Both Sides of the Table

JULY 22, 2010

I couldn’t understand why they wanted so many options until a friend pointed out that this just lowered their “true&# pre-money valuation (they also asked for some sharp elbowed terms in the deal). So let’s start calling the term sheet listed pre-money valuation as the “nominal&# pre-money valuation.

Valuation 405

Valuation Liquidation Preference Pre-Money Valuation Term Sheet 405

Gust

OCTOBER 12, 2011

In my experience, a term of 12 to 24 months is common, with 12 months being on the short end. Particularly when there are multiple closings taking place over a period of months, the fuse burns awfully quickly on a 12-month note given the many competing priorities of early stage entrepreneurs.

Finance 107

Finance Term Sheet Pre-Money Valuation Early Stage 107

Gust

OCTOBER 21, 2011

Assuming a hypothetical $100,000 investment at a 10% interest rate, this kind of payoff would yield a return of $5,000 ( 5% ) six months later – not exactly the kind of return angel investors are looking for when they make risky early stage investments. a) payable upon demand as of the closing of such transaction; or. (b)

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Tim Keane

JANUARY 12, 2010

An average of these ranges results in a pre-money valuation of about $4MM.   If similarly situated companies are seeing $3.5MM pre-money valuations, this might become the target valuation.   A cumulative dividend can get to be very expensive and is not often a feature in early stage terms.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Both Sides of the Table

SEPTEMBER 5, 2012

As in, “your money into my company will convert at a 15-20% discount to the next round of capital I raise with a maximum price of $8 million pre-money valuation (or whatever the cap was).” You rarely find full ratchets in early-stage deals any more. That’s not possible.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

www.paulgraham.com

APRIL 28, 2010

A lawyer I asked about it said: When the company goes public, the SEC will carefully study all prior issuances of stock by the company and demand that it take immediate action to cure any past violations of securities laws. Angels and even VC firms occasionally do this, but they alsoinvest at later stages.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76