caps and discount percentages, if applicable. Click the Edit icon if you wish to override the default conversion mechanism defaults.

Additional Resources

Screenshots are for illustrative purposes only.

Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.
Fidelity provides cap table management and other administrative services to private companies and their equity compensation plans.

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