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

ReadWriteStart

JUNE 1, 2020

These usually play a role in the very early stage of your business, primarily pre-revenue. I have interacted with a lot of founders who funded their initial business expenses through credit cards. If you are facing any problem you can always check out this: Business Loan vs. Equity Financing. Inception stage.

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

Both Sides of the Table

NOVEMBER 14, 2017

As an early-stage VC I love this phase. Sam also had a vision as early as 2012 about how MakeSpace would be a large employer of middle-income jobs: The company would hire employees rather than just have contractors and he would lead the effort to ensure they had opportunities for growth and benefits for their families.

Operations 286

Operations New York City Technical Review Startup 286

Both Sides of the Table

SEPTEMBER 10, 2021

And the loosening of federal monetary policies, particularly in the US, has pushed more dollars into the venture ecosystems at every stage of financing. What Has Changed in Financing? They might be ideas they hatch internally (via a Foundry) or a founder who just left SpaceX and raises money to search for an idea.

Pre-Money Valuation 471

Pre-Money Valuation Valuation Venture Capital Early Stage 471

David Teten

JANUARY 19, 2021

From RBI, Flexible VCs borrow the ability to reap meaningful returns without demanding founders build for an exit. Every Flexible VC structure allows founders to access immediate risk capital while preserving exit, growth trajectory, and ownership optionality. . Flexible VC 102: Variations.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

View from Seed

MAY 2, 2019

This is the logical path that one would think is pretty “standard” for early stage companies. There may be some twists and turns along the way, like a bridge or seed extension, but I think something like this is plan A for most founders. The challenge with pre-seed rounds is that pricing will sometimes be pretty dilutive.

Early Stage 214

Early Stage Dilution Valuation .Net 214

ReadWriteStart

OCTOBER 28, 2010

Do More Faster: TechStars Lessons to Accelerate Your Startup is the new book by David Cohen , founder and CEO of TechStars, and Brad Feld , managing director of Foundry Group. Below is his chapter, Avoid Co-Founder Conflict. A perennial favorite is to decide that each founder should own an equal share. Can any of us be fired?

Cofounder 128

Cofounder Founder Equity Dilution 128

Startup Company Lawyer

MARCH 14, 2010

After the recent announcement of the Series Seed Financing documents by Marc Andreesen, Brad Feld points out that there are now four sets of “open source&# equity seed financing documents: TechStars Model Seed Funding Documents (by Cooley). Y Combinator Series AA Equity Financing Documents (by WSGR). under $500K).

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

David Teten

AUGUST 19, 2019

RBI normally requires founders to pay back their investors with a fixed percentage of revenue until they have finished providing the investor with a fixed return on capital, which they agree upon in advance. For background, see Revenue-Based Investing: A New Option for Founders who Care About Control. Bigfoot Capital.

Revenue 60

Revenue Technical Review Software Review Equity 60

Austin Startup

JULY 6, 2018

Ask the Users Startup Accelerators: Bundled and Unbundled Over the past several years, accelerators have emerged as a powerful filtering and signaling mechanism in early-stage startup ecosystems, allowing high-potential young startups to connect with investors, advisors, and other strategic partners far faster and more efficiently than before.

Dilution 48

Dilution Startup Technical Review Equity 48

View from Seed

OCTOBER 28, 2019

Over the past few years, “pre-seed” as a distinct category has emerged within the early stage fundraising landscape. But this financing contour description is just a proxy for underlying business metrics. A Symptom, Not A Cause.

Seed Stage 247

Seed Stage Finance Dilution Early Stage 247

Both Sides of the Table

JUNE 5, 2011

I’ve decided to take all of my private conversations and subjective points-of-view on the topic and make them public in a keynote speech at the Founder Showcase in San Francisco on June 15th. That’s the deal you get when you’re raising in a good market for startup financing. That’s fine.

Pre-Money Valuation 336

Pre-Money Valuation Valuation Silicon Valley Stock 336

View from Seed

SEPTEMBER 19, 2019

When I started out in VC, there was a strong consensus around early stage investors that the “right” level of ownership was 20%. Fast forward 12 years or so and I’m seeing early stage funds exhibit some of the same dynamics around ownership. Pretty much every firm was targeting at least 20% ownership.

Dilution 136

Dilution Early Stage Business Model Founder 136

Both Sides of the Table

JUNE 5, 2015

I am reminded of this problem every time my firm does a financing where a note went before us but more specifically I was reminded by this great post by Brad Feld to talk about the pre-money vs. post-money conversion issue. So how DOES a VC think about financings at early stages? It’s very simple. Size of my check.

Pre-Money Valuation 150

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

Austin Startup

FEBRUARY 13, 2019

The first one relates to the most important investor…you, the founder(s)! Either way, if you know you’re going to fail, it’s much better to do so with your own money on the line than money that also costs you in dilution, perpetuity or more. Bootstrap if you can, for as long as you can As a startup you’ll likely fail.

Strategic Investors 49

Strategic Investors Austin Angel Investor Bootstrapping 49

Both Sides of the Table

SEPTEMBER 18, 2014

It’s like we need a finance 101 course for entrepreneurs. In finance they call it “terminal value” but the truth is the price is as arbitrary at your A round as it is at your seed round. And now I have to explain to team that they’re taking more dilution than they expected if we do a down round.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Haystack

JULY 8, 2018

So, that’s why I’m writing this short post specifically for 1) employees of early-stage startups and 2) the earliest investors in these startups, who are often themselves new to the entire sector. And as a disclaimer, 1) I am figuring this out myself in real-time.

Early Stage 95

Early Stage Dilution Private Equity Common Stock 95

Both Sides of the Table

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.). 5 million was always the classic definition of an A-round between the late nineties (crazy financings aside) and say 2007.

Cap Table 399

Cap Table Silicon Valley Term Sheet Finance 399

Feld Thoughts

JULY 29, 2011

Finance Friday’s gets off the ground with today’s post by introducing you to an imaginary startup, the entrepreneurs that we’ll being following throughout the series, and their first challenges: splitting up the founders’ equity and addressing the case where one of the founders provides the initial seed capital for the business.

Equity 137

Equity Finance Pre-Money Valuation Denver 137

VC Cafe

FEBRUARY 27, 2024

A founder asked me what makes a $2M round “pre-seed”? While the answers are somewhat semantic, the pre-seed funding round is making a comeback in 2024 startup financing. Pre-seed rounds accounted for 14% of all seed stage deals in 2023, up from just 5% in 2020 according to Pitchbook data and I predict it will be even higher in 2024.

Valuation 186

Valuation Software Review Generative AI Technical Review 186

K9 Ventures

JUNE 12, 2012

This situation is not always in the best interest of founders. Founders typically get their equity in a company once — at the time of founding and then get diluted with each subsequent round of financing. Some founders like to think that if they raise a lot of money now, they will never need to raise money again.

Venture Capital 117

Venture Capital Silicon Valley Founder Seed Stage 117

View from Seed

JANUARY 26, 2016

There are a number of factors that have contributed to the rise of pre-seed rounds, but the strongest have been the frothy late-stage financing market, coupled with both the scaling-up of some of the early winners in the institutional seed ecosystem and the scaling-down of some larger funds that retrenched after the financial crisis.

Seed Stage 120

Seed Stage Early Stage Cofounder Finance 120

K9 Ventures

JUNE 12, 2012

This situation is not always in the best interest of founders. Founders typically get their equity in a company once — at the time of founding and then get diluted with each subsequent round of financing. Some founders like to think that if they raise a lot of money now, they will never need to raise money again.

Venture Capital 105

Venture Capital Silicon Valley Founder Seed Stage 105

The Equity Kicker

MAY 14, 2012

Twice in the last week I found myself coaching founders on how to build a financing plan around value creation milestones so I thought I would share what I said here. Given that the valuation of a startup increases when milestones like these are hit it makes sense to build a financing plan based on when they are likely to come in.

Finance 118

Finance Valuation Venture Capital Dilution 118

Gust

OCTOBER 12, 2011

Last week , we took the plunge and began dissecting an example term sheet for a convertible debt financing round piece by piece. In Part II, we looked at the mandatory conversion language that is at the heart of any convertible debt financing. Same, except at the option of the noteholders (per the term sheet example above).

Finance 107

Finance Term Sheet Pre-Money Valuation Early Stage 107

Both Sides of the Table

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. a priced/valued preferred stock financing)?&#. Why many early-stage investors DO price rounds (e.g.

Equity 319

Equity Early Stage Angel Investor Valuation 319

Gust

OCTOBER 21, 2011

To account for scenarios in which the startup is acquired before it has a chance to complete a priced equity financing round, most term sheets and deal documents contain a “ change in control ” provision. In descending order of preference from the founders’ point of view: 1. What happens to the outstanding convertible notes?

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Both Sides of the Table

DECEMBER 1, 2009

I was reading one of my favorite websites for entrepreneurs, VentureHacks, this weekend and noticed that they are running a long piece on how to pick a co-founder. Once it’s set up I recommend bringing in a co-founder and giving them 10-30% of the company depending upon when you bring them in. You’ll be fine.

Hiring 289

Hiring Cofounder Dilution Startup 289

David Teten

AUGUST 21, 2019

Most founders who are raising capital look first to traditional equity VCs. Revenue-Based Investing (“RBI”) is a new form of VC financing, distinct from the preferred equity structure most VCs use. For more background, see Revenue-Based Investing: A New Option for Founders who Care About Control. Less or no dilution.

Revenue 60

Revenue Liquidation Preference Equity Cofounder 60

keen.io

FEBRUARY 5, 2013

The founders had been dropping hints that they wanted me to join them. To begin answering this question, I started on a quest to understand startup financing. These were the best resources I found: Equity for Early Employees in Early Stage Startups. Startup Equity for Early Employees. 8 and 2.5%

Salary 50

Salary Equity Startup San Francisco 50

Both Sides of the Table

SEPTEMBER 5, 2012

Was Paul Graham right in his “high resolution” financing post? In fact, most early investor work hard to help their startups get to the next level so it makes no sense for the angel investor and founders to be at odds. Convertible debt WITH a cap is stupid for founders. Some thoughts on raising angel money.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Hunter Walker

JANUARY 15, 2016

By the end of 2004 I had brought on two co-founders: John Vars – who is now the Chief Product Office at TaskRabbit, and Steven Reading took over Sales and Revenue. How do founders think about whether it’s time to move on or not? Ben Horowitz talks about asking founders what secret they know that no one else does.

Technical Review 48

Technical Review Startup Cofounder SMS 48

David Teten

NOVEMBER 17, 2011

I’ve often found it helpful to have on hand a simple model showing the impact of each financing stages on all team members, suitable for sharing with everyone in the company. In particular, this model is designed to help all team members understand the impact of dilution on their options.

Employee 155

Employee IRR Startup Mexico 155

The Startup Lawyer

AUGUST 22, 2011

Here’s a list of the top 5 deal terms that cause harm to startups at the seed financing stage and therefore should be avoided: 5. This is something you might see in a late stage private equity financing with a company that has a history of generating revenue. It does not belong in any early stage deal.

Angel Investor 99

Angel Investor Dividend Dilution Cofounder 99

www.instigatorblog.com

OCTOBER 23, 2010

David Crow just posted about this very topic: Founders vs. Early Employees and shows the Venture Hacks chart. David’s absolutely correct when he writes, “Remember the goal is to incent early employees to have an emotional ownership of the product and company they are building. the better the startup will be.

Equity 41

Equity Employee Startup Vesting 41

Both Sides of the Table

APRIL 14, 2012

What I want to talk about today is one of the insider baseball discussions of our industry this past week: The odd fact of the $500 million financing round completed just before the company sold for a B. You just said, “nobody would take 1-2% dilution.” But I owe it to my existing investors and co-founders to listen.

Valuation 316

Valuation Balance Sheet Dilution Term Sheet 316

David Teten

JANUARY 21, 2021

This essay is part of a series on alternative VC: I: Revenue-Based Investing: a new option for founders who care about control. III: Why are Revenue-Based VCs investing in so many women and underrepresented founders? VI: Revenue-based financing: The next step for private equity and early-stage investment.

Equity 78

Equity Revenue Cofounder Colorado 78