Both Sides of the Table

AUGUST 3, 2010

How much dilution should I take for it?&# My friend’s company was pre-revenue. Me: “Zero dilution. I’m doing due diligence on a company of another entrepreneur in LA whose company was apparently doing very well. I can save tons of development time and I think I can buy it for all equity.

Merger 276

Merger Technical Review Early Stage Dilution 276

Both Sides of the Table

OCTOBER 12, 2014

If they trust their own due diligence process why worry about a silly thing called “signaling?” This might happen because to meet all investors needs they end up selling too much of the company, taking too much dilution and feeling beat up. ” So now the fight often happens. Aren’t they getting screwed?

Technical Review 336

Technical Review Later Stage Early Stage LP 336

YoungUpstarts

FEBRUARY 10, 2020

It will dilute your efforts and mask your talents. I’m a big fan of due diligence for appropriate decisions and initiatives. You shouldn’t be hiring an advertising agency, or buying an off-shore facility, or changing your pension fund investments, or investing in property without a boatload of due diligence.

Leadership 147

Leadership Due Diligence Dilution Advertising 147

Gust

NOVEMBER 1, 2011

in the case of one investment round, no subsequent investment and therefore no dilution). I have seen some complex methods for accommodating anticipated dilution, but here is an easy way to adjust the pre-money valuation of the current round. Then: Post-money Valuation = Terminal Value ÷ Anticipated ROI.

Venture Capital 161

Venture Capital Valuation Pre-Money Valuation Post-Money Valuation 161

David Teten

AUGUST 19, 2019

Benefits: Non-dilutive, flexible credit offerings that fit SMB or enterprise SaaS. Additionally, portfolio companies are able to access competitive and often non-dilutive financing by monetizing an unavoidable expense that is being paid to its current processors, thus yielding a mutual benefit for both parties. over next 12 months.

Revenue 60

Revenue Technical Review Software Review Equity 60

Both Sides of the Table

SEPTEMBER 25, 2010

These days there are many lawyers that will do equity deals cheaply as long is it is a standardized, simplified term sheet, early stage, no serious investor / management debates, limited IP / customers / due diligence and as long as they perceive you as a “hot&# company that’s likely to need legal services for many years ahead. (if

Finance 286

Finance Term Sheet Technical Review Warrant 286

Startup Professionals Musings

AUGUST 1, 2016

Founder insistence on non-dilute clauses, arms-length relationships, and quick closure without due diligence will short-circuit active interest. Surprises during due diligence. Smart entrepreneurs pre-disclose any possible due diligence issues, with full and open explanations and no excuses.

Due Diligence 120

Due Diligence Intellectual Property Preferred Stock Seed Stage 120

ReadWriteStart

JUNE 1, 2020

You must ensure that you do your due diligence on the investors, their sources of funds, their management style, and the support system they offer before signing the deal. Raising higher capital at an early stage means more equity to be diluted to the investors. Point number 2: Do not raise funding more than what you require.

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

Startup Professionals Musings

JANUARY 27, 2012

But due diligence and paperwork take time, and can change everything. Anti-dilution protection. But some dilution is almost inevitable. Remember that due diligence and negotiation takes time. Remember a term sheet agreement is not a deal until the check clears. Right of first refusal.

Term Sheet 223

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

Startup Professionals Musings

SEPTEMBER 14, 2010

But due diligence and paperwork take time, and can change everything. Anti-dilution protection. But some dilution is almost inevitable. Remember that due diligence and negotiation takes time. Remember a term sheet agreement is not a deal until the check clears. Right of first refusal.

Term Sheet 227

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

Pascal's View

OCTOBER 11, 2013

While you can package optimism in many different wrappers, in my view it is essential, especially for unsophisticated accredited investors, to understand critical concepts such as equity dilution from follow on rounds.

New York 31

New York Technical Review Angel Investor Finance 31

Both Sides of the Table

JULY 25, 2010

It’s hard for angels to assess whether or not to invest because they often have day jobs and can’t commit to the kind of due diligence that most VCs go through. I’d far rather dilute 10% early and get some investor traction than to wither for another 3-6 months trying to get my seed round together.

Silicon Valley 293

Silicon Valley Technical Review Southern California Angel Investor 293

ReadWriteStart

JULY 18, 2011

At this stage, the founders pay for the dilution of the shares and the funders will take 20 to 25% of the company. You should do your own due diligence on the investors. The next stage is seed funding, and you should raise $500k-$1.5m with a run rate of 12 to 18 months: 6 months of development and then 12 months of distribution.

Investment Bankers 153

Investment Bankers Technical Review Cofounder Due Diligence 153

Gust

OCTOBER 18, 2011

in the case of one investment round, no subsequent investment and therefore no dilution). It is one of the most useful methods for establishing the pre-money valuation of pre-revenue startup ventures. Return on Investment (ROI) = Terminal (or Harvest) Value ÷ Post-money Valuation. (in The Dave Berkus Method.

Valuation 174

Valuation Pre-Money Valuation Southern California Post-Money Valuation 174

Startup Company Lawyer

MARCH 14, 2010

If new investors get better rights in a future equity financings (such as registration rights, price-based anti-dilution, redemption rights, etc.), I suspect that this seems reasonable if there is basically no due diligence due to the early stage of the companies. (By Anti-dilution protection. Future rights.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Gust

OCTOBER 17, 2011

Due diligence and paperwork take time, and can change everything. Anti-dilution protection. But some dilution is almost inevitable. Remember that due diligence and negotiation take time. Remember a term sheet agreement is not a deal until the check clears. Right of first refusal.

Term Sheet 158

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

Up and Running

JULY 14, 2015

Receiving more funding often means more due diligence and having to accept higher control provisions from investors. Consequently, in order to maintain a 50 percent equity position when raising $3 million, the valuation of the business will have to increase from $2 million to $3 million. Should you ever raise more than you need?

Technical Review 60

Technical Review Valuation Due Diligence Finder 60

David Teten

JANUARY 19, 2021

That said, Jonathan Bragdon, General Partner, Capacity Capital , points out that Flexible VC terms “twin” well with equity: providing less dilution while still providing investor assistance. . Typically 1-3 months of due diligence. Most Flexible VCs lead rounds and often take 100% of the round to mitigate this risk.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

The Next Web

SEPTEMBER 13, 2013

Finding the right partner is a much bigger win than the extra cash or minimizing dilution. Remember, it’s a two-way street – do your due diligence too. Be sure to raise well in advance of this scenario and plan for a very long cycle of about nine months – just to be cautious. Finally, don’t over-optimize on valuation.

Asia 132

Asia Silicon Valley India Term Sheet 132

Up and Running

MAY 27, 2014

Is the investor asking for a non-dilution clause (a stipulation that their equity shares never dilute) in your operating agreement? (No Every time an investment is made, everyone dilutes!). Is the investor asking for an equity stake that does not fairly correlate with the amount of money they are giving you?

Angel Investor 119

Angel Investor Dilution Accredited Investor Due Diligence 119

Austin Startup

NOVEMBER 12, 2017

You’ll need to be prepared for much more thorough due diligence than with angels, up to and including a colonoscopy. You reached a conclusion that this ought to be better for you personally as a founder even though you will suffer some dilution of ownership and authority. You’ve taken the baby steps.

Term Sheet 48

Term Sheet Technical Review Due Diligence Merger 48

rapidrollout.wordpress.com

JANUARY 15, 2011

Investors use a consulting CTO for technical due diligence. And finally, you may be able to avoid diluting your equity. Technology executives use a consulting CTO when they want to supplement their own understanding of a new technology with additional knowledge and experience. Why are consulting CTOs so scarce?

Fractional CTO 40

Fractional CTO CTO CTO Hire Fractional VPE 40

David Teten

SEPTEMBER 2, 2017

So I would start by sharing with the fund an institutional LP due diligence checklist , and ask them to share their data room with you. Also see Preqin’s Key Due Diligence Considerations for Private Equity Investors. . – Protection against dilution when adding partners. – Succession. name of the Fund).

Private Equity 60

Private Equity Venture Capital Equity Partner 60

Scott Edward Walker

SEPTEMBER 14, 2011

For example, most term sheets will provide that they are “conditioned upon the completion of due diligence satisfactory to the investors.” It means that investors may walk away from the deal at any time prior to the execution of the definitive agreements if a specific condition (such as satisfactory diligence) has not been met.

Term Sheet 76

Term Sheet Due Diligence Liquidation Preference Redemption 76

VC Cafe

SEPTEMBER 26, 2010

That said, it’s your responsibility to do proper due diligence on the investors you are about to meet. Nivi Babak , VentureHacks: As much as possible while keeping your dilution under 20%, preferably under 15%, and, even better, under 10%.

Elevator Pitch 102

Elevator Pitch Incubator Technical Review Startup 102

The Equity Kicker

JULY 4, 2012

The deal almost dies during due diligence. Nicholas and I want it to be a book we can be proud of and that means doing more than putting the blog posts back to back with an introduction and some nice cover art. The process starts well, then stalls. They change tack and then get offered terms following a piece of commercial success.

Venture Capital 107

Venture Capital Due Diligence Participating Preferred Dilution 107

Tim Keane

JANUARY 12, 2010

.   This is most commonly used when a conversion confers superior economic benefits on the preferred stockholder. ·       Anti-dilution provisions that reduce the price of the preferred shares (using a variety of formulas) in the event that the company issues new stock at a lower price.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

ithacaVC

DECEMBER 13, 2013

VCs in particular typically insist on a slug of available options counting in the pre-money share total as they do not want to be diluted later by the issuance of those options. 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. I have posted on this previously.

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

Both Sides of the Table

APRIL 14, 2010

Or you find out that management has been through a few rounds of dilution such that the management team only has 10-15% of the total equity of the company and as a new investor you know a priori that management is either going to quit soon after your investment or are going to ask you for a big increase in their equity package.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

ithacaVC

MAY 4, 2011

Term sheet gets signed and the parties are working towards the closing (lots of transaction docs keeping the lawyers busy, due diligence clean up, etc.). The Series C investor negotiates a term sheet that provides for the Series C to be senior to the A and B and also for the Series C to have a 1X LP. LP; we need that too.”

Term Sheet 49

Term Sheet LP Ratchet Liquidation Preference 49

Both Sides of the Table

OCTOBER 17, 2009

If a VC term sheet comes in they begin their due diligence process. I recommend you do your own due diligence before deciding whether to take this money. Entrepreneurs want less cash because they want to control dilution and preserve exit options at lower prices. The contra is also true.

Software Review 283

Software Review Term Sheet Due Diligence Southern California 283

Both Sides of the Table

FEBRUARY 25, 2010

But we weren’t optimizing for dilution – we were building a $1 billion+ company and we wanted the runway to succeed. We moved into the legal process and final due diligence in January and February of 2000. Push hard to set up the technical reviews, the due diligence meetings, the reference calls – whatever.

Technical Review 301

Technical Review Term Sheet Due Diligence Venture Capital 301

Rob Go

JANUARY 17, 2017

This can be a fair bit of dilution for the founders as you have two firms trying to get to their 20%, so ideally this can happen for a large enough capital raise to make it worth it. This means some combination of: Pitching the entire partnership and allowing the VC to do real due diligence. This is a bit counter-intuitive.

Due Diligence 28

Due Diligence Seed Stage Syndicate Syndication 28

www.paulgraham.com

APRIL 28, 2010

Whatkind of anti-dilution protection do they want? The angel now owns 200/1200 shares, or a sixth of thecompany, and all the previous shareholders percentage ownershipis diluted by a sixth. VCs legal and financialdue diligence is pretty thorough, but the technical due diligenceis generally a joke. [ Hell if they know.In

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

VC Cafe

FEBRUARY 9, 2011

In the eleventh hour of the due diligence process, we discovered a one-page agreement between a company founder (before incorporation) and a consultant, promising the latter 5% of the company’s capital. This specific agreement didn’t state whether the 5% was on a fully diluted basis or not.

Technical Review 90

Technical Review Cap Table Due Diligence Non-Compete 90

Both Sides of the Table

FEBRUARY 22, 2011

Here’s the problem: Let’s say you have 5 VCs (plus angels but let’s ignore that for now) and each one owns 5% so you took 25% dilution to get the round done. This is largely true because most VCs have a 20% minimum threshold in order to invest so bringing in multiple VCs can be very expensive in terms of dilution.

Dilution 314

Dilution Cap Table Due Diligence Option Pool 314

abovethecrowd.com

APRIL 20, 2016

It will also minimize future dilution. I get that you want to grow and I want you to grow, but let’s internally finance that growth by spending gross margin dollars rather than new dilutive dollars of equity. They use the reputation of the other investors as a proxy for due diligence. ” Go public.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40