Do not worry if you see CCPS instead of Equity in your term sheet


In early-stage fundraising (pre-seed through Series B), CCPS (Compulsorily Convertible Preference Shares) are by far the more common instrument.

Why CCPs rather than ordinary equity:

  • Liquidation preference: CCPS holders sit ahead of ordinary shareholders in a liquidation or acquisition waterfall. Investors get their money back before founders see anything
  • Anti-dilution protection: CCPS typically carry weighted average or full ratchet anti-dilution provisions - not available to ordinary equity holders
  • Dividend preference: Usually non-cumulative, but still structurally senior.
  • Conversion at IPO/exit: "Compulsorily convertible" means they automatically convert to ordinary equity at IPO or on a defined trigger, keeping the cap table clean for a public offering

Ordinary equity situations:
  • Founders almost always hold ordinary equity.
  • ESOPs are typically on an ordinary equity pool.
  • In some angel deals (especially informal ones), ordinary equity is used - but sophisticated angels and institutions almost always push for preference.
Institutional money always comes with structure.

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