Both Sides of the Table

JULY 22, 2010

Back in 1999 when I first raised venture capital I had zero knowledge of what a fair term sheet looked like or how to value my company. The VC’s $1 million still buys them 25% of your company – it’s you who has diluted to 60% ownership rather than 75%. So your 100% of the company is down to 80% even before VC funding.

Valuation 405

Valuation Liquidation Preference Pre-Money Valuation Term Sheet 405

www.inc.com

SEPTEMBER 24, 2011

Before Roving Software could receive its first round of financing from professional investors, in early 1999, he had to put all the stock arrangements in writing. Besides the future potential earnings youre forgoing, youre also diluting your own ownership in the company. Consider whether or not youll be raising financing down the road.

Fractional CTO 40

Fractional CTO Equity Iowa Technical Cofounder 40

abovethecrowd.com

APRIL 20, 2016

In 1999, record valuations coexisted with record IPOs and shareholder liquidity. If 1999 was a wet (read liquid) bubble, 2015 was a particularly dry one. Back in 1999, if a company raised $30mm before an IPO, that was considered a large historic raise. It will also minimize future dilution. 2015 was the exact opposite.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Professor VC

DECEMBER 8, 2015

Not surprisingly, the merger was highly dilutive, particularly to Confinity/PayPal shareholders. Luckily, Google was one of the 150 and did ultimately return the fund assuming the LP was smart enough to hold the stock after distribution. At the IPO, Musk held a 14.2% stake vs Thiel's 5.6% (Sequoia Capital had 10.7%).

Merger 28

Merger LP IPO Redemption 28