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

Both Sides of the Table

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
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How to Fund Your Startup Without Losing Control

Up and Running

That’s because obtaining a pre-money valuation for a concept level technology company in excess of $1 million is difficult, particularly for a startup founder without a proven track record. million early-stage raise that involved pitching to over a dozen PE firms, which took months to negotiate.

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Knowledge Is Power: Convertible Note Financing Terms, Part III

Gust

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
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How to Evaluate an Offer from a Startup Incubator

The Startup Lawyer

The following are some issues to consider and actions to take before accepting an incubator’s offer: (1) Calculate Valuation and Determine Value. Pre-money valuations startups receive from incubators are typically low…really low. 2) Scrutinize the Investment Structure.

Incubator 105
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Knowledge Is Power: Convertible Note Financing Terms, Part IV

Gust

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 mix of cash and stock) received by other equity holders in the transaction.

Finance 79
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Term-sheets and Valuations: Thinking about Negotiations - Startups.

Tim Keane

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.

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The Truth About Convertible Debt at Startups and The Hidden Terms You Didn’t Understand

Both Sides of the Table

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