| Types
of Securities |
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| The model includes five types of securities. |
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• Convertible notes earn non-cash payments (termed dividends).
See Technical Notes below
for default conversion rules. |
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| • Preferred shares earn a dividend and can convert to common
stock. |
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| • Common stock |
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• Warrants have an exercise price, a selling price, and exercise
conditions. See Technical Notes below
for default exercise rules. |
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| • Options have an exercise price, a selling price, and exercise
conditions. |
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| FinModel can easily change the number of series for each types
of security. (Such changes would present a major challenge if authoring were
performed using conventional spreadsheets). |
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| Major Computed Results |
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| The model computes: |
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| • the value and
share units of each type of security owned before and after each transaction
round. |
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| • the number of share units of each type purchased at each
transaction round. |
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| • the number of fully diluted common share units before and
after each conversion event. |
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• the valuation of each type of security before and after each
transaction round, and the value of
the enterprise before and after
each transaction round. |
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| • the payout at liquidation to each type of security, accounting
for liquidation preferences of senior securities. |
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| Investment Rounds |
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| The model includes a number of investment rounds that you can
set, including 'Exit'. You can specify the number of rounds in your
customized template. |
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| Phases within Each Investment Round |
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| Each investment round has five phases that occur in this order,
and include these transactions. |
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| 1. "Start Phase": Stock splits occur and dividends in
kind are paid at the start of each investment round. |
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2. "New Sales Phase": Sell new securities (convertible
notes, preferred stock, warrants, options,
common stock) |
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| 3. "Post Sales Phase": Record investments and share
units after sale of new securities. |
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4. "Conversion Phase": Stakeholders can convert notes
and preferred shares and can exercise warrants and
options to obtain common stock. |
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| 5.
"End Phase": Record security holdings, prices and values at the end
of the investment round. |
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| All five phases are assumed to occur on the date of the
investment round. |
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| You can edit this phase structure of a round in customized
templates. You can edit the phase structure using FinModel Authoring. This is
a fairly complex process, but it is much easier to do with FinModel Authoring
than with conventional spreadsheets. |
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| Investment and Return on Investment |
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| The model reports three measures of return on investment for
each series of each type of security. |
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| • Return multiples: the multiple of investment that is paid out |
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• Present value of the cash flow for each series of each type of
security. The discount rates can differ across
series and types of securities to
reflect different risk profiles. |
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| • Internal rate of return for the cash flow from each type of
security |
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| The key results are collected on worksheets 'Investment',
'Shares', 'Valuation', and 'Payout'. |