Both Sides of the Table

SEPTEMBER 18, 2014

And now I have to explain to team that they’re taking more dilution than they expected if we do a down round. A down round? These are all real conversations. What if when you have that conversation you don’t agree? Raising lower seems kind of like something is wrong. Me: More dilution?

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Both Sides of the Table

MAY 30, 2018

Of course valuation is in the eye of the beholder but if that VC thinks your last round valuation was way too high then he or she is more likely to politely pass rather than try and talk down your valuation now. VCs hate “down rounds” and many don’t even like “flat rounds.” There are some simple reasons.

Valuation 324

Valuation Post-Money Valuation Pre-Money Valuation Cofounder 324

Startup Professionals Musings

JANUARY 27, 2012

This clause attempts to protect the conversion price of stock of Angel investors, prior to additional financing, from being reduced to a price equal to the price per share paid in a later “down” round. These “IV drip” financings may reduce risk for investors, but put more pressure on founders. Anti-dilution protection.

Term Sheet 223

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 223

Feld Thoughts

APRIL 21, 2016

Also, they have a strong belief that any sign of weakness (such as a down round) will have a catastrophic impact on their culture, hiring process, and ability to retain employees. Their own ego is also a factor – will a down round signal weakness?

Marketing 70

Marketing Down Round Startup IRR 70

Both Sides of the Table

FEBRUARY 4, 2016

note: to follow realtime conversations & engage with me on Facebook you can follow me here: https://www.facebook.com/msuster ]. My conversations with LPs tell me that 2016 is one of their business calendars in years and unless we see an unexpected, sudden downturn expect the market size in 2016 to remain at current levels or increase.

LP 150

LP Valuation Burn Rate Pre-Money Valuation 150

Startup Professionals Musings

SEPTEMBER 14, 2010

This clause attempts to protect the conversion price of stock of angel investors, prior to additional financing, from being reduced to a price equal to the price per share paid in a later “down” round. These “IV drip” financings may reduce risk for investors, but put more pressure on founders. Anti-dilution protection.

Term Sheet 227

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 227

Gust

SEPTEMBER 17, 2014

And now I have to explain to team that they’re taking more dilution than they expected if we do a down round. A down round? These are all real conversations. What if when you have that conversation you don’t agree? But people seem pretty focused on that number. Me: More dilution? We never thought about it.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Gust

OCTOBER 17, 2011

This clause attempts to protect the conversion price of stock of angel investors, prior to additional financing, from being reduced to a price equal to the price per share paid in a later “down” round. These “IV drip” financings may reduce risk for investors, but put more pressure on founders. Anti-dilution protection.

Term Sheet 158

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

ithacaVC

NOVEMBER 14, 2014

Here is Walla’s post: I can’t tell you how many times I’ve had this conversation. A founder is about to raise their first round and asking me how to value their company. [1]. Hopefully, it’s in high demand for good reasons, otherwise you risk a down round in the future. Don’t risk a down round.

Valuation 69

Valuation Startup Down Round Early Stage 69

Bryce Dot VC

APRIL 19, 2016

Instead of their intended use of kicking the hard conversation of setting a valuation down the road, founders had come to believe that setting a high cap today meant that they must clear that cap to sufficiently reward themselves and their seed backers.

Valuation 40

Valuation Down Round Equity Conversion 40

Business Plan Blog

OCTOBER 8, 2013

This may be the number of sales representatives, website traffic and conversion rates, size of email lists, number of licensees, etc. Additionally, if/when you need to raise the next round of capital, you dont want to risk taking in money in a down round because you overvalued the company early on. Ignoring Milestones.

Business Plan 67

Business Plan NDA Exit Strategy Valuation 67

Steve Blank

NOVEMBER 2, 2009

In times when venture capital is hard to get, investors extract high costs for failure (down-rounds, cram downs , new management teams, shut down the company.) I see a lot of early-stage entrepreneurs waste too much time chasing money rather than figuring this out first.

Lean 244

Lean Silicon Valley Startup RSS 244

Rob Go

JUNE 1, 2016

Where I think funds do start having hard conversations around follow-ons is when they need to lead inside rounds or protect themselves in down rounds. This might not be true of all VC funds, and I know a number of funds that have a mantra that they treat follow-on rounds like “a new deal”.

Term Sheet 28

Term Sheet Portfolio Valuation Warrant 28

Reid Hoffman

JUNE 8, 2021

You can listen to the conversation on the Greymatter podcast here. And I made a decision not to do an equity round, because I thought it would be a down round. And I said, I think it’s going to be a down round, because people are scared. I always saw it as the opposite.”. EPISODE TRANSCRIPT.

Silicon Valley 69

Silicon Valley Hosting Rhode Island Design 69

Both Sides of the Table

JUNE 5, 2016

If a company raised a big B and/or C round and needs more money the late stage guys have the bucks and that early-stage guys often don’t. So in companies with high burn rates you can find the following: Seed funds wanting to sell the company / get a return or growth investors pushing for a recap or massive down round.

Venture Capital 150

Venture Capital Silicon Valley Burn Rate LP 150

Bryce Dot VC

APRIL 21, 2016

But his post was detailed and thorough and took the conversation to a level few have pressed. If you read this post your takeaway might be that founders egos are crushed, employees options are worthless and Investors have very difficult conversations with their LPs. That about covers it, right? What happens when they go under?

Silicon Valley 40

Silicon Valley Dilution Term Sheet Down Round 40

Reid Hoffman

JUNE 8, 2021

You can listen to the conversation on the Greymatter podcast here. And I made a decision not to do an equity round, because I thought it would be a down round. And I said, I think it’s going to be a down round, because people are scared. I always saw it as the opposite.”. EPISODE TRANSCRIPT.

Silicon Valley 36

Silicon Valley Hosting Rhode Island Design 36

www.quora.com

SEPTEMBER 22, 2011

Even if your company succeeds, there is absolutely no guarantee your equity will not be wiped out in a down round. Even better, executives will negotiate the acquisition price of their company down; in exchange for a larger amount of post-acquisition retentio n equity and accelerated vesting.

Equity 40

Equity Employee Founder Cofounder 40