Both Sides of the Table

OCTOBER 11, 2009

They are usually offered around 0.25% of the companies equity in exchange for their role and I’ve seen many companies hand out a total of 2% to advisers. My main advice to you if you’re considering it is don’t waste much equity on it. Using this approach you may be able to get a few key advisers with no equity at all.

Advisory Board 306

Advisory Board Startup Equity Valuation 306

Both Sides of the Table

JANUARY 4, 2014

Equity for the future? If you are the person staying how resentful will you become working your arse off for equity that your co-founder who leaves will get value from. What should the financial settlement be for the founder leaves be? What mechanisms exist for mediating if you can’t come to a consensus on these issues?

Founder 340

Founder Cofounder Sacramento Technical Review 340

Both Sides of the Table

OCTOBER 1, 2009

We spent our future since the equity was artificial. 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. Consumer spending is where I’m dubious. So why the ’09 bounce? See point 2 below. million – take it.

Technical Review 269

Technical Review Stock Hawaii Early Stage 269

Both Sides of the Table

SEPTEMBER 28, 2014

So money spent should add equity value or create IP that eventually will. Think: If you raise $10 million at a $30 million pre ($40 million post) that investor needs you to exist for at least $120 million (3x) to hit his or her MINIMUM return target his or her investor’s are expecting.

Burn Rate 383

Burn Rate Balance Sheet .Net Valuation 383

Both Sides of the Table

JUNE 5, 2015

” Today I want to talk about how a VC thinks about equity pricing on your round and particularly if you’re coming off of a convertible note. Option pool (likely dilution in the future, which is a function of a higher price just not yet defined). Then you’ll willing to take more dilution for them. No problem.

Pre-Money Valuation 150

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

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). So in a way it’s self selecting. These days $10 million is quaint for the best A-Rounds and many are raising $20 million at $60–80 million pre-money valuations (or greater).

Pre-Money Valuation 471

Pre-Money Valuation Valuation Venture Capital Early Stage 471

Both Sides of the Table

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 lawyers will charge much more for equity.” Try doing THAT with equity. But people seem pretty focused on that number. Raising lower seems kind of like something is wrong.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Both Sides of the Table

SEPTEMBER 5, 2012

This time by the efforts of Adeo Ressi to introduce a new kind of structure called “ convertible equity.” My initial reaction to Adeo when we spoke was that while it may have solved some issues (debt versus equity) it didn’t solve the ones that I’ve been warning entrepreneurs about most loudly.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Both Sides of the Table

SEPTEMBER 29, 2009

This came in part due to the huge influx of money into VC but also because hedge funds and private equity shops with no VC experience wanted part of the action. High burn-rates fueled by over investment – One of the most damning things that happened to the start-up markets in 97-00 and 05-08 was the overfunding of technology companies.

Burn Rate 263

Burn Rate Valuation Pre-Money Valuation Private Equity 263

Both Sides of the Table

MARCH 21, 2010

I’ve heard the following so many times that it still makes me scratch my head, “if those guys are going to get rich off of our backs then we’re going to look like fools if we don’t have equity.&#. I’ve already made clear that I think raising equity from “strategic money&# is an oxymoron.

Warrant 298

Warrant Dilution Startup Stock Options 298

Both Sides of the Table

DECEMBER 1, 2009

I advocate treating them like a co-founder in every way except when they join and how much equity they get. You agonize over whether it is better to take a “A investor&# for 30% dilution or a “nice to have&# investor for 25% and on better terms.

Hiring 289

Hiring Cofounder Dilution Startup 289

Both Sides of the Table

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. Give them a large sum of equity. It is not uncommon to see startup founders walk before raising capital and take large pieces of equity with no vesting. Hire your co-founder. Vested over 4 years. Why risk it?

Cofounder 393

Cofounder Founder Vesting Founder Vesting 393

Both Sides of the Table

SEPTEMBER 12, 2010

Many of the growth equity firms have had outbound dialing programs for years. Growth equity firms typically target profitable businesses that are often not technical in nature. Perhaps outbound dialing / emailing programs worked well for growth equity firms in their core business. These kind of companies were seldom startups.

Programming 294

Programming Entrepreneur Private Equity Equity 294

Both Sides of the Table

APRIL 14, 2012

You are either bought for stock or for equity. Is your crappy little 12-person company really worth they and their shareholders diluting by 2% given more than a decade they’ve put in building one of the Internet’s most solid business social networks? You just said, “nobody would take 1-2% dilution.”

Valuation 316

Valuation Balance Sheet Dilution Term Sheet 316

Both Sides of the Table

MARCH 11, 2010

Let’s assume that the $2 million buys 25% of your company, which is the norm in an equity financing. I think that if you’re offered fair terms that aren’t destructively dilutive, preserve options for an exit, don’t put undue pressure on your company to do things too quickly you TAKE THE MONEY. add a buffer.

Venture Capital 319

Venture Capital Startup Silicon Valley Warrant 319

Both Sides of the Table

APRIL 25, 2011

The founders could reinvest this in growth (0% tax, focus on future equity growth) or take the profits of $12 million and divide amongst the founding partners. That is $12 million in profits over 3 years. There are at least two types of tech services businesses in my mind: 1.

Silicon Valley 332

Silicon Valley IP Dividend Finance 332

Both Sides of the Table

APRIL 14, 2010

Or you find out that management has been through a few rounds of dilution such that the management team only has 10-15% of the total equity of the company and as a new investor you know a priori that management is either going to quit soon after your investment or are going to ask you for a big increase in their equity package.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Pre-Money Valuation 289

Both Sides of the Table

OCTOBER 14, 2011

million pre-money valuation, which is a $10 million post-money) you get diluted by 25% (2.5m / 10m). But understanding how you’re likely to get diluted over time is a more difficult concept. And figuring out how much your equity may be worth over the course of a 5-year stint at a startup is even more complicated.

Dilution 394

Dilution Pre-Money Valuation Valuation Startup 394

Both Sides of the Table

NOVEMBER 23, 2012

And equal numbers of startups seeking celebrity endorsements in exchange for equity. Don’t give up your hard-earned equity to celebrities. So having a huge celeb who takes 10% of your company is – well – taking 10% dilution for 0% benefit. For the most part my advice is simple, “don’t bother.”

Startup 321

Startup Equity Warrant Dilution 321

Both Sides of the Table

FEBRUARY 14, 2016

In the case of startups the “buyer” is the VC looking to part cash for “purchasing” equity in your startup. Plus, down rounds trigger anti-dilution provisions. The most basic chart of microeconomics is a supply & demand curve. Demand represents a buyer and supply a seller.

Valuation 150

Valuation Down Round Startup Later Stage 150