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Want to Know How VC’s Calculate Valuation Differently from Founders?

Both Sides of the Table

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
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Revisiting Paul Graham’s “High Resolution” Financing

Both Sides of the Table

I talked about this in my social proof post where I gave some suggestions about how to get the early guys off of the fence. Most early-stage entrepreneurs who have worked with me (either as an angel or as a seed VC) know that I don’t rely at all on the social proof of other investors. When I’m in, I’m in.

Finance 286
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What is the Right Burn Rate at a Startup Company?

Both Sides of the Table

by Michael Woolf that is worth any startup founder reading to get a sense of perspective on the reality warp that is startup world during a frothy market such as 1997-1999, 2005-2007 or 2012-2014. Plus, most early-stage M&A fails so this isn’t likely a good use of capital for a young company).

Burn Rate 383
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On Human Capital & Venture Capital

thebarefootvc

This is also what I advise entrepreneurs when discussing dilution and valuation — think of the bigger picture and the end game of what you are looking to build — and who will help you get there.

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Venture Deals 4e German Edition

Feld Thoughts

However, the lack of a conversion right also has implications for anti-dilution protection: in the U.S., In Germany, anti-dilution protection is achieved by issuing additional preferred shares. The boom years of 1998 (79 IPOs), 1999 (175 IPOs), and 2000 (142 IPOs) are long gone. Hence, the negation is exactly in reverse.

Germany 165
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Time is the Enemy of All Deals

Both Sides of the Table

When I was raising money for my first company we had closed a seed round in 1999 and were working on our A round. We had many term sheets (it was 1999 and we had a pulse) and we were deciding which one to take. But we weren’t optimizing for dilution – we were building a $1 billion+ company and we wanted the runway to succeed.

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How Many Investors are Too Many?

Both Sides of the Table

You may feel as I did in 1999 that the more smart people around the table the more intros you’ll have, the more sage advice you’ll receive and the more impressive you’ll seem to outsiders. So in order to get a two-handed deal you need to dilute by 40% which is an awful lot at the start of your company.

Dilution 314