Both Sides of the Table

JULY 22, 2010

So taking the same fund raising round and assuming that the VC wants the options including before he or she funds (and before is totally standard) then the math works like this: Assuming a 15% option pool post funding then you need a 20% option pool pre funding (because the pool gets diluted by 25% also when the VC invests their money).

Valuation 405

Valuation Liquidation Preference Pre-Money Valuation Term Sheet 405

Both Sides of the Table

SEPTEMBER 10, 2021

A-Rounds used to be $3–7 million with the best companies able to skip this smaller amount and raise $10 million on a $40 million pre-money valuation (20% dilution). The biggest change for us in early-stage investing is that we now need to commit earlier. So in a way it’s self selecting. That used to be called A-round investing.

Pre-Money Valuation 471

Pre-Money Valuation Valuation Venture Capital Early Stage 471

Both Sides of the Table

SEPTEMBER 25, 2010

I talked about this in my social proof post where I gave some suggestions about how to get the early guys off of the fence. Most early-stage entrepreneurs who have worked with me (either as an angel or as a seed VC) know that I don’t rely at all on the social proof of other investors. When I’m in, I’m in.

Finance 286

Finance Term Sheet Technical Review Warrant 286

Both Sides of the Table

OCTOBER 1, 2009

So I believe that now is the perfect time to build a company and the perfect time for early-stage investors to bet on innovation. If you’re raising $2 million and can close on $3 million – don’t optimize to minimize short-term dilution, optimize for contingencies in case the market gets worse. million – take it.

Technical Review 269

Technical Review Stock Hawaii Early Stage 269

Both Sides of the Table

NOVEMBER 14, 2017

As an early-stage VC I love this phase. While early-stage companies have all of their engineers working on product innovation, companies that want to scale realize that you also have to build systems to help with organizational scaling.

Operations 286

Operations New York City Technical Review Startup 286

Both Sides of the Table

JUNE 5, 2011

Early-stage investors in technology startups are only looking for growth-oriented companies that can achieve an “exit&# someday – either via selling your company to a larger company or via an IPO. Over time some “norms&# have emerged in pricing based on investors risk / return profile.

Pre-Money Valuation 336

Pre-Money Valuation Valuation Silicon Valley Stock 336

Both Sides of the Table

SEPTEMBER 28, 2014

Plus, most early-stage M&A fails so this isn’t likely a good use of capital for a young company). We want a strong balance sheet (um, ok. but that’s our firm’s money on your balance sheet. if you have a good use for it and we’re excited about your company – fine.

Burn Rate 383

Burn Rate Balance Sheet .Net Valuation 383

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JUNE 5, 2015

In the old days there usually weren’t convertible notes on early-stage deals and there weren’t party rounds with 20 angels or 6 seed funds. So how DOES a VC think about financings at early stages? Option pool (likely dilution in the future, which is a function of a higher price just not yet defined).

Pre-Money Valuation 150

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

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JULY 25, 2010

Rincon is part of the new breed of Seed Stage VCs and with the leadership of Jim Andelman has charted out the most authentic early-stage investment strategy in Southern California. Any SoCal entrepreneur raising early-stage money should put Rincon on their short list.

Silicon Valley 293

Silicon Valley Technical Review Southern California Angel Investor 293

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FEBRUARY 17, 2011

If you are able to raise money from credible sources at a reasonable dilution percentage then I personally favor getting the round done now and building your business. How much dilution am I going to have to take now? So if you can take 27% dilution for $1.5 So if you can take 27% dilution for $1.5 25% dilution).

Pre-Money Valuation 303

Pre-Money Valuation Dilution Valuation PR 303

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AUGUST 30, 2010

Funnily enough I just answered this question yesterday on Quora when somebody asked, “Why would an early-stage investor specifically NOT prefer a convertible note structure to straight equity (e.g. Why many early-stage investors DO price rounds (e.g. 20-25% dilution). What about “super angel&# funds?

Equity 319

Equity Early Stage Angel Investor Valuation 319

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OCTOBER 7, 2014

There weren’t a lot of seed funds in 2007 so this was often done by angels, funding consortia or sometimes early-stage funds that existed then (First Round Capital, True Ventures, SoftTech VC, etc.). When I first became a VC, seed rounds were typically $500k – $1.5 Why the latter?

Cap Table 399

Cap Table Silicon Valley Term Sheet Finance 399

Both Sides of the Table

APRIL 27, 2014

Seed investors are aplenty and of course they need downstream money to fuel their early-stage bets. If we got an offer to raise $25 million to grow would she take it or be too worried about exit price, dilution, valuation expectations, etc. And we live in public so many people are able just to reach out.

Cofounder 374

Cofounder Syndicate Syndication Early Stage 374

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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. Me: More dilution? But people seem pretty focused on that number. Raising lower seems kind of like something is wrong. A down round? I thought it was a convertible note with a cap?

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

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DECEMBER 1, 2009

I know this is unconventional thinking but if you want to understand more I cover my rationale on this post about The Most Common Early Stage Startup Mistakes and again in this post covering how to implement startup prenuptials.

Hiring 289

Hiring Cofounder Dilution Startup 289

Both Sides of the Table

MAY 30, 2018

Many VCs will have a distribution curve where they’ll do a small number of early-stage deals (say $1.5–3 3 million invested at a $6–10m pre-money), a larger number of “down the fairway” deals ($4–5 million at a $15–25 million pre) and a few later-stage deals (say $8–10 million at a $30–40 million pre).Of

Valuation 324

Valuation Post-Money Valuation Pre-Money Valuation Cofounder 324

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APRIL 14, 2012

Let me remind readers as I outlined in this post , there are VERY FEW M&A transactions for early-stage startup companies above $100 million. You just said, “nobody would take 1-2% dilution.” .” You know, close your $100 million round so buyers will come in at $200 million. Hang on, Mark.

Valuation 316

Valuation Balance Sheet Dilution Term Sheet 316

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SEPTEMBER 5, 2012

In a standard VC term sheet there is a standard term called an “anti dilution provision” and they are in nearly 100% of deals. You rarely find full ratchets in early-stage deals any more. It has nowhere near the same dilutive effects as a full ratchet except in extreme edge cases. ” Full R at-shits.

Liquidation Preference 354

Liquidation Preference Ratchet Equity Stock 354

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MAY 9, 2011

Conventional wisdom says that you gain far more in working as a team than you lose by diluted by half before you start. I wrote about many of the early-stage startup mistakes here. Either you’re not technical and you think you need a technical co-founder or vice-versa. Now feel free to shoot the messenger.

Cofounder 393

Cofounder Founder Vesting Founder Vesting 393

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MARCH 21, 2010

Future investors aren’t likely to mind that you had a PBW program because the dilution will be taken before they invest. Early in your company’s evolution, high-potential individuals take a bigger risk to join you so you’re more liberal with your allocations to them. How Should You Structure Them?

Warrant 298

Warrant Dilution Startup Stock Options 298

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SEPTEMBER 25, 2011

Pro-rata rights are designed to protect investors from being diluted in future rounds of financing, which is an important way for VCs to protect the investments they make early that turn out to be super successful. As though 18% of a big company is a terribly embarrassing outcome. What are “super” pro-rata rights.

Entrepreneur 310

Entrepreneur Dilution Finance Silicon Valley 310

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APRIL 3, 2010

So if a VC wants to work with really talented early-stage entrepreneurs there are times where they have to be willing to seed fund them in order to be in the deal. They said that they didn’t want the extra money or dilution. A very well known early stage fund used to have a rule that they didn’t do follow ons.

Venture Capital 265

Venture Capital Term Sheet Early Stage Silicon Valley 265

Both Sides of the Table

MAY 7, 2016

If you’re an early-stage startup and even contemplating acquiring other companies slap yourself in the face and focus on your own business instead. Or some teams who start driving revenue paper over the fact that they aren’t acquiring customers profitably. It’s what you do in these moments that often determine success from failure.

Churn Rate 150

Churn Rate Vesting Dilution Europe 150

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OCTOBER 17, 2009

Many VCs who do lots of seed stage deals are very supportive and active. They do many early-stage deals. Entrepreneurs want less cash because they want to control dilution and preserve exit options at lower prices. Look at Josh Kopelman over at First Round Capital. What exactly is seed funding anymore?

Software Review 283

Software Review Term Sheet Due Diligence Southern California 283

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FEBRUARY 25, 2010

But we weren’t optimizing for dilution – we were building a $1 billion+ company and we wanted the runway to succeed. I’ve offered to fund an early stage company where I promised cash in bank in less than 30 days. I’ve offered to fund an early stage company where I promised cash in bank in less than 30 days.

Technical Review 301

Technical Review Term Sheet Venture Capital Due Diligence 301

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

Both Sides of the Table

MARCH 1, 2010

He was grateful since I stuck with my first company, BuildOnline, well beyond when others would have (since I had taken great dilution during the dot com burst.). Large early stage rounds. • Work with the best at early stages : I’d like to get involved with capital efficient companies early in their lifecycle.

Entrepreneur 321

Entrepreneur Warrant Silicon Valley Early Stage 321