VC Deals Are Becoming More Investor Friendly as Market Cools

True or false: are venture capital deals becoming more investor-friendly as the startup market cools?

Data says: ...true 😐

We'll be going deep on all sorts of deal terms tomorrow in the Data Minute newsletter, get it delivered to your inbox here: https://lnkd.in/gNa_Dk-F

So - the chart below maps out "liquidation preference multiples". Kind of a mouthful, here's the simple breakdown.

A 1x liquidation preference means that if you (as a VC) have invested $1 million into a startup, when the startup exits, you get paid back $1M before any common shareholders are paid anything.

If the startup sells for less than your initial investment, you get all the proceeds and everybody else walks away with zero.

In tough markets (eg now), multiples can get rather scary. 1x is standard, 2x is difficult, 3x or more is a last resort move by the founder in many cases.

Carta data shows that multiples over 1x are rising (still only 6.4% of deals in Q4 but I'd bet that's still headed upward over the past couple months).

Founders need to think carefully before agreeing to these terms. Perhaps this is really the only way to keep the ship afloat - but it can have major consequences to the eventual exit for common shareholders (mostly founders and employees) down the road.

#cartadata #dealterms #multiplier #liquidationpreference #venturecapital