Concept-of-the-week
Term sheets
Imagine your company sells for $100M. An investor who put in $1M at a $10M post-money valuation owns 10%, so you might assume they get about $10M.
With non-participating preferred, that's roughly right. The investor converts to common and takes their 10%.
But if they negotiated participating preferred, they can "double dip." First, they get their $1M liquidation preference back. Then they still take 10% of the remaining $99M. Total: $10.9M.
That extra $900K doesn't come from nowhere. It reduces what's left for common shareholders and everyone else lower in the payout stack.
Other terms can matter even more. A 2x liquidation preference means the investor gets 2x their money back off the top, before common shareholders see any proceeds. Cumulative dividends can increase that preference over time while the company stays private.
Read the payout terms, not just the valuation. Watch for participating preferred, cumulative dividends, and liquidation preferences above 1x. These won't be obvious in a simple cap table, but they can materially change who gets paid at exit.
One hour with an attorney is often far cheaper than discovering these economics after the deal is signed.
What we’re watching
Nvidia-Nebius deal
Source: Nvidia.com
Nvidia invested $2B in neocloud provider Nebius this week, adding to $2B each in CoreWeave and Nscale, and $30B in OpenAI over recent months.
The pattern: Nvidia takes equity in companies that buy its chips at scale.
For founders building on GPU-dependent infrastructure, this reshapes access. Nebius gets early access to Nvidia's next-gen Rubin platform and Vera CPUs. CoreWeave gets similar treatment. Startups on these providers inherit that hardware advantage, but also a dependency chain where compute allocation is shaped by equity relationships, not just pricing.
The signal: AI infrastructure financing is consolidating around a chipmaker-as-investor model. If your burn depends on GPU availability, the cap table of your cloud provider now directly affects your operational risk. Worth factoring into vendor and fundraising decisions alike.
Sources: Bloomberg
This week’s highlights
Replit raises $400M Series D at $9B valuation led by Georgian, tripling from $3B just six months ago; targeting $1B ARR by year-end (Source)
Quince closes $500M Series E at $10.1B valuation led by Iconiq, more than doubling from $4.5B in early 2025 (Source)
Vast secures $500M ($300M Series A equity + $200M debt) led by Balerion Space Ventures to accelerate its Haven commercial space station program (Source)
Eridu exits stealth with a $200M Series A led by Socratic Partners and John Doerr, building next-gen AI networking infrastructure (Source)
Rhoda AI raises $450M Series A at $1.7B valuation led by Premji Invest, using internet-scale video data to train industrial robots (Source)
See you next week,
Team EquityList
