Analyst: Sorry, back up. You were saying the 60 to 80 percent drawdown number is the wrong frame.
Expert: The number's fine. It's lazy. Everyone quotes it because it's clean. Peak mark to trough mark, down 60 to 80. But the peak mark wasn't a price. It was a price plus a pile of structure that nobody put in the press release. Those 2021 rounds, the last one especially, the headline valuation existed because somebody swallowed terms. One-times non-participating if you were lucky. Participating with a ratchet if you weren't. So when someone tells you a company is down 70, what they're describing is the common going to roughly nothing while the preferred takes a haircut of, what, about a fifth. Two different stories. The second one decides whether a deal can close.
Analyst: How common was structure in those late rounds? Ballpark.
Expert: In what I saw, over half the 2021 crossover rounds. First half of '22, basically everything. That's my book though, not the market. Later stage, US. Don't take it down to seed.
Analyst: Okay. Why does it matter for M&A specifically?
Expert: Because you can't sell a business when the stack is bigger than the bid. Well. You can, but the people who have to say yes, the founder, management, everyone whose options are wall art, they get zero. And those are the people the buyer is paying for. So every process I touched from the back half of '23 until I left had the same shape. Price in six weeks. Then four months on the waterfall. Four months, negotiating with people nominally on your own side of the table.
Analyst: How does that get unstuck?
Expert: Carve-out. Retention pool cut out of the consideration before it hits the waterfall. Six to twelve percent depending on how badly the buyer needs the team. I saw twenty-two once. Twenty-three, sorry, it was an odd number because they'd sized it off a headcount schedule. Founder-led thing where the founder was more or less the product. And the preferred signs off, because the alternative is a wind-down where they get their pro rata slice of a customer list and some depreciated laptops.
Analyst: You said "until I left." That was mid-2025?
Expert: June. Fourteen years at the firm, last nine in fintech coverage. Before that I was on the financial institutions side doing depositories, which actually matters here, because it explains why I got the single biggest call of the last three years wrong.
Analyst: Which call?
Expert: That the banks would be the buyers.
Analyst: That's it?
Expert: That's it. I said it constantly through '22 and most of '23. Cheap deposit franchises, core systems written before I finished school, here comes the shopping spree. I put it in a client deck. Several. And it just didn't happen, for a reason I should have understood better than anybody in that building, because I'd spent five years on the other side of that floor.