Lightspeed Venture Partners

NOVEMBER 19, 2012

They talked about a referral program, as well as direct sales. The company did $250,000 in sales last year and is profitable. Barbara thought that the company should be further along for $240,000 already invested, and didn’t like that the founder only owned 43% and would be diluted by a further 10% in this round, so she passed.

Pre-Money Valuation 161

Pre-Money Valuation Alabama Valuation Churn Rate 161

Tim Keane

JANUARY 12, 2010

It also assumes the entire value of the investment is captured for investors at a sale of the company in the time specified in the term-sheet.   On the last line on page two of the workbook, you see the resulting returns to the entrepreneur with a variety of terms and valuations and assumptions. Let’s start at the end.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Lightspeed Venture Partners

OCTOBER 22, 2012

This implies a pre money valuation of $1.045M. See my breakdown of week 2 for more on how to calculate pre money valuation.). The sharks greeted this with skepticism, and rightfully so, especially given the short time the company has been in business and the relatively low sales volume.

Pre-Money Valuation 101

Pre-Money Valuation Valuation Dilution Differentiation 101

ithacaVC

DECEMBER 13, 2013

There are many reasons for this, but fundamentally, it is impossible to calculate a share price for the investment round unless you have complete agreement on how many shares are outstanding pre-money. The share price is calculated by taking the pre-money valuation and dividing it by the number of shares outstanding pre-money.

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

Gust

OCTOBER 21, 2011

For convertible notes, the only liquidity event we need be concerned with is an acquisition of the startup in the near future, before the maturity date; otherwise, the notes will convert to equity of one kind or another, and the eventual sale of that equity (in a public offering, acquisition, or private sale) is a different subject for another day.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Both Sides of the Table

SEPTEMBER 5, 2012

As in, “your money into my company will convert at a 15-20% discount to the next round of capital I raise with a maximum price of $8 million pre-money valuation (or whatever the cap was).” It has nowhere near the same dilutive effects as a full ratchet except in extreme edge cases. That would suck.

Liquidation Preference 354

Liquidation Preference Ratchet Equity Stock 354

K9 Ventures

MARCH 23, 2011

The founders’ interest is to maximize the valuation of the company at the time of a follow-on financing, thereby minimizing founder dilution. However, the note holders’ motivation is to minimize the valuation of the company so that the dollars committed as part of their note convert in to as large a piece of the company as possible.

Pre-Money Valuation 132

Pre-Money Valuation Valuation Equity Liquidation Preference 132

Seeing Both Sides

JULY 15, 2009

Entrepreneurs often mistakenly focus solely on the pre-money valuation while VCs look at multiple knobs in the negotiation to drive to a set of terms that, in total, they find acceptable. The first, and most focused on, is something called the pre-money valuation. What is the promote? Life isn’t fair.”).

Pre-Money Valuation 49

Pre-Money Valuation Option Pool Stock Options Post-Money Valuation 49

Scott Edward Walker

APRIL 9, 2012

First, the founders risk substantial dilution because it is often difficult for the founders and the investors to agree on a valuation for the startup and, accordingly, to agree on the percentage ownership the investor will receive. In addition, the issuance of shares of common stock creates three potential problems.

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Both Sides of the Table

OCTOBER 14, 2011

” Everybody knows that when you raise money at a startup your ownership percentage of the company goes down. million pre-money valuation, which is a $10 million post-money) you get diluted by 25% (2.5m / 10m). So here is our crack at explaining the world of dilution to you. million at a $7.5

Dilution 394

Dilution Pre-Money Valuation Startup Valuation 394

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. We had people hearing through the grapevine that we were about to raise money and new investors started calling us to get in on the deal. Any deal.

Technical Review 301

Technical Review Term Sheet Venture Capital Due Diligence 301

www.paulgraham.com

APRIL 28, 2010

Whatkind of anti-dilution protection do they want? For example, VCs generally write it into the deal thatin any sale, they get their investment back first. Some VCsnow require that in any sale they get 4x their investment backbefore the common stock holders (that is, you) get anything, butthis is an abuse that should be resisted.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

www.paulgraham.com

OCTOBER 23, 2010

The woman in charge of sales was so tenacious that I used to feelsorry for potential customers on the phone with her. Stephen Hawkings editor told him that every equationhe included in his book would cut sales in half. A 10% improvement in ease of use doesnt just increase your sales 10%. Its more likely to double your sales.

Startup 105

Startup Cofounder Software Stock 105

www.paulgraham.com

APRIL 28, 2010

You give a startup money and they give you stock. Youllprobably get either preferred stock, which means stock with extrarights like getting your money back first in a sale, or convertibledebt, which means (on paper) youre lending the company money, andthe debt converts to stock at the next sufficiently big fundinground. [

Angel Investor 63

Angel Investor Dilution Syndicate Syndication 63

Lightspeed Venture Partners

SEPTEMBER 23, 2012

The right number to focus on is pre money valuation as that is how an investor is valuing the company before the investment. Post money valuation = Pre money valuation + Investment. post money valuation and a $1.35M pre money valuation.

Pre-Money Valuation 158

Pre-Money Valuation Post-Money Valuation Valuation Dilution 158