Both Sides of the Table

JUNE 17, 2017

70–80% of the costs of most startups are employee costs so what you’re really talking about when a company is unprofitable is that they are growing their staff ahead of their revenue. They don’t want high burn rates but they will never fund slow growth. The Nature of Revenue Matters Of course revenue alone won’t tell you enough.

Stock Options 227

Stock Options Startup Dilution Venture Capital 227

Bryce Dot VC

FEBRUARY 6, 2017

And not just a token “ramen” level of profitability: The startup is profitable, with January revenue of 10x its burn rate and sales expected to be in the millions for the quarter. Reliance on revenue keeps them close to their customers.

Cap Table 40

Cap Table Burn Rate Dilution Bootstrapping 40

Both Sides of the Table

FEBRUARY 8, 2016

The startup industry may be “resetting,” which doesn’t mean a “crash” but rather just a resetting of valuations, timescales, winners/losers, capital sources and the relative emphasis of growth rates vs. burn rates. Optimize for a W more than % dilution in these circumstances.

Burn Rate 150

Burn Rate Cap Table Startup Balance Sheet 150

dondodge.typepad.com

JANUARY 15, 2011

The second and third rounds of funding take additional shares of equity and dilute existing investors and founders. They start out higher and get diluted down to these levels after multiple rounds of financing; CEO - 4% VPs - 1% each Director level -.5% How much money should I take? 5% Managers -.25% 25% Individuals -.05

Equity 40

Equity Employee Dilution Valuation 40

BeyondVC

JUNE 11, 2007

If you burn through your cash and can’t make the monthly principal and interest payments, your lender can take over your company as their debt is usually secured against your company and intellectual property.

Intellectual Property 60

Intellectual Property Covenant Warrant Equity 60

abovethecrowd.com

APRIL 20, 2016

The pressures of lofty paper valuations, massive burn rates (and the subsequent need for more cash), and unprecedented low levels of IPOs and M&A, have created a complex and unique circumstance which many Unicorn CEOs and investors are ill-prepared to navigate. It will also minimize future dilution. ” Go public.

IPO 40

IPO Term Sheet Valuation Silicon Valley 40

Professor VC

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). So what does this all mean. As I said up front, I have mixed emotions about the financing. Can Entrepreneurship Be Taught? ► October. (1). Watch Out for the Red W(h)ine.

San Jose 28

San Jose Angel Investor Term Sheet Venture Capital 28

Both Sides of the Table

MARCH 30, 2016

Invoca was raising at the tail end of this market phenomenon at this time doing tens of millions in SaaS recurring revenue and growing at a nice clip. Here are some stats to give you a sense: • Year over year revenue grew 51% in 2015 and we’re forecasting the same again for 2016. forward revenue for public comps (comparable stocks).

Balance Sheet 150

Balance Sheet Burn Rate Valuation Forecast 150

www.paulgraham.com

APRIL 28, 2010

There never has to be atime when you have no revenues. Whatkind of anti-dilution protection do they want? When you have a high "burn rate," youre alwaysunder time pressure, which means (a) you dont have time for yourideas to evolve, and (b) youre often forced to take deals you dontlike. Hell if they know.In

Technical Review 76

Technical Review Startup Software Review Vesting 76

Both Sides of the Table

FEBRUARY 14, 2016

Huge funding increases lead to massive wage inflation, rent inflation and thus higher burn rates. forward revenue for SaaS businesses when in the years before it had been less than 5x. Plus, down rounds trigger anti-dilution provisions. You’ll see here that in 2007 people were willing to pay 7.7x

Valuation 150

Valuation Down Round Startup Later Stage 150