New Deal Terms in a Down Market  Joseph W. Bartlett, Founder of
VC  In a down market, to which many of the current players in
venture capital are unaccustomed, you see some strange things.
In order to attract capital, investors (who are lacking self
confidence, on the one hand) and entrepreneurs (who are
desperate, on the other) will sometimes resort to bizarre
financing structures in order to get a deal done. A couple of
cases in point, which illuminate the current landscape:  First,
it is well known that nervous investors are attempting to shore
up their position as they subscribe to shares in a company by
creating what I call a supercharged participating preferred.
"Supercharged" means that, upon a liquidity event (either a
company sale an IPO), the holders of the preferred get a
multiple of their money back (the amount of the initial
investment, plus accrued dividends) before the inferior
shareholders take anything off the table. "Participating" means
that, after the preferred holders have raked in, say,