Stocks holding or liquidating

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The common stock holders split the remaining .5 million. In recent years, it's become the most common liquidation preference for VC firms investing in startups. The people who bring the capital should have some protection. If that company then sells for million, the VC gets more than 50% of the million. Even if the company sold for 0 million, common stock holders would only split the remaining million.

In some cases, the preferences are structured so that the investors would then even get 50% of the remaining million.

In this example the VC would get million and the employees get million.

The VC gets his or her million out first, and then half of the remaining million (.5 million) for a total return of .5 million. Where startup employees can get really screwed is when preferred stock owners have 2x or 3x liquidation preferences. Imagine a VC that buys the 50% of a company for million, at the same 0 million post-money valuation. In fact, common stock holders would get zero money unless the company sold for more than twice the amount the investors put in — in this case, 0 million.Meanwhile, the employees only saw a doubling of the value of their shares, despite the company's value tripling. If the company only rises in value from million to million, the VCs will get all of the first million, plus half of the next million.So the VC gets million and the employees' portion is worth million, which means the value of their shares went down, so they will have lost money if they had exercised their options and bought shares in the beginning.Over a 30-year time horizon, the accounts would grow as follows, depending on (as noted earlier) whether the bonds are in the taxable account and the stocks are in the IRA (Scenario 1), or vice versa with the bonds in the IRA and the stocks taxable (Scenario 2).As the results reveal, there is a significant benefit to holding bonds in the IRA and stocks in the taxable account, with a final wealth level that is almost

The VC gets his or her $50 million out first, and then half of the remaining $25 million ($12.5 million) for a total return of $62.5 million. Where startup employees can get really screwed is when preferred stock owners have 2x or 3x liquidation preferences. Imagine a VC that buys the 50% of a company for $50 million, at the same $100 million post-money valuation. In fact, common stock holders would get zero money unless the company sold for more than twice the amount the investors put in — in this case, $100 million.

Meanwhile, the employees only saw a doubling of the value of their shares, despite the company's value tripling. If the company only rises in value from $20 million to $30 million, the VCs will get all of the first $20 million, plus half of the next $10 million.

So the VC gets $25 million and the employees' portion is worth $5 million, which means the value of their shares went down, so they will have lost money if they had exercised their options and bought shares in the beginning.

Over a 30-year time horizon, the accounts would grow as follows, depending on (as noted earlier) whether the bonds are in the taxable account and the stocks are in the IRA (Scenario 1), or vice versa with the bonds in the IRA and the stocks taxable (Scenario 2).

As the results reveal, there is a significant benefit to holding bonds in the IRA and stocks in the taxable account, with a final wealth level that is almost $1.1M greater than the alternative asset location strategy.

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The VC gets his or her $50 million out first, and then half of the remaining $25 million ($12.5 million) for a total return of $62.5 million. Where startup employees can get really screwed is when preferred stock owners have 2x or 3x liquidation preferences. Imagine a VC that buys the 50% of a company for $50 million, at the same $100 million post-money valuation. In fact, common stock holders would get zero money unless the company sold for more than twice the amount the investors put in — in this case, $100 million.Meanwhile, the employees only saw a doubling of the value of their shares, despite the company's value tripling. If the company only rises in value from $20 million to $30 million, the VCs will get all of the first $20 million, plus half of the next $10 million.So the VC gets $25 million and the employees' portion is worth $5 million, which means the value of their shares went down, so they will have lost money if they had exercised their options and bought shares in the beginning.Over a 30-year time horizon, the accounts would grow as follows, depending on (as noted earlier) whether the bonds are in the taxable account and the stocks are in the IRA (Scenario 1), or vice versa with the bonds in the IRA and the stocks taxable (Scenario 2).As the results reveal, there is a significant benefit to holding bonds in the IRA and stocks in the taxable account, with a final wealth level that is almost $1.1M greater than the alternative asset location strategy.

.1M greater than the alternative asset location strategy.

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