Gust

OCTOBER 17, 2011

Entrepreneurs sometimes assume an initial agreement with an angel is a commitment, so they start spending before any money is received. It’s true that angel investors typically do not present entrepreneurs with overly complicated deal structures, especially when compared to venture capitalists. Anti-dilution protection.

Term Sheet 158

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 158

Both Sides of the Table

MAY 30, 2018

One of the hardest things about the fund-raising process for entrepreneurs is that you’re trying to raise money from people who have “asymmetric information.” As an entrepreneur it can feel as intimidating as going to buy a car where the dealer knows the price of every make & model of a car and you’re guessing at how much to pay.

Valuation 324

Valuation Post-Money Valuation Pre-Money Valuation Cofounder 324

Tim Keane

JANUARY 12, 2010

Term-sheets and Valuations: Thinking about Negotiations. Please see later version of this post on May 16, 2010 Entrepreneurs are often not experts in the area of term-sheet negotiations and all of the surrounding issues.   Investors sometimes “present” the terms they’d like and expect the entrepreneurs to react.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Gust

OCTOBER 21, 2011

This week we move on to something near and dear to the hearts of entrepreneurs and investors alike: The exit, more formally known as a “ liquidity event.” In Parts II and III, we looked at commonly used mandatory and voluntary conversion language in convertible notes.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

ithacaVC

JUNE 3, 2015

Quick explanation: a note with a valuation cap provides that upon a subsequent conversion of the note to equity resulting from a subsequent equity round (let’s say a Series A round), the note holder either converts at a price equal to (i) a stated discount to the Series A price OR (ii) a price determined using the valuation cap.

Liquidation Preference 40

Liquidation Preference Pre-Money Valuation Dilution Valuation 40

Both Sides of the Table

APRIL 14, 2010

It’s meant to be a bit provocative but the reality is that I give this advice to entrepreneurs all the the time and I usually leave the “e&# off of the end. I learned all of this myself on your side of the table raising money at my first company. The list goes on. Legacy deals have “hair.&#. But pass they will.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Pre-Money Valuation 289

Both Sides of the Table

SEPTEMBER 5, 2012

My initial reaction to Adeo when we spoke was that while it may have solved some issues (debt versus equity) it didn’t solve the ones that I’ve been warning entrepreneurs about most loudly. A standard entrepreneur retort I heard back then (2008-09) was “I don’t know what my company is worth now.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Feld Thoughts

JULY 29, 2011

Finance Friday’s gets off the ground with today’s post by introducing you to an imaginary startup, the entrepreneurs that we’ll being following throughout the series, and their first challenges: splitting up the founders’ equity and addressing the case where one of the founders provides the initial seed capital for the business.

Equity 137

Equity Finance Pre-Money Valuation Denver 137

K9 Ventures

MARCH 23, 2011

The founders’ interest is to maximize the valuation of the company at the time of a follow-on financing, thereby minimizing founder dilution. However, the note holders’ motivation is to minimize the valuation of the company so that the dollars committed as part of their note convert in to as large a piece of the company as possible.

Pre-Money Valuation 132

Pre-Money Valuation Valuation Equity Liquidation Preference 132

Gust

OCTOBER 12, 2011

In Part II, we looked at the mandatory conversion language that is at the heart of any convertible debt financing. 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

Seeing Both Sides

JULY 15, 2009

A typical start-up company will do 2-4 venture capital financings before a successful exit (or, conversely, an ignomious ending). Thus, the universe of financings that even the most experienced entrepreneurs get directly exposed to is typically 5-10 financings over a 15-20 year career. What is the promote?

Pre-Money Valuation 49

Pre-Money Valuation Option Pool Stock Options Post-Money Valuation 49

Scott Edward Walker

APRIL 9, 2012

Part 2 will discuss the two most significant issues for founders in connection with the issuance of convertible notes: (i) the valuation cap and (ii) the discount (and how they interrelate). 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)

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Both Sides of the Table

FEBRUARY 25, 2010

A reminder that it is important for all entrepreneurs is to remember to be careful about “deal drift.” I think the perfect saying to have as a reminder is “time is the enemy of all deals,” or as my wife is all too tired of hearing me say, “Don’t pop the champagne until the ink is dry on the contract and the money is in the bank.”.

Technical Review 301

Technical Review Term Sheet Due Diligence Venture Capital 301

thestartuplawyer.com

FEBRUARY 24, 2010

Entrepreneurs often believe their startup company faces legal threats from only external sources. do not think being friends or relatives reduces the need for these difficult and/or awkward conversations. Because now you have more to lose than just a company and your (or someone else’s) money.

Cofounder 40

Cofounder Founder Preferred Stock Startup 40

venturehacks.com

OCTOBER 21, 2010

If you don’t keep your eyes on the option pool while you’re negotiating valuation, your investors will have you playing (and losing) a game that we like to call: Option Pool Shuffle You have successfully negotiated a $2M investment on a $8M pre-money valuation by pitting the famous Blue Shirt Capital against Herd Mentality Management.

Option Pool 68

Option Pool Pre-Money Valuation Dilution Warrant 68