View from Seed

SEPTEMBER 14, 2021

One thing that jumps out quickly is that TVPI between 2004-2010 (avg 2.6x) has underperformed 2011-2017 (avg 3.0x). Seed investors are being compensated for the risk because later-stage investors are paying higher prices, and diluting early-stage investors less. So, let’s just look back 10 years to the 2011 vintage.

Valuation 295

Valuation Pre-Money Valuation Distribution Early Stage 295

Altgate

DECEMBER 15, 2010

This chart shows that adding additional founders to the team is in fact dilutive, but also that the more founders the more dilutive. Is the dilution of co-founders counterbalanced by other factors? Again, anecdotal though. So, I’m curious. What is your take? Is it worth it or not? Bookmark the permalink.

Pre-Money Valuation 66

Pre-Money Valuation Valuation Cofounder Founder 66

View from Seed

SEPTEMBER 14, 2021

One thing that jumps out quickly is that TVPI between 2004-2010 (avg 2.6x) has underperformed 2011-2017 (avg 3.0x). Seed investors are being compensated for the risk because later-stage investors are paying higher prices, and diluting early-stage investors less. So, let’s just look back 10 years to the 2011 vintage.

Valuation 156

Valuation Pre-Money Valuation Distribution Early Stage 156

Startup Professionals Musings

SEPTEMBER 30, 2012

They don’t realize that this option would likely be their worst nightmare, since it costs millions for the road show, usually dilutes your equity to a tiny fraction, and takes away all your entrepreneurial control. IPOs in 2008, the market was up to a still trivial 159 in 2011. After a record low of 39 U.S.

Exit Strategy 239

Exit Strategy IPO Investment Bankers Entrepreneur 239

www.payne.org

SEPTEMBER 22, 2011

Startup Equity For Employees. 3 Dilution. 7 Salary vs Equity. The re-heating of the venture funded tech market has pushed a heat up of the hiring market, and Im getting more calls from friends asking for help understanding startup stock (equity) offers. In a startup, dilution happens, and you just need to factor it in.

Equity 56

Equity Employee Vesting Preferred Stock 56

ithacaVC

JUNE 29, 2018

I have posted a few times on management carve out plans (back in February 2011 and November 2011 ; wow, time flies!!). Our portfolio companies routinely adopt carve out plans when the founders/employees equity values are not likely to provide enough incentive to get a company to an exit.

Management 40

Management Liquidation Preference Preferred Stock Dilution 40

dondodge.typepad.com

JANUARY 15, 2011

Community is more powerful than money or technology » August 11, 2007 How much equity for investors and employees? How much equity should I give up? How much equity should I grant to early employees? No loss of equity, at least until they convert at Series A. How much equity should be given to employees?

Equity 40

Equity Employee Dilution Valuation 40

Tim Keane

JANUARY 12, 2010

The investors and the entrepreneurs are – or should be – aware that the price of the company’s equity is set by the market – in simplest terms, what an informed buyer is willing to pay.   Note that this applies only to earl stage Series A-type equity financings and assumes no cash dividends are paid to investors.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

rapidrollout.wordpress.com

JANUARY 15, 2011

And finally, you may be able to avoid diluting your equity. Preserve your equity by using a consulting CTO to ramp up your company before securing early-stage financing and hiring a permanent technology partner. Increasingly, people who were only available as full-time, equity-position founders or [.]

Fractional CTO 40

Fractional CTO CTO CTO Hire Fractional VPE 40

thinkspace.com

SEPTEMBER 7, 2012

How to Divide Equity to Startup Founders, Advisors, and Employees. 20 Aug 2011 | 33 Comments | posted by Peter Chee | in entrepreneurship , funding. Equity for Founders. From there you can get the percentage of equity. Equity for Board of Directors and Advisory Board. Equity for Employees. Office Space.

Equity 62

Equity Employee Founder CTO Hire 62

Both Sides of the Table

APRIL 25, 2011

A great recent example of this was a successful group of entrepreneurs who had created a company that will do $10-12 million in revenue at their system integration business (read: services business) in 2011 after having done $5 million or so in 2010 and $2-3 million in 2009. That is $12 million in profits over 3 years.

Silicon Valley 332

Silicon Valley IP Dividend Finance 332

www.mattbartus.com

DECEMBER 9, 2012

If you are a company that is fundraising, keep in mind that there are a few different levers you can pull to change the amount of dilution that the founders will experience. Let’s say you receive a term sheet for a $1 million investment at a $3 million fully diluted pre-money valuation, and you’re kind of disappointed.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

K9 Ventures

MARCH 23, 2011

I may be well be in the minority in the Valley to think this way — especially so as a seed stage investor — but I have a strong preference for doing priced equity rounds for funding companies at any stage. It is in essence equivalent to being a Liquidation Preference that is typically seen in a preferred equity financing.

Pre-Money Valuation 132

Pre-Money Valuation Valuation Equity Liquidation Preference 132

www.quora.com

SEPTEMBER 22, 2011

Type to Add and Search Questions; Search Topics and People Startups Startup Compensation Entrepreneurship Compensation Stock Options Major Internet Companies Silicon Valley Why is there such a large founder to early employee equity drop-off? This ties into this Paul Graham article: [link] /equity.

Equity 40

Equity Employee Founder Cofounder 40

The Equity Kicker

MAY 31, 2016

Looking at 2011 and 2012 the top 100 investments created c$10-15bn in value. The dangerous thing for early stage investors is dilution by later stage investors. Their advice to LPs is to catch these distributed returns by investing in emerging managers outside of traditional US venture heartlands.

Venture Capital 60

Venture Capital Early Stage Dilution Later Stage 60

Lightspeed Venture Partners

OCTOBER 22, 2012

The founders have more demand than they know what to do with, and want to raise $55k for 5% equity in the company to buy a second truck. The founders focused too much on dilution and on Barbara’s clever ideas on a dimension (marketing) that was not critical to the business. In 2011 they did $100k in sales and $40k in profits.

Pre-Money Valuation 101

Pre-Money Valuation Valuation Dilution Differentiation 101

Startup Company Lawyer

JANUARY 31, 2011

On January 28, 2011, Yuri Milner and SV Angel announced that their Start Fund would offer all Y Combinator companies $150K in convertible debt. Optional equity conversion: on other equity financings with no conversion discount and no price cap. I don’t know how to get a better deal than this.).

Preferred Stock 60

Preferred Stock Liquidation Preference IPO Common Stock 60

ithacaVC

FEBRUARY 23, 2011

The MCOP can serve a critical role as founders and other management team members are diluted down by rounds of financing or if their equity is not in the money. Remember VC = OB (see earlier post from February 18, 2011). Anyway, good point to consider and netting out equity value from a MCOP payout accomplishes this.

Liquidation Preference 55

Liquidation Preference Management Preferred Stock Dividend 55

David Teten

DECEMBER 2, 2019

And of course, effectively all venture capitalists are going to require some equity for their investment. I’m now researching non-dilutive funding for Action Tank , a startup I’m gestating to “Make America Functional Again”. I emphasize my focus here is organizations which are backing for-profit companies and do not take equity.

Technical Review 60

Technical Review SBIR Dilution Silicon Valley 60

Scott Edward Walker

APRIL 9, 2012

Part 3 will cover certain special issues, such as (i) what happens if the startup is acquired prior to the note’s conversion to equity? (ii) ii) what happens if the maturity date is reached prior to the note’s conversion to equity? A convertible note is short-term debt that converts into equity. What is a Convertible Note?

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

crowdSPRING Blog

AUGUST 7, 2011

In addition, as long as investors can earn higher returns on T-notes, they will expect higher returns from alternative investments in equities and VC’s may follow suit for similar reasons and expect a higher IRR from their invest,ends in new ventures. Three economic trends for 2011 (fueled by startup goodness).

Small Business 86

Small Business IRR Government United States 86

The Equity Kicker

JULY 4, 2012

Regular readers will be well aware that through 2011 and into early 2012 Nicholas Lovell and I were writing a series of 50 blog posts designed to help entrepreneurs with the fundraising process, and that we intended to publish them in book format once we were finished.

Venture Capital 107

Venture Capital Due Diligence Participating Preferred Dilution 107

Agile VC

JULY 11, 2012

in equity & loans which was ultimately worth >170x ($355M) when DEC went public about a decade later. Should there be a notion of “founder equity” for those individuals who put in the hard work to start a firm and build the brand? © 2011 GenuineVC - All rights reserved. Previous Entries.

Silicon Valley 240

Silicon Valley Carried Interest Cofounder Boston 240

Professor VC

JANUARY 17, 2008

There needs to be enough equity to go around for founders, early investors, later investors, and employees. ► 2011. (7). However, there was not any interest on the other side in debating me in front of the group of entrepreneurs, so Ill have to do it here. Older Post. Subscribe to: Post Comments (Atom). Twitter Updates.

Pre-Money Valuation 28

Pre-Money Valuation Angel Investor Angel Groups Valuation 28

Professor VC

JUNE 20, 2011

Monday, June 20, 2011. But of course, the model had us requiring only $10M equity to breakeven and to achieve $185M in revenues in 2008 (the magic Year 5 in all business plans). June 21, 2011 2:32 PM. June 21, 2011 4:21 PM. ▼ 2011. (7). ProfessorVC. The last blogger in Silicon Valley. How much is enough?

San Jose 28

San Jose Angel Investor Term Sheet Venture Capital 28

The Next Web

OCTOBER 3, 2012

In early 2011, I wrote a post, Startups: Not for the faint of heart , that discussed Parse.ly’s survival through a one-year bootstrapping period after Dreamit Ventures Philly ’09. Note: I’m not talking about equity. If you’re only doing a startup, then if the startup fails, you fail.

Cofounder 155

Cofounder Technical Cofounder Technical Review Software Review 155

maplebutter.com

JANUARY 8, 2013

Ideally you can pay them based + equity so that you’ll get their attention and focus on the project. 2) Co-Founders are the largest form of dilution (if you’re raising) 3) Everything around LeanStartup / Customer Development 4) Understand the micro economics of your business early. Offer equity to a programmer? A few nuggets.

Technical Review 44

Technical Review Startup Cofounder Software Review 44

Altgate

MAY 24, 2012

Mark Zuckerberg and his executive team have been extremely successful at retaining equity in their company. On the other hand, they are also understandably greedy about maintaining a high equity stake, by minimizing their dilution. Noam Wasserman and myself. But how well do most other founders do? As shown in Figure 9.5

Pre-Money Valuation 43

Pre-Money Valuation Cofounder Dilution Valuation 43

Reid Hoffman

JUNE 8, 2021

Yeah, that was 2011, that Churchill event. If I could add one more bonus idea, this is if you’re incorporating your company, I would think about taking 1% or 2% equity and setting it aside for other stakeholders. And I made a decision not to do an equity round, because I thought it would be a down round. RH: Exactly.

Silicon Valley 69

Silicon Valley Hosting Rhode Island Design 69

Reid Hoffman

JUNE 8, 2021

Yeah, that was 2011, that Churchill event. If I could add one more bonus idea, this is if you’re incorporating your company, I would think about taking 1% or 2% equity and setting it aside for other stakeholders. And I made a decision not to do an equity round, because I thought it would be a down round. RH: Exactly.

Silicon Valley 36

Silicon Valley Hosting Rhode Island Design 36

Life Beyond Code

SEPTEMBER 27, 2011

Once the $1 million revenue milestone is crossed, entrepreneurs find it easier to find additional customers, manage working capital, and access funding, whether it is credit or equity. In my roundtables, the vast majority of entrepreneurs I work with are in this rather vulnerable pre $1 million revenue stage.

Programming 116

Programming Silicon Valley Bootstrapping Technical Review 116

Up and Running

DECEMBER 9, 2014

We did GroupMe for around three years, turned into a company and ended up selling it to Skype for around eighty million dollars and that was in 2011. Jared could you quickly tell us what are the pros and cons of a bank loan versus an investment for equity? The pro is that it’s cheap capital and it’s not diluted.

Small Business 95

Small Business Finance Forecast Metrics 95