Manage Dilution Scenarios

Cap Table Intelligence & Exit Modeling Full Cap Table Reconstruction AI ingests: incorporation documents, stock purchase agreements, option grants, SAFEs, convertible notes, and warrant agreements. Builds the fully-diluted cap table showing: common stock, preferred series (A through current), option pool (granted, exercised, available), and outstanding convertible instruments. Dilution Impact Modeling For proposed financing rounds, AI models: pre-money valuation sensitivity (what ownership do founders retain at $50M vs. $80M pre?), option pool expansion

impact (the 'option pool shuffle'), and pro-rata participation rights. Shows each stakeholder's ownership under 10+ scenarios. Liquidation Waterfall Analysis AI models the payout waterfall at various exit valuations ($50M, $100M, $250M, $500M, $1B): participating vs. non-participating preferred, multiple vs. single liquidation preferences, and pay-to-play provisions. Identifies the 'breakeven' exit value where common holders receive meaningful proceeds. 409A Valuation Support AI prepares the inputs for 409A valuations: comparable company analysis (public

comps, recent transactions), Backsolve method (from latest round pricing), and OPM/PWERM output. Generates the supporting documentation auditors require. Secondary Transaction Modeling For employee liquidity events, AI models: tender offer pricing (typically at a discount to primary round pricing), tax implications for employees (AMT, QSBS eligibility, long-term vs. short-term gains), and the impact on the cap table pro forma. Model the option pool 'shuffle' explicitly — investors typically require a post-money option pool expansion, which dilutes

existing shareholders disproportionately relative to new investors. Track QSBS eligibility (Section 1202) — AI should verify that each share issuance maintains Qualified Small Business Stock status, which provides up to $10M in capital gains tax exclusion. Generate '1-pagers' for each stakeholder showing ONLY their shares, options, and exit scenarios — employees don't need to see the full cap table. Don't ignore convertible instruments — SAFEs and convertible notes convert at the next priced round, and their impact on dilution is often underestimated

until it's too late. Don't present waterfall analysis without a range of exit valuations — a single-point exit analysis is misleading. Show the full spectrum from 'downside' to 'best case.' Don't skip the 409A valuation — granting options at below fair market value triggers Section 409A penalties (20% excise tax + interest) for employees. AI should flag when a new 409A is needed. The 'Founder-Friendly' Term Sheet Analyzer AI can score term sheets across 15 dimensions: valuation, liquidation preference, anti-dilution (broad-based vs. full ratchet), board

composition, protective provisions, redemption rights, drag-along, pay-to-play, and no-shop period. Compares each term against market norms (from published term sheet databases) and flags provisions that are significantly investor-favorable vs. founder-favorable.