Berkonomics

MARCH 30, 2010

What most managers miss is that every month cut from the time it takes to perform such tasks cuts the cost by the value of a month’s worth of fixed overhead or burn. Hedging against downturns The fight for quality.

Silicon Valley 85

Silicon Valley Burn Rate Angel Investor Down Round 85

NZ Entrepreneur

SEPTEMBER 16, 2020

For example, “How will unit cost affect our capital requirements and how will product pricing affect revenue?” It isn’t good enough to just say ‘what does halving my revenue do to the business?’ Cost of goods sold (COGS). Underestimating costs. Unexpected costs should be expected.

Startup 69

Startup Sales Cycle Down Round Revenue 69

Both Sides of the Table

SEPTEMBER 18, 2014

How will you price the next round? Your A round? Revenue multiple? Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. 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?

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Lightspeed Venture Partners

OCTOBER 7, 2012

They won a design award at a trade show, but have no revenue and no orders. As he said, “Great innovations solve problems or reduce costs. As Cuban pointed out, this is a “down round” Zomm is seeking $2M for 10% of the company, implying an $18M pre money valuation today.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

VC Cafe

FEBRUARY 27, 2024

A founder asked me what makes a $2M round “pre-seed”? especially if the startup already has a product and revenue? And why do we still sometimes hear about pre-seed rounds that look more like a series A in pricing and size? The post How the pre-seed round made a comeback in 2024 appeared first on VC Cafe.

Valuation 186

Valuation Software Review Generative AI Technical Review 186

Berkonomics

JUNE 8, 2017

For the rest of us desiring to build large, valuable enterprises quickly, the need for outside capital is high on our list of requirements and even the source for some sleepless nights as we worry over the availability and cost of capital. It is for this group that we explore the implications implicit in raising money for growth.

Private Equity 106

Private Equity Valuation Cap Table Accredited Investor 106

Both Sides of the Table

FEBRUARY 8, 2016

If you raised money in the past 2 years and have grown it is possible that your next round valuation might be flat (or lower) even though you have a higher revenue because investors may value your multiple differently. Pragmatic cost cuts are always possible and often productive. Down rounds are corrosive.

Burn Rate 150

Burn Rate Cap Table Balance Sheet Dilution 150

Gust

SEPTEMBER 17, 2014

How will you price the next round? Your A round? Revenue multiple? Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. 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?

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

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.) Sales people cost money, and when they’re not bringing in revenue, their wandering in the woods is time consuming, cash-draining and demoralizing.

Lean 250

Lean Silicon Valley Startup RSS 250

Growthink Blog

MAY 23, 2011

This venture capital financing - usually between $3 and $10 million - is the first of a number of rounds of outside investment over a period of three to five years. With this capital, the company propels itself to $50 million+ in revenues, and to either a sale to a strategic acquirer or to an initial public offering.

Angel Investor 112

Angel Investor Venture Capital Sweat Equity Cram Down 112

Both Sides of the Table

SEPTEMBER 27, 2010

My wife worked at Google so while we had good income in Silicon Valley it’s hardly the life of luxury given the costs of housing. They raised at $40 million pre-money for pre-revenue companies and when the economy corrected it became hard for them to refinance themselves. &# I was a founder once.

Liquidity Event 308

Liquidity Event Silicon Valley Seed Stage Finance 308

David Teten

AUGUST 7, 2019

Likely signs of a Value investment: the company has challenges in filling out the round; the investors have more negotiating leverage than the founders during the closing process; the company has significantly better metrics (e.g. LTV / CAC, revenue growth, etc.) were clearly Momentum, but [in hindsight] they were also Value.”

Venture Capital 60

Venture Capital Valuation Stock NDA 60

VC Cafe

SEPTEMBER 26, 2022

The press took notice, especially since just a few months later startups were laying off employees en-masse to cut costs. Sustainable growth: Prioritise sales efficiency over growth at all costs. A good way to think about valuation in seed/pre-seed is to reverse engineer the next round.

Founder 187

Founder Startup Valuation Pre-Money Valuation 187

Berkonomics

JANUARY 20, 2010

For the rest of us desiring to build large, valuable enterprises quickly, the need for outside capital is high on our list of requirements and even the source for some sleepless nights as we worry over the availability and cost of capital. Do not expect grand valuations of your enterprise from these professional angels.

Private Equity 69

Private Equity Valuation Cap Table Accredited Investor 69

Scalable Startup

OCTOBER 26, 2011

The second round is often for some or all of the following – corporate growth, go to market, turn the prototype into a robust offering, marketing costs, or to hire a sales force. It’s no longer based on a hunch, unless the company is in trouble and needs money to finish what the first round started.

Mezzanine 22

Mezzanine Due Diligence IPO Angel Investor 22

abovethecrowd.com

APRIL 20, 2016

A high performing, high-growth SAAS company that may have been worth 10 or more times revenue was suddenly worth 4-7 times revenue. 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.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Altgate

MARCH 8, 2009

Growth stage investors are usually the Series B or C investors who come in when the product is in the market but there is little or no revenue and the team is probably in the 20-something range with the goal to ramp it up to 40-50 employees with the new money, build out a sales team, etc.

Later Stage 34

Later Stage Early Stage Venture Capital Portfolio 34

Both Sides of the Table

FEBRUARY 14, 2016

forward revenue for SaaS businesses when in the years before it had been less than 5x. And imagine this … if you’re doing triage on your own portfolio and spending hours negotiating with other VCs and with entrepreneurs who don’t want to cut costs … then how likely are you to want to look at other people’s deals?

Valuation 150

Valuation Down Round Startup Later Stage 150

VC Cafe

NOVEMBER 30, 2022

Atomico’s founder Nicklas Zennstrom recently called the end of the high valuations era and urged founders and VCs to remove the stigma from down rounds. To justify the valuation, some will require 10x revenue ramp and more efficient margins. Growth at all costs is no longer an option.

Europe 97

Europe Balance Sheet Valuation 97

Both Sides of the Table

MARCH 30, 2016

Investors had grown too used to the idea that any deal you funded would get marked up to a higher valuation in the next round and that’s clearly not always true. Invoca was raising at the tail end of this market phenomenon at this time doing tens of millions in SaaS recurring revenue and growing at a nice clip. FOMO was NOMO.

Balance Sheet 150

Balance Sheet Burn Rate Valuation Forecast 150

Reid Hoffman

JUNE 8, 2021

The burden [should] just be that we care; that if we learn something, we improve it, and that we don’t only use single output metrics and its growth at all costs. But now our hosts are really angry, and they have a huge revenue shortfall. And I made a decision not to do an equity round, because I thought it would be a down round.

Silicon Valley 69

Silicon Valley Hosting Rhode Island Design 69

Reid Hoffman

JUNE 8, 2021

The burden [should] just be that we care; that if we learn something, we improve it, and that we don’t only use single output metrics and its growth at all costs. But now our hosts are really angry, and they have a huge revenue shortfall. And I made a decision not to do an equity round, because I thought it would be a down round.

Silicon Valley 36

Silicon Valley Hosting Rhode Island Design 36

www.paulgraham.com

APRIL 28, 2010

There never has to be atime when you have no revenues. It costs you a little more equity, but being able to play the two firms off each other (as well as ask one if the other is being out of line) is invaluable. The lower your costs, the moreoptions you have—not just at this stage, but at every point tillyoure profitable.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

Both Sides of the Table

OCTOBER 18, 2015

“Trade in an asset at a price that strongly deviates from an asset’s intrinsic value” The arguments against that, “This time the startups have real revenues!” In 2014 3 out of 12 exits were occurred at a lower valuation than the previous round. 25% “down rounds? ” ring hollow.

IPO 150

IPO Venture Capital LP SEC 150