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  "documentTitle": "Valuing Pre revenue Companies",
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  "notes": "This slide provides definitions and examples for complex financial terms used in venture capital term sheets.",
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      "text": "Example: Angels invest $1 million for 25 percent of a company without a liquidation preference, and the company is later sold for $2 million. In this example, the investors would get only $500,000, losing half of their capital, and the entrepreneurs would pocket $1.5 million. If the investors negotiate a 1x simple preference, however, they would get $1 million off the top, and the common shareholders would get the remaining $1 million. Finally, if investors negotiate a 1x participating preference, they would get $1 million off the top plus another $250,000 (25 percent of the remaining $1 million). The common shareholders would receive $750,000.",
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      "text": "Liquidation preferences: Investors may negotiate a liquidation preference. At exit and after secured debt, trade creditors, and other company obligations are paid, a liquidation preference determines the relative distribution between the preferred shareholders (the investors) and the common shareholders.",
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      "text": "Non-participating simple preference (1x): At exit investors must choose between a return of capital and participation with common shareholders. Multiple preference: Investors get a multiple of their investment before common shareholders receive anything. Participating 1x liquidation preference: Investors receive capital first, then shares convert to common. High multiple (5x or 7x or more) preferences: Used less frequently, sometimes reflect creative deal structures or abusive terms.",
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      "text": "Dividends: Few investors and even fewer entrepreneurs understand how dividends are used in early-stage financing transactions. Protective dividend provision: No intention of dividends actually being paid. Dividends that accrue: Not paid in cash, but included in computing distribution to investors at exit. Cash dividends: Rarely contemplated.",
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      "text": "Investment Valuations of Seed- and Early-Stage Ventures (continued)",
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