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

AUGUST 4, 2014

The value in a startup is all about tangible results, so there is no equity value in the idea alone. Each co-founder should get equity for value, based on these key variables: Lived a key role in a previous startup. Your idea is not intellectual property yet, so it has no inherent value.

Cofounder 261

Cofounder Stock Founder Technical Cofounder 261

Startup Professionals Musings

AUGUST 24, 2016

The value in a startup is all about tangible results, so I see no equity value in the idea alone. Each co-founder should get equity for value, based on these key variables: Lived a key role in a previous startup. Your idea is not intellectual property yet, so it has no inherent value. But don’t get greedy.

Equity 120

Equity Cofounder Technical Cofounder Intellectual Property 120

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

Startup Professionals Musings

APRIL 23, 2012

The easy answer of splitting it equally among all co-founders, since there is minimal value at that point, is usually the worst possible answer, and often results in a later startup failure due to an obvious inequity. In the real world, the "idea" is a very small part of the overall equation. Domain expertise and connections.

Intellectual Property 252

Intellectual Property Equity Cofounder CTO Hire 252

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

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

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

Berkonomics

SEPTEMBER 28, 2017

Here’s an example: First, a brand-new enterprise is often formed from the efforts of several “partners”, each with an expertise valued by the others. An option plan should carve out an addition of about 15% of the “fully diluted” shares. Equity is divided between the founders and the business begun. There are some rules.

Early Stage 102

Early Stage Equity Stock Options Vesting 102

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

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

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

NOVEMBER 8, 2010

The easy answer of splitting it equally among all co-founders, since there is minimal value at that point, is usually the worst possible answer, and often results in a later startup failure due to an obvious inequity. In the real world, the "idea" is a very small part of the overall equation. Domain expertise and connections.

Equity 228

Equity Intellectual Property Cofounder CTO Hire 228

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

This is going to be BIG.

JANUARY 18, 2024

They might not understand how a pre-revenue startup could be worth anything, let alone be valued at $5mm. 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.

.Net 88

.Net Cap Table Startup Technical Review 88

Both Sides of the Table

JULY 22, 2010

Back in 1999 when I first raised venture capital I had zero knowledge of what a fair term sheet looked like or how to value my company. The VC’s $1 million still buys them 25% of your company – it’s you who has diluted to 60% ownership rather than 75%. Investors own 25%, the founders own 75%. This is a shame.

Valuation 405

Valuation Liquidation Preference Pre-Money Valuation Term Sheet 405

Both Sides of the Table

SEPTEMBER 10, 2021

I often answer the same way … * “First, yes, nearly every corner of our market is over-valued. 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). Are we in a bubble?” By definition?—?I’m So in a way it’s self selecting.

Pre-Money Valuation 471

Pre-Money Valuation Valuation Venture Capital Early Stage 471

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

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 color of any investor’s money may look the same, but it won’t help you if the price you pay is higher than the value it brings.

Angel Investor 246

Angel Investor IRR Venture Capital Valuation 246

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

Startup Professionals Musings

APRIL 12, 2021

The real value of these groups is the relationships you can build with key people who can help you later, as well as the early learning from the incubator organization. These programs don’t usually ask for equity, and they are particularly targeted to the early stages of your business to facilitate growth and survival.

Dilution 404

Dilution Incubator Bootstrapping Government 404

View from Seed

SEPTEMBER 9, 2014

For most of my career, I’ve served startups and early-stage companies as an operating executive or advisor. So when founders lose focus, they dilute their power and effectiveness, which diffuses the force of their impact. The COO now needs to unify them in a common cause and bring them together through a shared value system.

Hiring 336

Hiring Cofounder Startup Technical Cofounder 336

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

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

NOVEMBER 14, 2017

As an early-stage VC I love this phase. You start out with vision, you must adapt and have intellectual honesty once you stare at your data and know where your true sources of differentiation and value are. As a startup in this phase you often raise capital, get press, hire staff and everything feels possible.

Operations 286

Operations New York City Technical Review Startup 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

SEPTEMBER 28, 2014

Plus, most early-stage M&A fails so this isn’t likely a good use of capital for a young company). That is why these businesses are often valued more highly than other types of businesses. Your value creation must be at least 3x the amount of cash your burning or you’re wasting investor value.

Burn Rate 383

Burn Rate Balance Sheet .Net Valuation 383

Both Sides of the Table

JUNE 5, 2011

There is an inherent value that any company has. On a public stock market that is the value that investors place on future free cash flows of the business discounted to today’s date to account for the time value of money. Every day shareholders vote on the value of the company by buying or selling shares.

Pre-Money Valuation 336

Pre-Money Valuation Valuation Silicon Valley Stock 336

View from Seed

APRIL 30, 2015

Use good judgment, talk to your co-founders/investors/lawyers, and partner with a bank that values transparency and relationships such as SVB.]. 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.

Term Sheet 120

Term Sheet Equity Startup Seed Stage 120

View from Seed

APRIL 16, 2015

When raising capital, it’s important to focus on raising enough money to get your company past big value inflection points. Often, when I speak to very early-stage founders, the conversation around value focuses on achievements. These are four key value inflection points to reach and pass. Can this team do it?

Seed Stage 120

Seed Stage Cofounder Early Stage Startup 120

Berkonomics

NOVEMBER 23, 2023

and here is the usual early-stage trap… First, a brand-new enterprise is often formed from the efforts of several “partners”, each with an expertise valued by the others. An option plan should carve out an addition of about 15% of the “fully diluted” shares. Equity is divided between the founders and the business begun.

Equity 62

Equity Stock Options Vesting Early Stage 62

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

David Teten

JANUARY 19, 2021

The value ascribed by subsequent investors (in a secondary); buyers (acquisition); or the public markets (IPO). Seed-stage compatible: Like traditional equity VC investors, Flexible VCs accomodate early-stage investment risk within their portfolios better than a traditional RBI funder. Composition of Returns.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

View from Seed

SEPTEMBER 14, 2021

You’d expect the number to go down over time, but it’s notable that even 14 years later, VC funds are showing that a very significant % of value is still illiquid. And given that TVPI for these funds is meaningfully higher today, how long will LPs need to wait to see that value realized? How have more recent vintages performed?

Valuation 319

Valuation Pre-Money Valuation Distribution Early Stage 319

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. The color of any investor’s money may look the same, but it won’t help you if the price you pay is higher than the value it brings.

Angel Investor 314

Angel Investor Entrepreneur IRR Valuation 314

Berkonomics

FEBRUARY 23, 2023

How do you know when you are at or near that right point to sell for maximum value? Those of us in the business of calculating (guessing) this mythical peak in value often make the same mistake as our entrepreneurs. So, the question: load up with more equity and dilution? But there are wolves in the woods. Or sell now?

Dilution 62

Dilution Valuation Early Stage Equity 62

View from Seed

SEPTEMBER 14, 2021

You’d expect the number to go down over time, but it’s notable that even 14 years later, VC funds are showing that a very significant % of value is still illiquid. And given that TVPI for these funds is meaningfully higher today, how long will LPs need to wait to see that value realized? How have more recent vintages performed?

Valuation 295

Valuation Pre-Money Valuation Distribution Early Stage 295