NewCo Inc.

Pro Forma Cap Table

Start-up Capitalization Series A Funding
Series A Series A Post-Money FD
Common Total % Investment Preferred Total %
Founders 1,000,000 1,000,000 100.0% 1,000,000 75.0% Founders diluted by 25%
Options Granted 0 0.0% - 0.0%
Options Available 0 0.0% - 0.0%
Investor 1 0 0.0% $ 1,000,000 333,333 333,333 25.0% Investor desires 25%
Investor 2 0 0.0% $ - - - 0.0% ownership.
Investor 3 0 0.0% $ - - - 0.0%
Total 1,000,000 1,000,000 100.0% $ 1,000,000 333,333 1,333,333 100.0%

Pre-Money Valuation $ 3,000,000

Price / Share $ 3.00
Total $ Invested $ 1,000,000
Post-Money Valuation $ 4,000,000
Date 6/30/2009
NewCo Inc.

Pro Forma Cap Table

Start-up Capitalization New Option Pool Series A Funding
Pre-Money Series A Series A Post-Money FD
Common Total % New Options Total % Investment Preferred Total %
Founders 1,000,000 1,000,000 100.0% 1,000,000 80.0% 1,000,000 60.0%
Options Granted 0 0.0% 0 0.0% - 0.0% Including options in the pre-money calculation is very
Options Available 0 0.0% 250,000 250,000 20.0% 250,000 15.0% common in term sheets.
Investor 1 0 0.0% 0 0.0% $ 1,000,000 416,667 416,667 25.0%
Investor 2 0 0.0% 0 0.0% $ - - - 0.0%
Investor 3 0 0.0% 0 0.0% $ - - - 0.0%
Total 1,000,000 1,000,000 100.0% 250,000 1,250,000 100.0% $ 1,000,000 416,667 1,666,667 100.0%

Pre-Money Valuation True Pre-Money: $ 2,400,000 $ 3,000,000 Note the lower price per share despite same pre-money
Price / Share $ 2.40 valuation due to the new options. This values the pre-
Total $ Invested $ 1,000,000 money company prior to options at $2.4 million.
Post-Money Valuation $ 4,000,000
Date 6/30/2009
NewCo Inc.

Pro Forma Cap Table

Start-up Capitalization New Option Pool Series A Funding New Option Pool Series B Funding
Pre-Money Series A Series A Post-Money Pre-Money Series B Series B Post-Money FD
Common Total % New Options Total % Investment Preferred Total % New Options Total % Investment Preferred Total % % Preferred
Founders 1,000,000 1,000,000 100.0% 1,000,000 80.0% 1,000,000 60.0% 1,000,000 54.7% 1,000,000 36.5% 0.0%
Options Granted 0 0.0% 0 0.0% - 0.0% 0 0.0% - 0.0% 0.0%
Options Available 0 0.0% 250,000 250,000 20.0% 250,000 15.0% 161,000 411,000 22.5% 411,000 15.0% 0.0%
Investor 1 0 0.0% 0 0.0% $ 1,000,000 416,667 416,667 25.0% 416,667 22.8% $ 1,000,000 182,767 599,433 21.9% 45.1% Note who controls a majority of Preferred. This is
Investor 2 0 0.0% 0 0.0% $ - - - 0.0% 0 0.0% $ 4,000,000 731,067 731,067 26.7% 54.9% important for voting rights.
Investor 3 0 0.0% 0 0.0% $ - - - 0.0% 0 0.0% $ - - - 0.0% 0.0%
Total 1,000,000 1,000,000 100.0% 250,000 1,250,000 100.0% $ 1,000,000 416,667 1,666,667 100.0% 161,000 1,827,667 100.0% $ 5,000,000 913,833 2,741,500 100.0% 100.0%

Pre-Money Valuation True Pre-Money: $ 2,400,000 $ 3,000,000 True Pre-Money $ 9,119,095 $ 10,000,000
Price / Share $ 2.40 $ 5.47
Total $ Invested $ 1,000,000 $ 5,000,000
Post-Money Valuation $ 4,000,000 $ 15,000,000
Date 6/30/2009 6/30/2010
NewCo Inc.

Pro Forma Cap Table

Start-up Capitalization New Option Pool Series A Funding New Option Pool Series B Funding
Pre-Money Series A Series A Post-Money Pre-Money Series B Series B Post-Money
Common Total % New Options Total % Investment Preferred Total % New Options Total % Investment Preferred Total % % Preferred
Founders 1,000,000 1,000,000 100.0% 1,000,000 80.0% 1,000,000 60.0% 1,000,000 54.7% 1,000,000 36.5% 0.0%
Options Granted 0 0.0% 0 0.0% - 0.0% 0 0.0% - 0.0% 0.0%
Options Available 0 0.0% 250,000 250,000 20.0% 250,000 15.0% 161,000 411,000 22.5% 411,000 15.0% 0.0%
Investor 1 0 0.0% 0 0.0% $ 1,000,000 416,667 416,667 25.0% 416,667 22.8% $ 1,000,000 182,767 599,433 21.9% 45.1%
Investor 2 0 0.0% 0 0.0% $ - - - 0.0% 0 0.0% $ 4,000,000 731,067 731,067 26.7% 54.9%
Investor 3 0 0.0% 0 0.0% $ - - - 0.0% 0 0.0% $ - - - 0.0% 0.0%
Total 1,000,000 1,000,000 100.0% 250,000 1,250,000 100.0% $ 1,000,000 416,667 1,666,667 100.0% 161,000 1,827,667 100.0% $ 5,000,000 913,833 2,741,500 100.0% 100.0%

Pre-Money Valuation True Pre-Money: $ 2,400,000 $ 3,000,000 True Pre-Money $ 9,119,095 $ 10,000,000
Price / Share $ 2.40 $ 5.47
Total $ Invested $ 1,000,000 $ 5,000,000
Post-Money Valuation $ 4,000,000 $ 15,000,000
Date 6/30/2009 6/30/2010

Exit Waterfall
High Scenario Low Scenario
Exit Value $100,000,000 Value per share if everyone converted to comon. Note $ 12,000,000 Lower than preferences of B but higher than A.
Value Per Share (as-converted basis) $ 36.48 it is greater than preferences of A and B. $ 4.38
Exit Date 6/30/2011 6/30/2011

Liquidation Preferences Date Dividend Per Share Shares Date Dividend Per Share Shares
Series B 1x Straight Preferred $ 5.47 913,833 $ 5,000,000 $ 5.47 913,833 $ 5,000,000
Series B Dividend 6/30/2010 0% $ - 913,833 $ - 6/30/2010 0% $ - 913,833 $ - B exercises preference .
Total Series B Preference $ 5.47 $ 5,000,000 $ - $ 5.47 $ 5,000,000 $ 5,000,000
Convert to Common? 1 0

Series A 1x Straight Preferred $ 2.40 416,667 $ 1,000,000 $ 2.40 416,667 $ 1,000,000

Series A Dividend 6/30/2009 0% $ - 416,667 $ - 6/30/2009 0% $ - 416,667 $ -
A converts to common.
Total Series A Preference $ 2.40 $ 1,000,000 $ - $ 2.40 $ 1,000,000 $ -
Convert to Common? 1 1

Total Preferences $ - $ 5,000,000

Remaining Common Proceeds $100,000,000 $ 7,000,000

Common Proceeds Shares % of Proceeds Shares % of Proceeds

Series B 913,833 33.3% $ 33,333,333 A/B convert to common and participate in Common - 0.0% $ -
B does not participate in Common proceeds.
Series A 416,667 15.2% $ 15,198,492 proceeds. 416,667 22.8% $ 1,595,842
Common 1,000,000 36.5% $ 36,476,382 1,000,000 54.7% $ 3,830,020
Options 411,000 15.0% $ 14,991,793 411,000 22.5% $ 1,574,138
Total 2,741,500 100.0% $100,000,000 1,827,667 100.0% $ 7,000,000

Total Proceeds Per Share % of Proceeds

Series B $ 36.48 33.3% $ 33,333,333 $ 5.47 41.7% $ 5,000,000
Series A $ 36.48 15.2% $ 15,198,492 $ 3.83 13.3% $ 1,595,842
Common $ 36.48 36.5% $ 36,476,382 $ 3.83 31.9% $ 3,830,020
Options $ 36.48 15.0% $ 14,991,793 $ 3.83 13.1% $ 1,574,138
Total 100.0% $100,000,000 100.0% $ 12,000,000

Multiple of Cost
Series B 6.7x 1.0x Important criteria of how well the investment
Series A 15.2x 1.6x
performed. VCs typically aim for 4-10x returns.

Check if Proceeds are above Preference:

Series B OK OK Important check to make sure investor proceeds are
Series A OK OK greater than or equal to their preferences.
NewCo Inc.

Pro Forma Cap Table

Start-up Capitalization New Option Pool Series A Funding New Option Pool Series B Funding
Pre-Money Series A Series A Post-Money Pre-Money Series B Series B Post-Money
Common Total % New Options Total % Investment Preferred Total % New Options Total % Investment Preferred Total % % Preferred
Founders 1,000,000 1,000,000 100.0% 1,000,000 80.0% 1,000,000 60.0% 1,000,000 54.7% 1,000,000 36.5% 0.0%
Options Granted 0 0.0% 0 0.0% - 0.0% 0 0.0% - 0.0% 0.0%
Options Available 0 0.0% 250,000 250,000 20.0% 250,000 15.0% 161,000 411,000 22.5% 411,000 15.0% 0.0%
Investor 1 0 0.0% 0 0.0% $ 1,000,000 416,667 416,667 25.0% 416,667 22.8% $ 1,000,000 182,767 599,433 21.9% 45.1%
Investor 2 0 0.0% 0 0.0% $ - - - 0.0% 0 0.0% $ 4,000,000 731,067 731,067 26.7% 54.9%
Investor 3 0 0.0% 0 0.0% $ - - - 0.0% 0 0.0% $ - - - 0.0% 0.0%
Total 1,000,000 1,000,000 100.0% 250,000 1,250,000 100.0% $ 1,000,000 416,667 1,666,667 100.0% 161,000 1,827,667 100.0% $ 5,000,000 913,833 2,741,500 100.0% 100.0%

Pre-Money Valuation True Pre-Money: $ 2,400,000 $ 3,000,000 True Pre-Money $ 9,119,095 $ 10,000,000
Price / Share $ 2.40 $ 5.47
Total $ Invested $ 1,000,000 $ 5,000,000
Post-Money Valuation $ 4,000,000 $ 15,000,000
Date 6/30/2009 6/30/2010

Exit Waterfall
High Scenario Low Scenario
Exit Value $100,000,000 $ 12,000,000
Value Per Share (as-converted basis) $ 36.48 $ 4.38
Exit Date 6/30/2011 6/30/2011

Liquidation Preferences Date Dividend Per Share Shares Date Dividend Per Share Shares
Series B Full Participation $ 5.47 913,833 $ 5,000,000 $ 5.47 913,833 $ 5,000,000
Series B Dividend 6/30/2010 0% $ - 913,833 $ - 6/30/2010 0% $ - 913,833 $ -
Total Series B Preference $ 5.47 $ 5,000,000 $ 5,000,000 $ 5.47 $ 5,000,000 $ 5,000,000
Convert to Common? 0 0

Series A 1x Straight Preferred $ 2.40 416,667 $ 1,000,000 $ 2.40 416,667 $ 1,000,000

Series A Dividend 6/30/2009 0% $ - 416,667 $ - 6/30/2009 0% $ - 416,667 $ -
Total Series A Preference $ 2.40 $ 1,000,000 $ - $ 2.40 $ 1,000,000 $ -
Convert to Common? 1 1

Total Preferences $ 5,000,000 $ 5,000,000

Remaining Common Proceeds $ 95,000,000 $ 7,000,000

Common Proceeds Shares % of Proceeds Shares % of Proceeds

Series B 913,833 33.3% $ 31,666,667 Investor receives preference and participates in 913,833 33.3% $ 2,333,333
Common, effectively "double dipping".
Series A 416,667 15.2% $ 14,438,568 416,667 15.2% $ 1,063,894
Common 1,000,000 36.5% $ 34,652,562 1,000,000 36.5% $ 2,553,347
Options 411,000 15.0% $ 14,242,203 411,000 15.0% $ 1,049,425
Total 2,741,500 100.0% $ 95,000,000 2,741,500 100.0% $ 7,000,000

Total Proceeds Per Share % of Proceeds Per Share % of Proceeds

Series B $ 40.12 36.7% $ 36,666,667 Percentage of proceeds is an important way investors $ 8.02 61.1% $ 7,333,333
Series A $ 34.65 14.4% $ 14,438,568 look at ownership. $ 2.55 8.9% $ 1,063,894
Common $ 34.65 34.7% $ 34,652,562 In a big exit, participation doesnt matter as much. The $ 2.55 21.3% $ 2,553,347
Options $ 34.65 14.2% $ 14,242,203 smaller the exit, the more effect participation has. $ 2.55 8.7% $ 1,049,425
Total 100.0% $100,000,000 100.0% $ 12,000,000

Series B
Effective Pre-Money Valuation $ 8,636,364
Effective Post-Money Valuation $ 13,636,364

Multiple of Cost
Series B 7.3x 1.5x
Series A 14.4x 1.1x

Check if Proceeds are above Preference:

Series B OK OK
Series A OK OK