View from Seed

SEPTEMBER 23, 2019

To provide relevant perspective, listing past convertible note(s) and/or equity financing(s) including total round size and valuation (caps) is helpful. Previous venture firms’ specific involvement on the cap table should be noted here, though. What not to include is directly stating valuation expectations.

Cap Table 211

Cap Table Seed Stage Valuation Dilution 211

Hunter Walker

AUGUST 8, 2023

At the time, this is last quarter and the stock market has trended upwards nicely since then (a potential leading indicator of private tech valuations), we all agreed venture portfolios were probably still 25-40% overvalued. Valuations. Whatever gets reported is just the tip of the iceberg.

Portfolio 98

Portfolio Cap Table LP Valuation 98

The Next Web

OCTOBER 7, 2013

Cap tables sound intimidating. As an aside for founders, there is an interesting approach on how to arrive at equity offers outlined by Fred Wilson that may be worth checking out once there is a sense of valuation. As stated earlier, investors will dilute ownership upon nearly every round of financing.

Engineer 129

Engineer Dilution Option Pool Vesting 129

OnlyOnce

JULY 30, 2020

Or maybe when you look two years out you realize that your company is at its highwater mark in valuation, so it becomes a timing issue. Sometimes you can have a major internal problem related to the cap table–a founder with a lot of stock needs liquidity or you need to push this person out of the company.

Cap Table 48

Cap Table Institutional Investors Startup Early Stage 48

Hunter Walker

SEPTEMBER 15, 2023

So when I tell you what I’m seeing in venture financing these days if you disagree with me, it might just be that we’re touching different parts of the elephant. Semil asserts, Seed-stage valuations have generally been left-unchanged, and I could argue even they’ve gone up since the beginning of 2022. It’s just math.

Cap Table 93

Cap Table Valuation Salary Seed Stage 93

David Teten

DECEMBER 3, 2019

Some notable metrics are revenue growth rates, free cashflow, leverage ratios, historical financing amounts, returns on marketing spend, customer acquisition costs, lifetime value of customers, customer churn rates, and team social scores. 645 Ventures released a cap table simulator to help level the playing field.

Technical Review 78

Technical Review Software Review Analytics Private Equity 78

Berkonomics

AUGUST 3, 2023

Some businesses require very little capital and the founder can self-finance the enterprise and retain 100% of its ownership and control from ignition through liquidity event (startup through sale). And even with the significant cost of credit card debt, many entrepreneurs aggressively use existing cards to finance a startup.

Private Equity 118

Private Equity Valuation Cap Table Accredited Investor 118

ReadWriteStart

SEPTEMBER 2, 2011

While certainly not every business needs to raise venture financing, it is the path for many high-growth technology startups. Remember, once you screw up your Cap Table it's really hard to go back. This can be an intimidating experience so I've put together a list of five tips for raising a venture round.

Cap Table 125

Cap Table Term Sheet Liquidation Preference Technical Review 125

Pascal's View

JULY 9, 2017

This is a fundamental issue that does, indeed, boil down to understanding the post-money valuation of a company. At its core, this issue points to the lack of understanding about the importance of post-money valuation by both entrepreneurs and investors. Many entrepreneurs lose track of what they have been cooking up in the cap table.

Post-Money Valuation 49

Post-Money Valuation Valuation Cap Table Covenant 49

David Teten

MARCH 18, 2021

Valuation: $1M – $3M. Revenue-Based Finance and Flexible VC investors invest using “alternative VC” structures, as opposed to conventional preferred equity and convertible notes. “Index the Best” – Only invest in companies that have brand name firms on the cap table and/or as leads.

Technical Review 78

Technical Review Cofounder Venture Capital Deal Flow 78

Austin Startup

AUGUST 20, 2017

Your Cap Table is something that deserves constant care and attention. Keep the valuations consistent with company progress. Messy cap tables can come back to haunt you when you do a financing or sell the company. You will do yourself a great favor if you can maintain some uniformity in that endeavor.

Technical Review 48

Technical Review Software Review Cap Table Securities and Exchange Commission 48

Altgate

JUNE 25, 2012

Instead, the dead equity languishes on the cap table, weighing down the startup and making it harder to attract and motivate the people who could impact its growth. We took the percentage of equity held by former employees and founders and multiplied it by the startup’s valuation during its most-recent round of financing.

Equity 44

Equity Vesting Cap Table Technical Review 44

View from Seed

OCTOBER 15, 2014

Examples of housekeeping include the following list, though not every item will appear every time: Finance: Cash out date, burn rate, 409A valuation, cap table, common/preferred stock dashboard. Finance is mission critical, for instance – it just appears on a recurring basis.

Seed Stage 331

Seed Stage Cap Table Metrics Burn Rate 331

View from Seed

DECEMBER 11, 2019

Yes, there are intermittent points of feedback along the way, like valuation marks from subsequent rounds of financing. The reasons for Venture Capital Partner turnover are structural given the dynamics of the business, and so I don’t see them going away anytime soon.

Venture Capital 204

Venture Capital Cap Table Partner LP 204

www.readwriteweb.com

DECEMBER 29, 2011

While certainly not every business needs to raise venture financing, it is the path for many high-growth technology startups. Remember, once you screw up your cap table it's really hard to go back. This can be an intimidating experience so I've put together a list of five tips for raising a venture round.

Cap Table 47

Cap Table Term Sheet Liquidation Preference Technical Review 47

Altgate

AUGUST 25, 2012

Instead, the dead equity languishes on the cap table, weighing down the startup and making it harder to attract and motivate the people who could impact its growth. We took the percentage of equity held by former employees and founders and multiplied it by the startup’s valuation during its most-recent round of financing.

Equity 28

Equity Vesting Cap Table Technical Review 28

OnlyOnce

JULY 26, 2018

Or you negotiate the highest possible valuation from a new lead investor, only to discover that new lead investor, now on your Board, expects you to triple it in four years and is way out of alignment with the rest of your cap table. On the other side, what’s an example of a “good” loss?

Cap Table 61

Cap Table Lead Investor Valuation Reputation 61

Berkonomics

JUNE 8, 2017

Some businesses require very little capital and the founder can self-finance the enterprise and retain 100% of its ownership and control from ignition through liquidity event (startup through sale). And even with the significant cost of credit card debt, many entrepreneurs aggressively use existing cards to finance a startup.

Private Equity 106

Private Equity Valuation Cap Table Accredited Investor 106

keen.io

FEBRUARY 5, 2013

To begin answering this question, I started on a quest to understand startup financing. This book was written to help founders negotiate financing with investors, but it really helped me understand Keen’s financial situation, and I highly recommend it to anyone joining a startup. First, I read Venture Deals by Brad Feld.

Salary 50

Salary Equity Startup San Francisco 50

The Equity Kicker

MARCH 21, 2017

We need massively successful companies like Facebook, and even Uber to generate growth, employment and the profits needed in the venture industry to finance the next generation of companies. Recognise that the system is imperfect, but not broken. Some unicorns are bad, but lots are good. Or at least almost as much.

San Francisco 90

San Francisco Cap Table Angel Investor Valuation 90

ithacaVC

FEBRUARY 1, 2018

It is highly typical for a startup to have small investors on its cap table. The treatment of the friends, family and angels (FFA) as the startup matures and raises larger rounds of financing over time is interesting. In short, they own a smaller piece of a larger valuation pie. causing valuation bumps.

Preemptive Right 45

Preemptive Right Cap Table Valuation Dilution 45

OnlyOnce

JULY 26, 2018

Or you negotiate the highest possible valuation from a new lead investor, only to discover that new lead investor, now on your Board, expects you to triple it in four years and is way out of alignment with the rest of your cap table. On the other side, what’s an example of a “good” loss?

Cap Table 48

Cap Table Lead Investor Valuation Reputation 48

Feld Thoughts

JULY 14, 2015

A company raises $1m of seed money from angels in a convertible note with a $6m cap. Assuming equity is raised at or above that cap, the total dilution, before the new money, is 16.6% (equivalent to an equity financing of $1m at a $6m post money valuation. So they recapitalize the company.

Recapitalization 70

Recapitalization Pre-Money Valuation Post-Money Valuation Angel Investor 70

Eric Friedman

JUNE 27, 2016

I have seen what I call “predatory advisors” come in and really mess up a cap table by promising big intros and sales contracts only to disappear after the first 6-12 months. So what most companies do is get FMV from a 409A valuation and use that for their strike price. LAWYERLY DISCLAIMER: This is not legal advice.

Equity 98

Equity Vesting Cap Table Common Stock 98

ithacaVC

APRIL 5, 2011

I am a huge fan of simple cap tables. A cap table is a written record (in Excel, for example) of who owns stock in your company. Additionally, at the seed stage, investors and the company might want to issue the investors convertible debt to avoid the question of valuation. So, we needed a solution.

Common Stock 45

Common Stock Stock Cap Table Preferred Stock 45

genylabs.typepad.com

SEPTEMBER 24, 2011

I wont bother going into details on start-up financing terms ( see this post for an overview of typical VC terms) except to say if you dont know and understand: the firms cap table and valuation. Not all start-up stock is created equally. what kind of stock you are getting. what your rights are. Business Models.

Equity 40

Equity Technical Review San Jose Stock 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. The terrible consequence is that some great companies struggle to get financed. Start early.

Burn Rate 150

Burn Rate Cap Table Balance Sheet Valuation 150

Both Sides of the Table

SEPTEMBER 15, 2010

But knowing the right people and knowing a market only works well for angel investors in bullish tech markets in which IPO’s happen quickly (97-99) or where larger companies are actively scooping up little tiny companies at sub $50 million valuations to drive innovation (05-08, 10-?). So where are we now? It’s hard to say.

Angel Investor 284

Angel Investor Early Stage Cap Table Deal Flow 284

venturehacks.com

MARCH 21, 2008

And that wouldn’t make any sense—our valuation already takes the investor’s value-add into account.&# But if the balance is significant, you need an argument that makes sense to the other investors or they will also ask for advisory shares and lower your effective valuation: “We want to hire him as an advisor.

Advisory Board 44

Advisory Board Cap Table Vesting Equity 44

ithacaVC

SEPTEMBER 10, 2012

For example, let’s say Exec X is asking for 10% of the fully diluted cap table via a stock grant or option grant that is non-dilutable. So, the founders get diluted by the triggering equity issuance (like a financing) and then they are diluted again by Exec X’s non-dilution protection.

Dilution 53

Dilution Employee Cap Table Stock 53

Rob Go

FEBRUARY 24, 2014

Basically, this means that another VC invests at a higher valuation, making the early VC seem really smart and able to show unrealized gains. This financing probably came out the Sequoia US Venture fund and Growth fund, which are separate entities, but I believe represent a pool of capital somewhere in the neighborhood of $1.2B.

Cap Table 78

Cap Table Valuation Finance Institutional Investors 78

Feld Thoughts

JUNE 2, 2015

We’ve been regularly running into another problem with doing a financing after companies have raised convertible notes. This can be especially confusing, and ambiguous, when there are multiple price caps. If the entrepreneur knows this and is using it proactively so they get a higher post-money valuation, that’s fair game.

Liquidation Preference 70

Liquidation Preference Cap Table Angel Investor Post-Money Valuation 70

Both Sides of the Table

SEPTEMBER 14, 2010

But knowing the right people and knowing a market only works well for angel investors in bullish tech markets in which IPO’s happen quickly (97-99) or where larger companies are actively scooping up little tiny companies at sub $50 million valuations to drive innovation (05-08, 10-?). So where are we now? It’s hard to say.

Angel Investor 152

Angel Investor Cap Table Early Stage Deal Flow 152

venturehacks.com

OCTOBER 21, 2010

Use a hiring plan to justify a small option pool, increase your share price, and increase your effective valuation. Reading on, the term sheet states, “The $8 million pre-money valuation includes an option pool equal to 20% of the post-financing fully diluted capitalization.&# Don’t lose this game. share to $1.00/share:

Option Pool 68

Option Pool Pre-Money Valuation Dilution Warrant 68

Berkonomics

JANUARY 20, 2010

Some businesses require very little capital and the founder is able to self-finance the enterprise and retain 100% of its ownership and control from ignition through liquidity event (startup through sale). And even with the significant cost of credit card debt, many entrepreneurs aggressively use existing cards to finance a startup.

Private Equity 69

Private Equity Valuation Cap Table Accredited Investor 69

This is going to be BIG.

JUNE 2, 2010

I’m sure you’ll start seeing some rounds that essentially should be B rounds according to what the current cap table looks like, except that there’s a Series A level of progress, and about a million bucks in product overspend that didn’t really lead to a business. Once you have that, keep your focus simple. Try to prove one thing.

Cap Table 106

Cap Table Seed Stage .Net Venture Capital 106

Hunter Walker

SEPTEMBER 29, 2022

As an early stage fund, often buying 10–15% of a company during its seed financing, this meant we were often being asked if we wanted to sell portions of our stakes to other approved investors (let alone the random pings from market-makers unaffiliated with the company). You don’t try to reprice the company on your own.

Venture Capital 122

Venture Capital Cap Table LP Equity 122