An entrepreneurial friend of yours has just received the term sheet from a VC. He asks...

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An entrepreneurial friend of yours has just received the term sheet from a VC. He asks you for help as he does not fully understand many of the terms. In particular, he shows you the following excerpt from the term sheet: Securities: Price Per Share: Current Outstanding: Pre-Money Valuation: Liquidation Preference: Optional Conversion: 5,000,000 shares of Series A Convertible Stock (henceforth Series Preferred Preferred). A $1.00 per share (the "Original Purchase Price"). 15,000,000 shares of Common Stock. of The Original Purchase Price is based upon a fully-diluted pre-money valuation $15,000,000 and a fully-diluted post-money valuation of $20,000,000. In the event of any liquidation, dissolution or winding up of the Company, the proceeds shall be paid as follows: First pay 1.5 times the Original Purchase Price on each share of Series A Preferred. The balance of any proceeds shall be distributed pro rata to holders of Common Stock. The Series A Preferred converts 1:1 to An entrepreneurial friend of yours has just received the term sheet from a VC. He asks you for help as he does not fully understand many of the terms. In particular, he shows you the following excerpt from the term sheet: Securities: Price Per Share: Current Outstanding: Pre-Money Valuation: Liquidation Preference: Optional Conversion: 5,000,000 shares of Series A Convertible Stock (henceforth Series Preferred Preferred). A $1.00 per share (the "Original Purchase Price"). 15,000,000 shares of Common Stock. of The Original Purchase Price is based upon a fully-diluted pre-money valuation $15,000,000 and a fully-diluted post-money valuation of $20,000,000. In the event of any liquidation, dissolution or winding up of the Company, the proceeds shall be paid as follows: First pay 1.5 times the Original Purchase Price on each share of Series A Preferred. The balance of any proceeds shall be distributed pro rata to holders of Common Stock. The Series A Preferred converts 1:1 to