Series C Round
Provisions
- Down Rounds: A “down round” is when new shares are priced lower than in a previous round. Triggers anti-dilution protections to preserve earlier investors’ ownership and influence. Without protection, investors get diluted like common shareholders.
- Preferred Stock Conversion: If the investor holds preferred shares without an anti dilution provision, their shares will be diluted at the same rate as common shareholders, like pro rata but in the wrong direction.
- Pay-to-Play Provisions: Investors must join future rounds to keep their anti-dilution rights. Under IoW’s “Pay-to-Play” provisions, those who don’t participate in the Series C round lose these protections and may be converted to common stock.
Anti-Dilution Protections
Without any anti dilution provisions in place, an investor bears the full risk of having their proportional stake in a company reduced, on an unconverted basis, in the event of a down round.
- No Anti-Dilution Protection: Investors without this clause are diluted at the same rate as common shareholders — similar to pro rata, but in the wrong direction.
- Full Ratchet: Maximally protective. During a down round, prior preferred shares convert as if purchased at the new, lower price—i.e., the conversion price is reset to the latest share price.
- Weighted Average: Offers a fairer approach to dilution protection by adjusting the conversion price based on both the size and price of previous and current funding rounds—unlike full ratchet provisions, which apply a more aggressive adjustment.
Valuation & Share Calculations
- New Share Price = Pre-money valuation ÷ Existing shares.
- New Shares Issued = Capital raised ÷ New Share Price.
| CapTable after Series C | Values | Formula |
| Pre-Money Valuation | $30,000,000 | |
| Series C $ Raised | $10,000,000 | |
| Post-$ | $40,000,000 | |
| Shares Prior (Series B) | 27,499,175 | |
| Share Price Prior (Series B) | $1.82 | |
| Share Price At New Round | $1.09 | “= 30M / 27.49M “ |
| Series C Share Price % Change | -40% | “= $1.09/$1.82 – 1” |
| New Shares created from Series C | 9,166,392 | “= 10M / $1.09” |
Series C Investments
Provident Capital
- Because Provident Capital didn’t participate in the new round, it lost its anti dilution protection under the Pay-to-Play provision, and its Series B shares converted to common stock at the original $1.818 price.
BlackBox Capital
- BlackBox capital previously invested $3.5 million and negotiated a full ratchet clause. Due to IoW’s declining valuation, BlackBox Capital’s Series B shares will convert at the lower Series C price of $1.091 instead of the original $1.818, granting them 66% more common shares through a 1.666x conversion ratio under their full ratchet anti dilution protection where the conversion price is reset to the latest share price.
- BlackBox Capital now is investing $4 million for 3,666,361 Series C shares, ten percent of the company, undiluted.
Cormorant Ventures
- Cormorant Ventures is investing $6 million for 5,499,541 Series C shares, fifteen percent of the company, undiluted.
- Broad-Based Weighted Average Formula:
- Common formula: CP2 = CP1 * (A + B) / (A + C)
- CP2 = New conversion price after the down round
- $1.81 * (27,499,998 + 3,300,330) / (27,499,998 + 9,165,902) = $1.52
- CP1: Original conversion price for prior round shares ($1.818 for Series B)
- A: Shares outstanding at prior round (27,499,998 Series B Shares)
- B: “The aggregate consideration received by the corporation”
- $ Invested at Series C / Original Conversion Price for Series B Shares
- Series C capital ($6M) ÷ original Series B price ($1.81) = 3,300,330
- C: New Series C shares issued (9,165,902)
- Weighted average antidilution gave Cormorant Ventures a 1.191x conversion ratio—less than BlackBox’s 1.666x under full ratchet—preserving more equity for founders and other investors.
Unconverted Basis
| Shareholder | Initial Value | Current Price | Issued Price | Common Shares (Unconverted) | Series C % (Unconverted)) | Series C $ (Unconverted)) |
| Jill | $1.09 | $1.82 | 4,800,000 | 13.1% | $5,236,521 | |
| Jack | $1.09 | $1.82 | 3,200,000 | 8.7% | $3,491,014 | |
| Employee Pool | $1.09 | $1.82 | 2,000,000 | 5.5% | $2,181,884 | |
| Opaque Ventures | $2,500,000 | $1.09 | $1.82 | 2,083,333 | 5.7% | $2,272,795 |
| Blackbox Capital | $2,500,000 | $1.09 | $1.82 | 2,500,000 | 6.8% | $2,727,355 |
| Cormorant Ventures | $4,000,000 | $1.09 | $1.82 | 2,666,667 | 7.3% | $2,909,178 |
| Provident Capital | $2,000,000 | $1.09 | $1.82 | 1,333,333 | 3.6% | $1,454,589 |
| Blackbox Capital | $1,000,000 | $1.09 | $1.82 | 666,667 | 1.8% | $727,295 |
| Cormorant Ventures (Weighted Avg) | $9,999,000 | $1.09 | $1.82 | 5,499,450 | 15.0% | $5,999,580 |
| Provident Capital (No Anti Dilution) | $1,499,850 | $1.09 | $1.82 | 824,918 | 2.2% | $899,937 |
| Blackbox Capital (Full Ratchet) | $3,499,650 | $1.09 | $1.82 | 1,924,808 | 5.2% | $2,099,853 |
| Cormorant Ventures | $5,999,999 | $1.09 | 5,499,834 | 15.0% | $5,999,999 | |
| Blackbox Capital | $4,000,000 | $1.09 | 3,666,557 | 10.0% | $4,000,000 | |
| 36,665,566 | 100.0% | $39,999,999 |
Cormorant Ventures
- $9,999,999 investment / $1.82 = 5,499,450 shares
- 5,499,450 shares x $1.09 = $5,999,580
Provident
- $1,499,850 investment / $1.82 = 824,918 shares
- 824,918 shares x $1.09 = $899,937
Blackbox
- $3,499,650 investment / $1.82 = 1,924,808 shares
- 1,924,808 shares x $ 1.09 = $2,099,853
Converted Basis
| Shareholder | Initial Value | Current Price | Conversion Price | Conversion Ratio | Common Shares (Converted) | Series C % (Converted) | Series C $ (Converted) |
| Jill | $1.09 | $1.50 | 1.00 | 4,800,000 | 12.3% | $7,200,000 | |
| Jack | $1.09 | $1.50 | 1.00 | 3,200,000 | 8.2% | $4,800,000 | |
| Employee Pool | $1.09 | $1.50 | 1.00 | 2,000,000 | 5.1% | $3,000,000 | |
| Opaque Ventures | $2,500,000 | $1.09 | $1.50 | 1.00 | 2,083,333 | 5.3% | $3,125,000 |
| Blackbox Capital | $2,500,000 | $1.09 | $1.50 | 1.00 | 2,500,000 | 6.4% | $3,750,000 |
| Cormorant Ventures | $4,000,000 | $1.09 | $1.50 | 1.00 | 2,666,667 | 6.8% | $4,000,000 |
| Provident Capital | $2,000,000 | $1.09 | $1.50 | 1.00 | 1,333,333 | 3.4% | $2,000,000 |
| Blackbox Capital | $1,000,000 | $1.09 | $1.50 | 1.00 | 666,667 | 1.7% | $1,000,000 |
| Cormorant Ventures (Weighted Avg) | $9,999,000 | $1.09 | $1.53 | 1.19 | 6,546,943 | 16.8% | $7,142,334 |
| Provident Capital (No Anti Dilution) | $1,499,850 | $1.09 | $1.82 | 1.00 | 824,918 | 2.1% | $899,937 |
| Blackbox Capital (Full Ratchet) | $3,499,650 | $1.09 | $1.09 | 1.67 | 3,207,916 | 8.2% | $3,499,650 |
| Cormorant Ventures | $5,999,999 | $1.09 | $1.09 | 1.00 | 5,499,834 | 14.1% | $5,999,999 |
| Blackbox Capital | $4,000,000 | $1.09 | $1.09 | 1.00 | 3,666,557 | 9.4% | $4,000,000 |
| 38,996,168 | 100.0% | $50,416,920.3460 |
Cormorant Ventures
- $9,999,999 investment / $1.53 = 6,546,943 shares
- 6,546,943 shares x $1.09 = $7,142,334
- Conversion Ratio = $1.82 / $1.53 = $1.19
Provident
- $1,499,850 investment / $1.82 = 824,918 shares
- 824,918 shares x $1.09 = $899,937
- Conversion Ratio = $1.82 / $1.82 = $1.00
Blackbox
- $3,499,650 investment / $1.09 = 3,499,650 shares
- 3,499,650 shares x $ 1.09 = $3,499,650
- Conversion Ratio = $1.82 / $1.09 = $1.67
| Unconverted Shares | Unconverted Value | Converted Shares | Converted Value | |
| Cormorant Ventures | 5,499,450 | $5,999,580 | 6,546,943 | $7,142,334 |
| Provident | 824,918 | $899,937 | 824,918 | $899,937 |
| Blackbox | 1,924,808 | $2,099,853 | 3,499,650 | $3,499,650 |