Wealthfile helps entrepreneurs use equity financing to accelerate growth. Use Wealthfile as you raise money from friends and family, angel investors, and VCs.
Wealthfile keeps you organized every step of the way and computes the terms unique to each shareholder—for the life of your company.
To start, simply create your company in Wealthfile and enter common stock amounts for each founder. The first common stock transaction will equal 100% of issued shares.
Issuing a co-founder the same number of shares will dilute your ownership by 50%. Append common stock transactions in Wealthfile with reverse vesting and cliffs.
Companies raising money for the first time often use convertible notes. These early investors get a discount or valuation cap in the next round. Notes are also used for bridges between rounds.
If you choose 'convertible debt' instead of 'convertible note', fields will appear for Wealthfile to compute the interest coupon upon maturity.
Wealthfile computes all the variables that go into preferred equity rounds. Simply enter the new money and pre-money valuation and Wealthfile does the math for all the rest.
If previous investors have pro rata rights, Wealthfile will compute the amounts due and lets you choose who is participating in this funding round.
After you create a funding round, you can add investors. Wealthfile will allocate shares reserved in the round based on how much money they invest.
You can also specify rights that are unique to each investor. Pro rata and information rights are often determined based on the size of the investment.
Wealthfile computes the economic portions of the term sheet which will be reflected in the definitive documents prepared by your lawyer.
In some cases, you'll get a term sheet with anti-dilution provisions. Wealthfile calculates custom ratchets and broad based anti-dilution.
The 'preferred' part of preferred stock gives investors the choice of keeping preferred terms, like capped participation, or converting to common stock in an exit scenario.
In the example above, the founders collectively own 30.59% but only get a combined payout totalling 13.95% based on how all the terms play out.
Investment terms have been refined for hundreds of years, and they work. Yet without Wealthfile, the impact of these terms is unclear, which can cripple your company if you are not careful.
Wealthfile computes complex compounding terms like pro rata and anti-dilution.
You only have 100% to work with, so spend it wisely. The breakpoint analysis is the only way you can see dead zones and the impact of investor payout priority in an acquisition.
In the example above, Series C is a down round and has payout priority over Series B. Common Stock gets $0 for any acquisition offer lower than $20M.
Wealthfile.com is a web service that helps private companies simplify complex capital structures. We are not a law firm and are not a substitute for an attorney's advice.