Liquidation Preference and Downround Protection in Times of Crisis
Original: Liquidation Preference und Downround Protection in Krisenzeiten
The economic core of a venture capital transaction consists of the provision of capital in return for a shareholding in the target company (the start-up). Such an investment is always based on a valuation of the company (usually the fully-diluted pre-money valuation) at the time of entry. The valuations typically include a forward-looking expected value. Christian Tönies and Ludwig Niller provide an up-to-date assessment of certain contractual terms upon exit.