Reference no: EM132537898

Suppose you are negotiating an investment in a venture-backed company that has previously raised several rounds of funding. You are concerned that the combined value of all stock preferences now exceeds the enterprise value of the company. The company will not entertain reducing these preferences, but it has indicated a willingness to accept other structures that will address your concern. Under these circumstances, which of the following is most likely to allow an attractive risk-return profile for your investment under the widest possible range of exit values for the company? Why do you think so?

(a) Preferred Stock with additional common stock warrants at no cost.
(b) Preferred Stock with a lower price per share than the prior round.
(c) Preferred Stock with a multiple liquidation preference.
(d) Preferred Stock with a mandatory redemption feature.
(e) None of these are effective. The prior investors' preferences must be reduced in order to allow an attractive risk/return profile.