Festival French Tech 2014

1. Copyright Scality 2014
Comparing France and California
tax rate on exit
Prepared for Festival French Tech by

2. Copyright Scality 2014
3 Startups:
A. IPO at $800 M value, raising $96.5M in seed to Series D
B. Successful M&A at $187M, raising $41.4 in seed to Series C
C. Basic technology M&A at $37.5 M, raising $16.5M in seed to
Series B
4 Roles:
• Founder, owns 40% at inception, and receives stock option in
Series C and D
• Co-founder, owns 20% at inception
• Engineer, receives 0.2% stock option at seed, and then more
• Business angel, invests $200 K at seed
Comparing the tax rate at exit for
Slide 2

3. Copyright Scality 2014
Start-up A – IPO at $800 M value
Start-up A : Seed to D round, IPO
Inception Year 1 Year 2 Year 3 Year 4 Year 5
(in thousand) Seed Series A Series B Series C Series D IPO
Pre-money value 3,000$ 10,000$ 25,000$ 60,000$ 150,000$ 800,000$
Money raised 1,500$ 5,000$ 10,000$ 30,000$ 50,000$
New stock option 5% 5% 5% 5% 8%
Value per share 100$ 3,000$ 6,341$ 10,044$ 16,362$ 25,911$ 95,363$
Shares (% of fully diluted): Proceeds
CEO Entrepreneur - stock 60.0% 38.0% 24.1% 16.4% 10.4% 7.2% 57,218$
Business Angel 4.2% 2.7% 1.8% 1.1% 0.8% 6,294$
Other (cofounders, BA) 20.0% 12.7% 8.0% 5.5% 3.5% 2.4% 19,073$
Co-founder 20.0% 12.7% 8.0% 5.5% 3.5% 2.4% 19,073$
VC 27.5% 49.1% 60.4% 69.9% 71.3% 570,080$
Stock-option (% of fully diluted)
CEO Entrepreneur - stock option 0.00% 0.00% 0.00% 0.98% 1.49% 11,920$
Engineer - stock option 0.19% 0.12% 0.14% 0.14% 0.19% 1,526$
Other stock-option 4.76% 8.00% 10.36% 10.52% 14.35% 114,817$
year 6
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4. Copyright Scality 2014
Start-up B – Successful exit at $187 M
Start-up B : Seed to C round, Successful M&A
Year 1 Year 2 Year 3 Year 4 year 5
(in thousand) Seed Series A Series B Series C M&A Exit Exit/total raised
Pre-money value 3,000$ 10,000$ 25,000$ 50,000$ 187,500$ 452%
Money raised 1,500$ 5,000$ 10,000$ 25,000$
New stock option 5% 5% 5% 5%
Value per share 100$ 3,000$ 6,341$ 10,044$ 13,635$ 32,389$
Shares (% of fully diluted): Proceeds
CEO Entrepreneur - stock 60.0% 38.0% 24.1% 16.4% 10.4% 19,433$
Business Angel 4.2% 2.7% 1.8% 1.1% 2,138$
Other (cofounders, BA) 20.0% 12.7% 8.0% 5.5% 3.5% 6,478$
Co-founder 20.0% 12.7% 8.0% 5.5% 3.5% 6,478$
VC 27.5% 49.1% 60.4% 69.9% 131,143$
Stock-option (% of fully diluted)
CEO Entrepreneur - stock option 0.00% 0.00% 0.00% 0.98% 1,846$
Engineer - stock option 0.19% 0.12% 0.14% 0.14% 259$
Other stock-option 4.76% 8.00% 10.36% 10.52% 19,725$
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5. Copyright Scality 2014
Series C – basic technology exit at $37.5M
Start-up C : Seed to B round, Basic M&A
Year 1 Year 2 Year 3 year 5
Seed Series A Series B M&A Exit Exit/total raised
Pre-money value 3,000$ 10,000$ 15,000$ 37,500$ 227%
Money raised 1,500$ 5,000$ 10,000$
New stock option 5% 5% 5%
Value per share 100$ 3,000$ 6,341$ 6,027$ 8,589$
Shares (% of fully diluted): Proeeds
CEO Entrepreneur - stock 60% 38% 24% 14% 5,153$
Business Angel 0% 4% 3% 2% 567$
Other (cofounders, BA) 20% 13% 8% 5% 1,718$
Co-founder 20% 13% 8% 5% 1,718$
VC 0% 27% 49% 66% 24,737$
Stock-option (% of fully diluted)
CEO Entrepreneur - stock option 0.00% 0.00% 0.00% -$
Engineer - stock option 0.19% 0.12% 0.14% 52$
Other stock-option 4.76% 8.00% 9.48% 3,556$
Slide 5

6. Copyright Scality 2014
French tax rate for Start-up A – standard regime
Gain
d'acquisition
(1)
Plus-value de
cession
Impôt sur le
revenu (2)
Contrib. Except.
sur les hauts revenus
(3)
Prélèvements
sociaux
(4)
Contribution
salariale
(5)
Impôt français
total
Revenu net
Taux
d'imposition
effectif
Contribution
patronale (6)
0 57,158 -12,861 -2,286 -8,859 0 -24,006 33,152 42% 0
9,226 0 -4,152 -369 -738 -923 -6,181 3,045 67% 202
Total -30,188 36,196 45% 202
0 19,053 -4,287 -762 -2,953 0 -8,002 11,051 42% 0
0 6,096 -1,372 -244 -945 0 -2,560 3,536 42% 0
Engineer
1,240 0 -558 -50 -99 -124 -831 409 67% 21
(1) Opération de levée-cession : absence de PV cession
(2) Taux marginal d'imposition de 45% / Abattement pour durée de détention de 50% pour les PV cession / Taux de 19% pour les BSPCE
(3) Taux marginal d'imposition de 4%
(4) Taux de 15,5% pour les PV de cession - Taux de 8% pour les gains d'acquisition
(5) Taux de 10%
(6) Taux de 30% - Base de calcul égale à 25% de la valeur de l'action au jour de l'attribution
(7) Attention : les titres détenus par le CEO ne bénéficient pas du régime d'exonération des PEA car sa participation est supérieure à 25% dans la société pendant la période de 5 ans du plan
Régime normal (cession actions ordinaires / cession de stock-options)
Shares
En k$
66,384
Shares
Stock-options
CEO Entrepreneur
Total revenu brut
Business Angel
Co-founder
Shares
Stock-options
Slide 6

7. Copyright Scality 2014
French tax rate for start-up A – favorable regime
Gain
d'acquisition
(1)
Plus-value de
cession
Impôt sur le
revenu (2)
Contrib. Except.
sur les hauts revenus
(3)
Prélèvements
sociaux
(4)
Contribution
salariale
(5)
Impôt français
total
Revenu net
Taux
d'imposition
effectif
Contribution
patronale (6)
0 57,158 -12,861 -2,286 -8,859 0 -24,006 33,152 42% 0
9,226 0 -1,753 -369 -1,430 0 -3,552 5,674 39% 0
Total -27,558 38,825 42% 0
0 19,053 0 0 -2,953 0 -2,953 16,099 16% 0
0 6,096 0 0 -945 0 -945 5,151 16% 0
Engineer
1,240 0 -236 -50 -192 0 -478 763 39% 0
Business Angel
Régime aidé (cession actions via PEA / cession BSPCE)
En k$
CEO Entrepreneur
Shares - non PEA (7)
BSPCE
Shares - PEA
Total revenu brut 66,384
Co-founder
Shares - PEA
BSPCE
Slide 7

8. Copyright Scality 2014
Net after tax proceeds
Start-up A :
Seed to D round, IPO $800 M value Proceeds
Profit before
tax FR US Difference FR US Difference
CEO Entrepreneur - stock 69,138$ 66,384$ 36,196$ 40,298$ 11% 38,825$ 41,755$ 8%
Co-founder 19,073$ 19,053$ 11,051$ 11,984$ 8% 16,099$ 11,984$ -26%
Business Angel 6,294$ 6,096$ 3,536$ 3,834$ 8% 5,151$ 3,834$ -26%
Engineer - stock option 1,526$ 1,240$ 409$ 584$ 43% 763$ 780$ 2%
Start-up B succesful M&A:
Seed to C round, $187.5 M value Proceeds
Profit before
tax FR US Difference FR US Difference
CEO Entrepreneur - stock 21,280$ 20,442$ 11,589$ 12,689$ 9% 11,894$ 12,858$ 8%
Co-founder 6,478$ 6,458$ 3,746$ 4,062$ 8% 5,457$ 4,062$ -26%
Business Angel 2,138$ 1,940$ 1,125$ 1,220$ 8% 1,639$ 1,220$ -26%
Engineer - stock option 259$ 189$ 62$ 89$ 43% 116$ 119$ 2%
Start-up C technology M&A:
Seed to B round, $37.5 M value Proceeds
Profit before
tax FR US Difference FR US Difference
CEO Entrepreneur - stock 5,153$ 5,093$ 2,954$ 3,204$ 8% 2,954$ 3,204$ 8%
Co-founder 1,718$ 1,698$ 985$ 1,068$ 8% 1,435$ 1,068$ -26%
Business Angel 567$ 369$ 214$ 232$ 8% 312$ 232$ -26%
Engineer - stock option 52$ 24$ 8$ 12$ 43% 15$ 15$ 2%
General regime Favorable regime
Net after tax
* U.S. tax rate is composed of 20% maximum Federal long-term capital gains rate, 3.8% Federal net investment income tax, 12.3% maximum California tax rate,
and 1% CA Mental Health Services Tax
Slide 8