investorsLet’s assume the following scenario.
A company has a pre-money valuation of $10 million. An investor wants to invest $5 million and end up owning 33% of the company. Under this deal the ownership split is
The investor reveals a clawback provision which says if you reach milestone X by 6 months then my share in the company becomes 25% and the founders own 75%. If the founders reach the milestone and the ownership changes like so -
-would that mean that since the investor only received 25% of the company for an investment of $5 million, the valuation of the company is now $20 million ($5 mil * 1/0.25) against the $15 million post money valuation that was initially calculated ?
My hunch is that, that is not how it works and valuation does not change due to this clause.
What are your thoughts ?
Imagine we each put $100k cash into a venture and each get 50% of it too.
Next we agree that who every wins a coin toss gets 100% of the equity.
I win and you’re out $100k.
Next you offer to buy the company back at its cash value, and I agree to sell it to you.
How much cash did I get back in total?
Point is that clawbacks impact the value of what you own, not the value of company.
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