Conversion, Finance, Option Pool and Valuation

Venture Deals 4e German Edition

Feld Thoughts

FEBRUARY 28, 2023

Corporate law: In Germany, most companies in general and most VC-financed companies are structured in the legal form of a “Gesellschaft mit beschränkter Haftung” (GmbH). Often, this integration results in VC-financed GmbH companies having little to do with the GmbH as envisaged by the law.

Germany

Germany Liquidation Preference Option Pool Advisory Board

The Option Pool Shuffle

venturehacks.com

OCTOBER 21, 2010

SUPPORTED BY Products Archives @venturehacks Books AngelList About RSS The Option Pool Shuffle by Nivi on April 10th, 2007 “Follow the money card!&# – The Inside Man, Three-Card Shuffle Summary: Don’t let your investors determine the size of the option pool for you. Don’t lose this game.

Option Pool

Option Pool Pre-Money Valuation Dilution Warrant

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

Tim Keane

JANUARY 12, 2010

Term-sheets and Valuations: Thinking about Negotiations. I’ve sat down with entrepreneurs and a copy of a term sheet guide I like [ “Term Sheets & Valuations - A Line by Line Look at the Intricacies of Venture Capital Term Sheets & Valuations ” by Alex Wilmerding, Aspatore Press.] The Valuation Question.

Term Sheet

Term Sheet Valuation Dividend Liquidation Preference

Unintended Consequences: When SAFE and Convertible Notes Go Awry

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. But it is also a topic that many find esoteric and difficult to grasp.

Post-Money Valuation

Post-Money Valuation Valuation Cap Table Covenant

Cap Table Explained — What is it and How to Maintain it for Investors

Up and Running

SEPTEMBER 20, 2021

For instance, the cap table will help you with various possibilities while running business activities like available options and pre-money valuations faster. In case this option is not available, you may quickly discover how much you will give and calculate the percentage you are ready to offer. Total share ownership.

Cap Table

Cap Table Pre-Money Valuation Stock Options Option Pool

What is it Like to Negotiate a VC Round?

Both Sides of the Table

JUNE 5, 2015

I am reminded of this problem every time my firm does a financing where a note went before us but more specifically I was reminded by this great post by Brad Feld to talk about the pre-money vs. post-money conversion issue. In the old days VCs funded off of a “pre-money” valuation. How much is in the option pool?

Pre-Money Valuation

Pre-Money Valuation Option Pool Post-Money Valuation Dilution

Founders Should Set Aside More Equity for Their Team & “Split the Pain” With Investors

Hunter Walker

AUGUST 7, 2017

But employee option pool is important enough that I wanted to briefly expand upon my comment above. No one wants to run out of equity pool midway between financings (and larger seed rounds these days usually means more hiring pre-A)! As you can see, Weekend VC Twitter gets pretty wild and crazy!!!!

Equity

Equity Pre-Money Valuation Option Pool Founder

VCs eating our own dog food: Using technology and analytics to make better investments

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. I have not found a thorough platform for due diligencing all aspects of a potential investment.

Technical Review

Technical Review Software Review Analytics Private Equity

Building Convertible Debt into the Premoney Valuation

ithacaVC

JANUARY 24, 2013

Having a relatively small about of convertible debt on your balance sheet prior to your Series A financing is not a bad thing. One interesting point that comes up a lot is how to factor the convertible debt into the premoney valuation of the Series A round. And let’s assume that the debt has a 20% conversion discount.

Valuation

Valuation Balance Sheet Option Pool Dilution

Cap Table Clean Up

ithacaVC

DECEMBER 13, 2013

The share price is calculated by taking the pre-money valuation and dividing it by the number of shares outstanding pre-money. So Share Price (SP) = Pre-Money Valuation (PMV) / Shares Outstanding (SO). On a fully diluted pre-money basis, that would mean the option pool represents 14.5% (356,758/2,456,758) of the cap table.

Cap Table

Cap Table Pre-Money Valuation Option Pool Liquidation Preference

How to Evaluate an Offer from a Startup Incubator

The Startup Lawyer

FEBRUARY 4, 2011

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. The “revised for the cash investment only&# pre-money valuation is $600,000. (2)

Incubator

Incubator Pre-Money Valuation Option Pool Advisory Board

In VC deals, Price Doesn't Matter - But The "Promote" Does

Seeing Both Sides

JULY 15, 2009

VCs have an unfair advantage when it comes to financings. A typical start-up company will do 2-4 venture capital financings before a successful exit (or, conversely, an ignomious ending). In contrast, the typical venture capitalist, either individually or across their partnership, will do 5-10 financings in any given year.

Pre-Money Valuation

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

Everything you ever wanted to know about advisors: Part 2.

venturehacks.com

MARCH 21, 2008

If an advisor can uncork a million dollars of your company’s latent value with 15 minutes of conversation or a single introduction, you should pay him appropriately. Many advisors want options they can exercise immediately —that’s fine. They’re not paid for their inputs—they’re paid for their outputs.

Advisory Board

Advisory Board Cap Table Vesting Equity

Why Co-Founders Are a Startup's Biggest Liability | The Startup Lawyer

thestartuplawyer.com

FEBRUARY 24, 2010

do not think being friends or relatives reduces the need for these difficult and/or awkward conversations. About the Author Ryan Roberts is a startup lawyer and represents technology companies through all phases of the startup process, including incorporation, seed & venture financings, and exit transactions.

Cofounder

Cofounder Founder Preferred Stock Startup

StartUpRoar