View from Seed

OCTOBER 24, 2019

The reality is that if a founder raised every one of these rounds, and lead investors always got their “target” ownership, the level of dilution would be ridiculous. No good investor would want the founder/CEO of a company to have insufficient ownership by the series A, and every founder I know is sensitive to taking too much dilution.

Dilution 149

Dilution B2B Burn Rate Early Stage 149

View from Seed

JANUARY 13, 2021

It turns out capital is not a weapon, especially in the early stages of building a business, and even experienced founders who can raise huge sums often realize this and right-size their asks. And yes, a seed fund may have a tougher time holding on to their ownership down the road, and thus get diluted down. But guess what?

Dilution 399

Dilution Later Stage Portfolio Technical Review 399

Startup Professionals Musings

SEPTEMBER 10, 2018

Because these considerations can be quite complex, very emotional, and have long-term implications, smart entrepreneurs don’t hesitate to get some legal advice at this early stage, in drawing up an agreement document to be signed by each of the co-founders. The CFO may have a major financial background, but might be a minority owner.

Equity 238

Equity Cofounder Technical Cofounder Intellectual Property 238

Both Sides of the Table

FEBRUARY 6, 2013

I am fond of quoting that about 70% of my investment decision of an early-stage company is the team. it’s the most expensive dilution you’ll ever face. Resist the temptation to build a group of “C Level” execs in an early stage business. Final startup grind from msuster.

Cofounder 388

Cofounder Early Stage Startup Silicon Valley 388

Startup Professionals Musings

APRIL 27, 2019

In fact, it’s all about the “focus” required to get early stage technology products across the deadly chasm from early adopters to mainstream customers. It takes focus to resist adding a long list of features that seem to make the opportunity larger, but dilute to focus of both you and potential customers.

Technical Review 255

Technical Review Dilution Early Stage Product Development 255

Startup Professionals Musings

AUGUST 4, 2014

Because these considerations can be quite complex, very emotional and have long-term implications, smart entrepreneurs don’t hesitate to get some legal advice at this early stage, in drawing up an agreement document to be signed by each of the co-founders. The CFO may have a major financial background, but might be a minority owner.

Cofounder 261

Cofounder Stock Founder Technical Cofounder 261

Both Sides of the Table

MAY 28, 2018

There’s a quick litmus-test conversation any early-stage VC will have with the founder and it’s one that you should be as prepared for as your elevator pitch. It’s true that some later-stage private equity firms like to fund “roll ups” (a company that acquires many related companies in it sector), but this is seldom the domain of VCs.

Burn Rate 247

Burn Rate Valuation Pre-Money Valuation Dilution 247

Berkonomics

MARCH 8, 2018

Many early stage CEOs and board members have asked for some guidance regarding pay and time commitments for board members. Pay early stage board members of companies that are not lifestyle businesses one percent of the fully diluted equity in the form of an option that vests over four years of service.

Early Stage 102

Early Stage Vesting Stock Options Preferred Stock 102

Gust

APRIL 9, 2014

Equity dilution works when the same pie is divided among more people. Because the total percentage of equity will always equal exactly 100%, every time anyone gets another piece, by definition it “dilutes” all of the previous equity holders. Uncategorized company equity dilution founder investors startup'

Dilution 150

Dilution Equity Vesting Stock Options 150

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. The only thing worse than your early-stage company buying another early stage company is you trying to pull off a merger of equals. Want to sell early? We both meant mostly the same thing.

Merger 276

Merger Technical Review Early Stage Dilution 276

David Teten

DECEMBER 2, 2019

I’m now researching non-dilutive funding for Action Tank , a startup I’m gestating to “Make America Functional Again”. I worked with outsourced research firm Wonder * to identify all of the institutions we could who support tech impact startups with cash and community, and in many cases without dilution. SEIF Awards Tech for Impact.

Technical Review 60

Technical Review SBIR Dilution Silicon Valley 60

The Startup Magazine

MARCH 14, 2022

At this stage, the founder mainly raises funding from their sources or family and friends. If you are one of the fortunate early-stage investors to be presented with such an opportunity, it could lead to rewarding returns. 2) Seed funding.

Technical Review 144

Technical Review Due Diligence India Startup 144

Berkonomics

SEPTEMBER 28, 2017

And then there are options: [Email readers, continue here…] Stock options or phantom stock are the tools of early stage businesses used to attract great talent when there is not enough cash to pay market rates. An option plan should carve out an addition of about 15% of the “fully diluted” shares.

Early Stage 102

Early Stage Equity Stock Options Vesting 102

Both Sides of the Table

OCTOBER 12, 2014

These tensions seep out in some angels or seed funds publicly or semi-privately deriding later-stage VCs for their “bad” behavior. I have seen bad behavior from later-stage VCs, believe me. But I have seen equally bad behavior from super early stage investors. As always a balanced perspective is in order.

Technical Review 336

Technical Review Later Stage Early Stage LP 336

Both Sides of the Table

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.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

VC Cafe

JUNE 10, 2022

Until now, early stage startups were relatively unaffected. As a result, founders are accepting increased dilution of the stakes they hold in their own companies. The market correction has come for series A and seed startups.

Valuation 151

Valuation Marketing Venture Capital 151

Startup Professionals Musings

APRIL 23, 2017

In fact, it’s all about the “focus” required to get early stage technology products across the deadly chasm from early adopters to mainstream customers. It takes focus to resist adding a long list of features that seem to make the opportunity larger, but dilute to focus of both you and potential customers.

Customer 191

Customer Entrepreneur Technical Review Dilution 191

Both Sides of the Table

MARCH 19, 2013

If you’re an early-stage enterprise startup services revenue is exactly what you need. The most important way to sell a product for an early-stage business (or frankly any stage) is to have strong referenceable customers. That it is non-dilutive financing? We only want software revenue.”

Technical Review 403

Technical Review Software Review Startup API 403

Startup Professionals Musings

AUGUST 24, 2016

Because these considerations can be quite complex, very emotional, and have long-term implications, smart entrepreneurs don’t hesitate to get some legal advice at this early stage, in drawing up an agreement document to be signed by each of the co-founders. The CFO may have a major financial background, but might be a minority owner.

Equity 120

Equity Cofounder Technical Cofounder Intellectual Property 120

ReadWriteStart

JUNE 1, 2020

These usually play a role in the very early stage of your business, primarily pre-revenue. The seed stage is focused on building the core team, product optimization, exploring avenues for monetization. ? Early-stage. An early-stage investor usually looks at a return of 10 to 15 times.

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

YoungUpstarts

OCTOBER 24, 2013

“The reality is that there has not been a reliable, simple, or cost-effective way to calculate an early stage company’s valuation – which is why so many entrepreneurs and angel investors get it wrong,” says Alan Lobock, co-founder of Worthworm.

Pre-Money Valuation 150

Pre-Money Valuation Web Technical Review Angel Investor 150

Both Sides of the Table

SEPTEMBER 17, 2011

I recently wrote a post about why I didn’t think early-stage startups should have COOs. Dilute your cash, equity or both. In summary, tons of early-stage M&A is driven by only one thing: CEO ego. I expected it to be controversial and it was. But it will not help your business grow faster.

Operations 292

Operations CTO Hire Startup Early Stage 292

David Teten

JANUARY 21, 2021

VI: Revenue-based financing: The next step for private equity and early-stage investment. Jonathan Bragdon , CEO, describes Capacity as “a team of founders-turned-funders making non-dilutive, founder-aligned investments of $50-$300k in post-startup, post-revenue businesses planning to 2X revenues in 12-24 months.

Equity 78

Equity Revenue Cofounder Colorado 78

Startup Professionals Musings

APRIL 23, 2012

Providing the major funding source for an early-stage startup is a totally different dimension, but it usually trumps all the items above in demanding some equity. For purposes of commitment and business decision making, I always recommend that execution partners retain control of at least 50% of the equity.

Intellectual Property 252

Intellectual Property Equity Cofounder CTO Hire 252

The Next Web

OCTOBER 7, 2013

However, at the very early stage, they are taking as much risk with their future as the founders. Every time a startup raises capital, all common shareholders are diluted. All of the estimates displayed above are figures prior to any dilution. So, if o = initial ownership and y = total dilution, x = o * (1 – y).

Engineer 129

Engineer Dilution Option Pool Vesting 129

Startup Professionals Musings

DECEMBER 18, 2013

In fact, it’s all about the “focus” required to get early stage technology products across the deadly chasm from early adopters to mainstream customers. It takes focus to resist adding a long list of features that seem to make the opportunity larger, but dilute to focus of both you and potential customers.

Entrepreneur 252

Entrepreneur Marketing Technical Review Dilution 252

This is going to be BIG.

JANUARY 18, 2024

Governance Moreso than a lot of actual VCs, a lot of high-net-worth folks tend to ask for board representation—even in the super early stages of a company where boards tend to be a little less formal. It will save everyone a lot of cost and time. On one hand, I get this.

.Net 88

.Net Cap Table Startup Technical Review 88

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

Startup Professionals Musings

OCTOBER 17, 2022

This can cause early investor dilution, lower ultimate returns or leave the startup stranded. Yet, in my view, every early-stage entrepreneur should be exploring this new funding alternative before approaching VCs. It’s the right way to get money without giving up too much equity or control of your business.

Angel Investor 342

Angel Investor Venture Capital Silicon Valley Portfolio 342

Startup Professionals Musings

NOVEMBER 10, 2012

In fact, it’s all about the “focus” required to get early stage technology products across the deadly chasm from early adopters to mainstream customers. It takes focus to resist adding a long list of features that seem to make the opportunity larger, but dilute to focus of both you and potential customers.

Startup 254

Startup Technical Review Dilution Early Stage 254

YoungUpstarts

MAY 6, 2019

In this article, we will discuss why it is important to understand the whole startup stages concept before you start a business to get the most benefit. Early Stage. This startup stage starts from the day you decide to work on a startup idea. Here is the complete list of points available in early stage startup.

Startup 113

Startup Technical Cofounder Merger Early Stage 113

Feld Thoughts

FEBRUARY 28, 2023

However, the lack of a conversion right also has implications for anti-dilution protection: in the U.S., In Germany, anti-dilution protection is achieved by issuing additional preferred shares. It is not uncommon for companies wanting to go public to relocate their registered office to the USA at an early stage.

Germany 165

Germany Liquidation Preference Option Pool Advisory Board 165

Startup Professionals Musings

NOVEMBER 8, 2010

Providing the major funding source for an early-stage startup is a totally different dimension, but it usually trumps all the items above in demanding some equity. For purposes of commitment and business decision making, I always recommend that execution partners retain control of at least 50% of the equity.

Equity 228

Equity Intellectual Property Cofounder CTO Hire 228

Startup Professionals Musings

DECEMBER 11, 2022

Getting investors to trust you with their money is always a challenge, and it’s even more difficult in the early stages, where you don’t have a significant revenue stream, a few customers, or maybe even a product yet. At these stages, it’s all about you, and your ability to communicate and execute effectively.

Due Diligence 271

Due Diligence Intellectual Property Entrepreneur Preferred Stock 271

YoungUpstarts

JULY 31, 2019

Billions of dollars are being poured into companies that have yet to clear the value chasm, as entrepreneurs use early traction that isn’t necessarily financially-oriented, but shows a certain level of uptick or success, to raise capital and convince early stage investors that their horse is the one to bet on.

Cofounder 127

Cofounder Burn Rate Technical Cofounder Seed Capital 127

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

Startup Professionals Musings

MARCH 12, 2023

Angels are more likely to fund new entrepreneurs, and early-stage or seed rounds, while VCs tend to focus on entrepreneurs with a successful track record, and later stage rounds. The amounts from angels start as low as $25K, while minimum venture capital amounts usually start in the $2M range.

Angel Investor 246

Angel Investor IRR Venture Capital Valuation 246