Both Sides of the Table

JULY 16, 2010

So even within the “alternative class&# our LPs are looking at other asset investment choices such as distressed buyout funds, private equity or hedge funds. He acknowledged the importance of the growing seed fund movement in creating a new wave of cost-effective innovation. VC will shrink. Oh yes it will.

LP 311

LP Technical Review Early Stage Silicon Valley 311

Both Sides of the Table

NOVEMBER 19, 2009

He would have found somebody technical and inspired that individual to work for equity or deferred payment. The company had less than $5 million in revenue yet we had a multi-tab spreadsheet doing activity-based costing on our customer service staff, operations and technology. I said that was my point.

Entrepreneur 414

Entrepreneur Fractional CTO Technical Review CTO Hire 414

Both Sides of the Table

JUNE 22, 2018

Perhaps the costs of “winning” the battle aren’t worth the consequences. I have seen this in cases where a fight would take the CEO’s time & attention away from important business dealings or where the cost of not settling is huge (as in, inability to raise more capital until the dispute is resolved).

Equity 199

Equity Hosting Demand Cost 199

Both Sides of the Table

JUNE 22, 2011

But this mania to not miss out on the next big thing is driving some investors to pay growth-equity prices for traditional market risk (as in, they’re paying up before it is clear there is product / market fit). And well they should be. And so on down then line.

Saudi Arabia 309

Saudi Arabia Valuation IPO Technical Review 309

Both Sides of the Table

SEPTEMBER 29, 2009

This came in part due to the huge influx of money into VC but also because hedge funds and private equity shops with no VC experience wanted part of the action. While the company continues to perform well it has come at a cost. disclosure: I am thankfully no longer on this board). I only had one board with this problem.

Burn Rate 263

Burn Rate Valuation Pre-Money Valuation Private Equity 263

Both Sides of the Table

SEPTEMBER 18, 2014

There are a million ways to do quick, easy, low-cost rounds with prices. “But lawyers will charge much more for equity.” Try doing THAT with equity. So if the next round is higher they have a much lower cost of ownership than the next investors anyways. My colleague: Whoa. And so forth. Employment.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Both Sides of the Table

APRIL 28, 2010

It seems the focus on “virtual&# goods has been both the demo of the consumer as well as the fact that by definition virtual goods have almost no marginal costs to the seller so giving a huge slice to the carrier (and Zong) isn’t a problem since actual costs are ~ $0. 15mm in Series A. 4mm in Series A.

Venture Capital 270

Venture Capital Cofounder Spain San Diego 270

Both Sides of the Table

MAY 19, 2018

A detailed financial model that shows your anticipated revenue, costs and profits (Income Statement) as well as your balance sheet and cashflow statements. The buyer is shopping for equity in startups and the seller is looking for cash in exchange for equity and shared governing control of his or her company.

Cap Table 336

Cap Table Due Diligence Forecast Churn Rate 336

Both Sides of the Table

JANUARY 21, 2010

You never got around to agreeing exact equity splits but you had many conversations about it. How to manage costs - One of the biggest frustrations that people have with lawyers are unexpected costs. I write about some of the lessons in my post on Startup Mistakes. In every firm there are A, B and C players.

Southern California 318

Southern California Silicon Valley IP Stock Options 318

Both Sides of the Table

OCTOBER 14, 2015

The truth is that the brutal reality of public markets is that they self correct much more quickly than our shitty little private equity illiquid corner of the universe. I encouraged them to stay in shorter-term space, higher per-unit costs but no capital outlays. I put up this slide as part of my discussion. Does this suck?

Burn Rate 150

Burn Rate San Francisco Private Equity LP 150

Both Sides of the Table

SEPTEMBER 5, 2012

This time by the efforts of Adeo Ressi to introduce a new kind of structure called “ convertible equity.” 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.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Both Sides of the Table

MAY 23, 2010

a loan) that is later converted to equity at the time of the next financing. If no financing happened then this “note&# may not be converted and thus would be senior to the equity of the company in the case of a bankruptcy or asset sale. It starts as a debt instrument (e.g.

Startup 290

Startup Burn Rate Warrant Bankruptcy 290

Both Sides of the Table

AUGUST 18, 2009

To be clear – it is not about being stingy with or hoarding equity – it is about having a prenuptial agreement. What if you have to make really tough calls on cutting costs, biz dev deals, fund raising and you violently disagree on direction? I believe that it very important to spread the equity. Who prevails?

Founder 251

Founder Cofounder Equity Stock Options 251

Both Sides of the Table

AUGUST 14, 2010

Suggest Solution of what you think the right answer is including time, cost to implement and other asks (such as executive level support for change) (“we don’t have the cash reserves to increase pay. Option 3: “we could promise pay increases on next fund raising round and not focus on equity.

Equity 342

Equity Hiring Developer Management 342

Both Sides of the Table

JULY 15, 2010

Convertible debt is a loan to the company that doesn’t typically get paid back but rather “converts&# into equity when you raise a larger round at a later date. . - Can you please explain convertible debt and specifically how it pertains to angel deals?

Southern California 210

Southern California Venture Capital Seed Stage Angel Investor 210

Both Sides of the Table

JULY 10, 2010

Michael is a very accomplished corporate executive in his own right having run Sega Gameworks and helped IPO EuroDisney as well as having been on the founding team of DreamWorks SKG (where he helped them raise their first $900 million in equity). Shame they didn’t like his suggested name for the company: DreamWorks SKG-MM.

IPO 242

IPO Venture Capital Private Placement Cofounder 242

Both Sides of the Table

APRIL 14, 2012

You are either bought for stock or for equity. Strategic must be a hugely defensive move or a move that the management team of the buyer believes could drive a huge increase in future revenue to more than cover the costs of having acquired your company. Not as an enticement to get a buyer to pay up after the deal. Think about it.

Valuation 316

Valuation Balance Sheet Dilution Term Sheet 316

Both Sides of the Table

APRIL 25, 2011

The founders could reinvest this in growth (0% tax, focus on future equity growth) or take the profits of $12 million and divide amongst the founding partners. Final message on financing – just be careful not to let your fixed costs get too high as a young services business. That is $12 million in profits over 3 years.

Silicon Valley 332

Silicon Valley IP Dividend Finance 332

Both Sides of the Table

JULY 11, 2010

These are not to be confused with incubators like YCombinator or IdeaLab which look to invest in your company and take equity positions. I also had lunch there which was served buffet style with the rest of the office, which apparently costs $5 / day and you just let the office manager know in advance so they can plan numbers.

San Francisco 285

San Francisco Incubator Silicon Valley Startup 285

Both Sides of the Table

FEBRUARY 11, 2012

agreeing whether or not to top up a founder’s equity. It costs me more than that. Can we pay the same amount but extra licenses at the same cost? We like to short-hand it, as in, “What’s our BATNA?” ” As a VC I’m required to negotiate constantly. submitting term sheets. Vendor: Ay.

Mexico 305

Mexico Term Sheet Hiring Search 305

Both Sides of the Table

JUNE 5, 2015

” Today I want to talk about how a VC thinks about equity pricing on your round and particularly if you’re coming off of a convertible note. They know that they have complete flexibility to raise as much as they want (within reason) but they emotionally absorb the costs in terms of dilution.

Pre-Money Valuation 150

Pre-Money Valuation Option Pool Post-Money Valuation Dilution 150

Both Sides of the Table

JANUARY 31, 2011

And also there are a large number of people who would like to do startups in theory, but have high cost bases (family, real estate, school loans, whatever) that makes it very difficult to take the kinds of risks required. One investor played chicken with me by threatening not to approve my next-round financing unless I gave him more equity.

Entrepreneur 384

Entrepreneur Startup Salary Egypt 384

Both Sides of the Table

MAY 5, 2011

Great lifestyle, great cost of living, motivated people and only the crap weather on the negative side. When you account for competition for talent, the difficulty of retention, the cost of living and the difficulty of rising above the noise – there are many advantages of staying put. The ingredients are all here.

Seattle 317

Seattle Silicon Valley Technical Review Los Angeles 317

Both Sides of the Table

JANUARY 22, 2011

And also there are a large number of people who would like to do startups in theory, but have high cost bases (family, real estate, school loans, whatever) that makes it very difficult to take the kinds of risks required. One investor played chicken with me by threatening not to approve my next-round financing unless I gave him more equity.

Entrepreneur 176

Entrepreneur Startup Salary Egypt 176

Both Sides of the Table

SEPTEMBER 2, 2009

The very modest salary that I drew didn’t come anywhere near meeting my monthly costs so I had to eat into savings. We exchanged ideas when I was an entrepreneur along side him in NorCal in 05-07 and my point-of-view on founder / VC relationships hasn’t shifted even 1% since I went to the dark side.

Founder 329

Founder Liquidation Preference Term Sheet Participating Preferred 329

Both Sides of the Table

JUNE 29, 2011

If you don’t want to read that post, the summary is: Open source computing drove computing costs down 90%, which spurred innovation in technology. Open cloud led by Amazon with their AWS services drove total operating costs down by 90%. This led to an explosion in startups. Will public investments come next?

Venture Capital 296

Venture Capital Software LP Early Stage 296

Both Sides of the Table

MARCH 3, 2013

Obviously that barrier has been brought down with low-cost ability to capture, stream and distribute content over the Internet. ” Money is not debt or equity but a “license to use their capital.” VC can’t don’t invest in these kinds of companies because they can’t get out (no liquidity event).

Bankruptcy 403

Bankruptcy Offshore Liquidation Preference Balance Sheet 403

Both Sides of the Table

FEBRUARY 23, 2010

Sort of amortizing the costs of their sales reps over more products. So Should I Avoid Channels at all Costs When I’m a Startup? Also, many businesses scale more cost effectively through channel partners. That’s going to cost you margin. Channel partners come in multiple flavors. If they have $1.2

Channel 293

Channel Startup Sales Partner 293

Both Sides of the Table

DECEMBER 3, 2013

As this astute journalist pointed out, DataSift “ likely would have cost a lot more to acquire.” And even in this growth equity round led by Insight Partners we asked for our full prorata investment and took as much as we were allowed to. ” What gives? Why all the fuss about the Twitter firehose?

Iran 358

Iran API San Francisco Nigeria 358

Both Sides of the Table

FEBRUARY 13, 2011

We are a venture capital growth equity fund in Washington DC with about $500m invested. They will come in for a big deal and quickly overwhelm a small company then, just as quickly, leave before the merchant has recouped those costs or retain them as continued customers. Revolution, what is it?

Cofounder 277

Cofounder Merger Founder Venture Capital 277

Both Sides of the Table

FEBRUARY 14, 2016

In the case of startups the “buyer” is the VC looking to part cash for “purchasing” equity in your startup. The most basic chart of microeconomics is a supply & demand curve. Demand represents a buyer and supply a seller.

Valuation 150

Valuation Down Round Startup Later Stage 150

Both Sides of the Table

AUGUST 9, 2011

The parallels to the music industry are too obvious even though the industry players, the medium and the cost structures are different. On the positive side, corporate profits are up, their balance sheets have been repaired and they have recapitalized themselves to have lower amounts of debt relative to equity.

Stock 305

Stock Technical Review Marketing Greece 305

Both Sides of the Table

MARCH 11, 2010

This means looking at what your buyer pays for similar products now, what the history of other people who have tried to monetize in this way have experienced, what your costs to acquire customers will be and what you believe you can make over the customers’ lifetimes. Get your cost base as low as you can as quickly as you can.

Silicon Valley 308

Silicon Valley Bankruptcy Intellectual Property Reputation 308

Both Sides of the Table

OCTOBER 6, 2012

The most interesting to me – and this got me thinking – is accounting services provided at cost. So why not offer this service to startups at cost? 10:30 Question from the chat: How do you define the difference between traditional VC and private equity? And every investor wants better records and transparency.

Los Angeles 303

Los Angeles Detroit Venture Capital Lean 303

Both Sides of the Table

JULY 19, 2011

Brands who build pages there are not building equity in the open Internet, they’re building it in today’s walled garden. Still, at its core I believe Google’s instincts are open. No prizes for guess who today’s AOL is. Strategically really well positioned today. Not so open. The “Internot.&#

Iran 274

Iran Silicon Valley Tunisia Social Media 274