YoungUpstarts

SEPTEMBER 16, 2015

What’s critical for entrepreneurs to understand is that valuations for startups do not increase at a linear rate; they increase geometrically based on achieving the right milestones. The best entrepreneurs raise enough money to achieve a set of interim milestones and then raise capital again at a significantly increased valuation.

Valuation 100

Valuation Dilution Chicago Technical Review 100

David Teten

JANUARY 19, 2021

More and more startups are pursuing Revenue-Based VCs , but “RBI” doesn’t fit everyone. Flexible VC 101: Equity Meets Revenue Share. By tying payments to actual revenues, founders and investors remain aligned around the company’s real-time performance, good or bad. Flexible VC: Revenue -based. Of the Inc.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

Startup Professionals Musings

MARCH 14, 2020

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 308

Due Diligence Intellectual Property Preferred Stock Seed Stage 308

Both Sides of the Table

NOVEMBER 14, 2017

As an early-stage VC I love this phase. Throughout the first year we made many fixes and saw our revenue base in these markets accelerate so we felt we were ready to attack Los Angeles, amongst the most important storage markets in the country.

Operations 286

Operations New York City Technical Review Startup 286

Both Sides of the Table

OCTOBER 1, 2009

Consumer spending is 70% of the economy and will continue to be stretched – We can look all we want at tech innovation, VC funding cycles and hot M&A deals, but ultimately growth and therefore investment must be underpinned by revenue. This has a tangible impact on the valuation of start-ups and the pace of investment.

Technical Review 269

Technical Review Stock Hawaii Early Stage 269

Tim Keane

JANUARY 12, 2010

Term-sheets and Valuations: Thinking about Negotiations.   I’ve sat down with entrepreneurs and a copy of a term sheet guide I like [ “Term Sheets & Valuations - A Line by Line Look at the Intricacies of Venture Capital Term Sheets & Valuations ” by Alex Wilmerding, Aspatore Press.] The Valuation Question.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

The Next Web

SEPTEMBER 13, 2013

Many Asian entrepreneurs tell me that they want to raise funds from Silicon Valley firms because they perceive the valuations to be higher. But the problem with this is that most VCs in the Valley, especially early stage ones, only like to invest in companies that are within driving distance from their offices.

Asia 132

Asia Silicon Valley India Term Sheet 132

View from Seed

APRIL 30, 2015

Especially in the early stages, so much about the company may change in how they think about product or go-to-market — and change multiple times — before raising an institutional round. NVV: Let’s talk about the seed stage specifically. Traction and revenue? NVV: Is there any dilution?

Term Sheet 120

Term Sheet Equity Startup Seed Stage 120

Austin Startup

FEBRUARY 13, 2019

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. Some came from angel investors, but we also sought out industry experts to be early contributors in this stage, which leads me to tip number three.

Strategic Investors 49

Strategic Investors Austin Angel Investor Bootstrapping 49

VC Cafe

FEBRUARY 27, 2024

especially if the startup already has a product and revenue? In smaller funds, ticket sizes tend to be lower, so pre-seed is the only stage where micro funds are able to secure their minimum equity targets. Lower valuations and follow on valuation sensitivity – fundraising is a recurring event in the life of a startup.

Valuation 186

Valuation Software Review Generative AI Technical Review 186

Both Sides of the Table

SEPTEMBER 18, 2014

Revenue multiple? Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. How do you think they’ll feel if your next round is at a $50 million post money valuation and their hard-earned $25,000 is worth 0.05% of your company? People seem concerned about valuation.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

ReadWriteStart

SEPTEMBER 10, 2010

They already have several customers including some telcos, and are at about $350,000 in revenues. You can get cash without diluting your ownership in the company. Because customer financing equals revenue, not equity. Why not go further, develop more valuation, customer experience, and really, deeply validate the business?

Cloud 115

Cloud Silicon Valley Incubator Finance 115

Both Sides of the Table

APRIL 14, 2012

Did raising money at a $500 million valuation help secure the $1 billion deal? “it’s smart to use an impending investment valuation to drive a higher acquisition valuation” I would like to amend her statement slightly to read, “it’s smart to use an impending investment valuation to drive an higher acquisition.”

Valuation 316

Valuation Balance Sheet Dilution Term Sheet 316

Berkonomics

MARCH 21, 2019

If you are a going business with a track record of revenues, then the importance of accurate current financial statements cannot be overstated. If there is no record of revenues, see the “The Berkus Method” available with any search query for valuing the business before revenues. Let’s start with the basics.

Hockey Stick 63

Hockey Stick Liquidity Event Valuation Balance Sheet 63

Startup Professionals Musings

AUGUST 1, 2016

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 120

Due Diligence Intellectual Property Preferred Stock Seed Stage 120

Venture Chronicles

MAY 26, 2010

This is why early stage companies that raise a lot of capital are valued richly, it’s a compromise between the company and investors summed up as “I know you will only sell 40% of the equity but you need a pretty big chunk of capital so we’ll give you $10m and value you at $15m pre money instead of $5m&#.

Lean 40

Lean Early Stage Valuation Startup 40

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. Download the Startup Options Valuation model here. I couldn’t find one online, so I built it. Valuing startups is a far fuzzier process.

Employee 155

Employee IRR Startup Mexico 155

View from Seed

JANUARY 26, 2016

With that in mind, let’s look at an illustration of these trends below, which demonstrates what’s been happening to early-stage financing rounds over the last 15 years or so. Series A investors invested quite early, often before product/market fit. Also, the stage of the company tends to be very early.

Seed Stage 120

Seed Stage Early Stage Cofounder Finance 120

Berkonomics

DECEMBER 20, 2018

Why are you so strongly sold on royalty licensing as the most effective way to finance a tech-based early stage company? Arthur: The usual royalty revenue sharing funding agreement is for an agreed period – and commences on the generation of revenues by the royalty issuer (company licensing the IP.)

IP 54

IP Intellectual Property Investment Bankers Product 54

David Teten

NOVEMBER 10, 2011

This is designed to be a simple end-to-end financial model for an early-stage startup. The Income Statement sheet allows you to model expenses and revenues as they occur. We included a Discounted Cash Flow Valuation tab for the sake of completeness, but it’s irrelevant for most startups. More on this in a later blog post.

Balance Sheet 154

Balance Sheet Startup Equity Valuation 154

Berkonomics

DECEMBER 20, 2018

Why are you so strongly sold on royalty licensing as the most effective way to finance a tech-based early stage company? Arthur: The usual royalty revenue sharing funding agreement is for an agreed period – and commences on the generation of revenues by the royalty issuer (company licensing the IP.)

IP 48

IP Intellectual Property Investment Bankers Product 48

Gust

SEPTEMBER 17, 2014

Revenue multiple? Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. How do you think they’ll feel if your next round is at a $50 million post money valuation and their hard-earned $25,000 is worth 0.05% of your company? People seem concerned about valuation.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Gust

OCTOBER 12, 2011

Particularly when there are multiple closings taking place over a period of months, the fuse burns awfully quickly on a 12-month note given the many competing priorities of early stage entrepreneurs. Entrepreneurs generally prefer #2, provided it’s at a valuation that wouldn’t be absurdly dilutive given the amount of notes outstanding.

Finance 107

Finance Term Sheet Pre-Money Valuation Early Stage 107

The Equity Kicker

MAY 14, 2012

There are certain types of events that investors look to as evidence that a company has overcome certain challenges and has therefore reduced risk in the business and become deserving of a higher valuation. achieving first revenues. breaking through revenue thresholds – e.g. run-rates of £1m, £5m, £20m and so on.

Finance 118

Finance Valuation Venture Capital Dilution 118

VC Cafe

JUNE 10, 2022

Until now, early stage startups were relatively unaffected. According to new research by Pitchbook , the trickle down effect has already started in seed and series A startups with round sizes and valuations shrinking in size compared to 2021. Forget about Unicorns (valuations), it’s all about Centaurs ($ ARR).

Valuation 151

Valuation Marketing Venture Capital 151

View from Seed

JUNE 30, 2015

As a founder, I think it’s easier to talk to potential investors about where they invest across the lifecycle of a company (whether it’s truly early-stage/early lifecycle, for instance), versus round stages like seed, series A, etc. Almost all VCs actually invest across this spectrum.

Seed Stage 120

Seed Stage Syndicate Syndication Dilution 120

Berkonomics

DECEMBER 6, 2010

Earlier, I stated that stock options are the currency of early stage business. Because the valuation is now a requirement under Rule 409a of the Internal Revenue Code, most companies with stock option plans today have fairly valued common stock with known prices per share.

Stock Options 61

Stock Options Stock Warrant Common Stock 61

Hippoland

MAY 16, 2018

inject more capital into the company) before their companies get to the next stage. This is both greater risk and reward – pre-seed funds can gain more ownership in companies by putting more money into the businesses at lower valuations. So we see higher valuations in this space. E.g. $200k on $3m.

Seed Stage 48

Seed Stage Valuation Convertible Security Equity 48

Hippoland

MAY 16, 2018

inject more capital into the company) before their companies get to the next stage. This is both greater risk and reward – pre-seed funds can gain more ownership in companies by putting more money into the businesses at lower valuations. So we see higher valuations in this space. E.g. $200k on $3m.

Seed Stage 48

Seed Stage Valuation Convertible Security Equity 48

Berkonomics

AUGUST 27, 2015

They financed their companies, to the extent possible, in a manner minimizing the cost of capital, planning for organic growth in the number of customers served and in associated revenues. As the business owners had a longer-term perspective, decisions were made with greater deliberation and with a more conservative recognition of risk.

Intellectual Property 48

Intellectual Property Balance Sheet Stock Options Valuation 48

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. VCs tend to demand more control of your spending and strategic decisions, with required board seats and lower valuations.

Angel Investor 246

Angel Investor IRR Venture Capital Valuation 246

Startup Professionals Musings

JUNE 13, 2020

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. VCs tend to demand more control of your spending and strategic decisions, with required board seats and lower valuations.

Angel Investor 314

Angel Investor Entrepreneur IRR Valuation 314

Up and Running

SEPTEMBER 20, 2021

For instance, the cap table will help you with various possibilities while running business activities like available options and pre-money valuations faster. The data presents a historical insight on a cap table that can affect the valuation of your startup when it comes time for a new round of fundraising. Total share ownership.

Cap Table 112

Cap Table Pre-Money Valuation Stock Options Option Pool 112

dondodge.typepad.com

JANUARY 15, 2011

Entrepreneurs face some pretty tough questions at a very early stage. How much equity should I grant to early employees? The entrepreneur expects the company to be worth many times this valuation and so does the investor. So they will give you a pre-money valuation somewhere around the amount you raise.

Equity 40

Equity Employee Dilution Valuation 40

www.startupnorth.ca

OCTOBER 23, 2010

But for every founder, there is an early employee that takes near equal risks in joining an early-stage company. I would assume that they are very similar but given the lower valuations and this may change the salary/options mix. Darmesh Shah has a great list of insights for employees joining early stage companies.

Employee 41

Employee Founder Salary Equity 41

Both Sides of the Table

FEBRUARY 25, 2010

million at a $15 million pre-money valuation. But we weren’t optimizing for dilution – we were building a $1 billion+ company and we wanted the runway to succeed. Morgan Stanley had proposed a higher valuation to let them in. 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 Due Diligence Venture Capital 301

www.paulgraham.com

APRIL 28, 2010

There never has to be atime when you have no revenues. Another concept we need to introduce now is valuation. I say "in theory" because in early stageinvesting, valuations are voodoo. As a company gets more established,its valuation gets closer to an actual market value. They just want to invest in this startup.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76