Both Sides of the Table

SEPTEMBER 15, 2022

Should SaaS companies trade at a 24x Enterprise Value (EV) to Next Twelve Month (NTM) Revenue multiple as they did in November 2021? billion in value to Upfront from just 6 deals that WERE NOT immediately up and to the right. Probably not and 10x (May 2022) seems more in line with the historical trend (actually 10x is still high).

Technical Review 416

Technical Review Pre-Money Valuation San Francisco Valuation 416

Both Sides of the Table

OCTOBER 14, 2011

The goal is to have the value of the startup go up by enough that you own a smaller percentage of a much larger business and therefore your total personal value goes up. million pre-money valuation, which is a $10 million post-money) you get diluted by 25% (2.5m / 10m). This post originally appeared on TechCrunch.

Dilution 394

Dilution Pre-Money Valuation Startup Valuation 394

View from Seed

OCTOBER 24, 2019

The reality is that if a founder raised every one of these rounds, and lead investors always got their “target” ownership, the level of dilution would be ridiculous. No good investor would want the founder/CEO of a company to have insufficient ownership by the series A, and every founder I know is sensitive to taking too much dilution.

Dilution 149

Dilution B2B Burn Rate Early Stage 149

View from Seed

MAY 2, 2019

The challenge with pre-seed rounds is that pricing will sometimes be pretty dilutive. My experience is that YC partners tend to encourage founders to hold off on taking more money shortly after getting into YC, arguing that their value will increase significantly in just a few months. The Pre-YC Pre-Seed.

Early Stage 214

Early Stage Dilution Valuation .Net 214

Both Sides of the Table

JULY 17, 2018

If you can any value please feel free to share this post or RT any individual Tweet. Hire when it feels like you're bursting at the seems or missing a critical skill on existing team or have figured out how to scale growth  —  @msuster 6/ Raising capital at very high prices helps avoid short-term dilution.

Founder 242

Founder Dilution Software Review Later Stage 242

Startup Professionals Musings

AUGUST 21, 2019

A common practice is to hire local employees who know the geographic culture, even though this may well dilute the company culture. This usually marks the end of organic growth, as partnerships and alliances aid growth, but again dilute the focus on culture. Product-line expansion. Efficiency and scale. Consolidation.

Dilution 224

Dilution Merger Flash Global 224

View from Seed

JANUARY 13, 2021

And yes, a seed fund may have a tougher time holding on to their ownership down the road, and thus get diluted down. We’ve had multiple companies in our early funds that hit bumps and had to raise flat rounds, which hurts from a dilution standpoint but doesn’t wipe out our position. So yes, seed funds will own less. 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

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

Startup Professionals Musings

SEPTEMBER 27, 2023

It’s disconcerting for most to realize that these shares are initially worth nothing, and the challenge is to get that value up as quickly as possible, without losing it just as quickly to investors, lazy partners, and taxation. This is called stock dilution control. Minimize your own loss of ownership as major investors contribute.

Stock 240

Stock .Net Vesting Founder Vesting 240

SoCal CTO

SEPTEMBER 27, 2011

Same Value for Sweat Equity as Investment Dollars? I also believe that early employees should be bringing higher value than early investor dollars as they can and should contribute to the concept greater than an investor. They are partially rewarded by the increase in value of their equity. Manager or Junior Engineer 0.2 – 0.33

Early Stage 391

Early Stage Equity CTO Hire Sweat Equity 391

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

Startup Professionals Musings

JANUARY 15, 2021

It’s disconcerting for most to realize that these shares are initially worth nothing, and the challenge is to get that value up as quickly as possible, without losing it just as quickly to investors, lazy partners, and taxation. This is called stock dilution control. Minimize your own loss of ownership as major investors contribute.

Vesting 298

Vesting Dilution Stock Founder Vesting 298

Gust

APRIL 11, 2014

Let’s get right down to business: Dilution of founders’ and other early shareholders’ equity in startups is frequently a subject of intense interest and debate. That’s the concept of what some call mathematical dilution. That is not economic dilution, but rather its opposite ( accretion ).

Dilution 162

Dilution Equity Pre-Money Valuation Prospectus 162

The Next Web

OCTOBER 7, 2013

Every time a startup raises capital, all common shareholders are diluted. All of the estimates displayed above are figures prior to any dilution. As stated earlier, investors will dilute ownership upon nearly every round of financing. So, if o = initial ownership and y = total dilution, x = o * (1 – y). N: exit size.

Engineer 129

Engineer Dilution Option Pool Vesting 129

Gust

NOVEMBER 1, 2011

The concept is simply…since: Return on Investment (ROI) = Terminal (or Harvest) Value ÷ Post-money Valuation. (in in the case of one investment round, no subsequent investment and therefore no dilution). Then: Post-money Valuation = Terminal Value ÷ Anticipated ROI. In this example, our Terminal Value is $42.5

Venture Capital 161

Venture Capital Valuation Pre-Money Valuation Post-Money Valuation 161

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

FEBRUARY 8, 2016

Much has changed in the past four months of the technology startup world and how outsiders value the business. That’s economics (or statistics) for asking whether price ratios of how investors value companies was simply coming back to historical norms. Optimize for a W more than % dilution in these circumstances.

Burn Rate 150

Burn Rate Cap Table Balance Sheet Dilution 150

Startup Professionals Musings

SEPTEMBER 2, 2017

A common practice is to hire local employees who know the geographic culture, even though this may well dilute the company culture. This usually marks the end of organic growth, as partnerships and alliances aid growth, but again dilute the focus on culture. Product-line expansion. Efficiency and scale. Consolidation.

Dilution 134

Dilution Merger Flash Global 134

View from Seed

AUGUST 17, 2021

This is the implied rate of return of a fund based on the value (mostly unrealized) of a portfolio. at exit due to dilution. It creates dilution, and investing in these rounds increases your effective post-money. We deeply value these relationships, but they were not all perfectly planned.

IRR 205

IRR Dilution Founder Portfolio 205

ithacaVC

OCTOBER 10, 2017

Here is the big problem with investors – they dilute the founders’ ownership in the company. Let’s cover some basics: It is impossible to issue stock to investors without existing shareholders (founders, employees and prior investors) being diluted. Is this actually a big problem? Are the founders happy?

Dilution 53

Dilution Stock Options Stock Valuation 53

Startup Professionals Musings

AUGUST 31, 2018

Totally new and risky products will dilute your focus, and may confuse existing customers. An alliance with a distribution organization enhances the value to existing and new customers of both your solutions. You need to explore all these growth choices and others, and plan experiments to measure their value and timing.

Angel Investor 167

Angel Investor Dilution Software Review Distribution 167

YoungUpstarts

APRIL 19, 2012

When not approached carefully, growth can destroy value as it outstrips a company’s managerial capacity, processes, quality, and financial controls, or substantially dilutes customer value propositions. Every business must continually improve its customer value proposition better than its competition in order to stay viable.

Dilution 209

Dilution Virginia Management Washington 209

View from Seed

AUGUST 17, 2021

This is the implied rate of return of a fund based on the value (mostly unrealized) of a portfolio. at exit due to dilution. It creates dilution, and investing in these rounds increases your effective post-money. We deeply value these relationships, but they were not all perfectly planned.

IRR 156

IRR Dilution Founder Portfolio 156

Steve Blank

APRIL 10, 2019

With the observation that founders added value during the long runup in the growth stage, VCs began to cede compensation and board control to founders. There are four problems: First, as the company raises more money, the value of your initial stock option grant gets diluted by the new money in. See the HBR story here.).

Stock Options 333

Stock Options Stock Vesting Common Stock 333

Startup Professionals Musings

OCTOBER 14, 2013

A common practice is to hire local employees who know the geographic culture, even though this may well dilute the company culture. This usually marks the end of organic growth, as partnerships and alliances aid growth, but again dilute the focus on culture. Product-line expansion. Efficiency and scale. Consolidation.

Dilution 187

Dilution Merger Flash Global 187

Startup Professionals Musings

JULY 23, 2021

Every one of you business owners I know has worked hard to build your brand, and recognizes the critical value of instant brand recognition and leadership. We all strive to reduce costs and improve efficiency, but the ultimate test is the potential to erode values, culture, and brand image.

Leadership 426

Leadership Management Brazil Differentiation 426

Feld Thoughts

SEPTEMBER 12, 2018

First, Felicis Ventures is committing 1% on top of every check the firm writes in non-dilutive capital earmarked for “founder development” in coaching and mental health. The post Acknowledging The Value of Coaching and Therapy for Founders appeared first on Feld Thoughts.

Founder 116

Founder Cofounder Dilution Email 116

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. Fundraising debt.

Cofounder 127

Cofounder Burn Rate Technical Cofounder Seed Capital 127

View from Seed

DECEMBER 4, 2019

One of the things I pointed out in my prior post was that even though the 2007 vintage was 10 years old, the vast majority of the value was still unrealized. One or two of the best companies may continue to appreciate, but most of a VC’s portfolio has probably been realized, written off, or has maxed out its value. and DPI was 1.68.

LP 256

LP IRR Distribution Portfolio 256

Startup Professionals Musings

DECEMBER 29, 2021

Focus your marketing on real customer value. Concentrate on providing real data demonstrating value and return in actual scenarios, from existing customers. Don’t confuse and dilute your potential customer base by weakly trying to appeal to all. Case studies, supporting videos, and giveaways still work well in this regard.

Restful 336

Restful Differentiation Social Media Dilution 336

Startup Professionals Musings

OCTOBER 7, 2022

Strategies that I do not recommend include opening the discussion with a big number, hoping to make a more reasonable value feel like a good deal, or starting with a tiny number, hoping to entice interest from everyone. This is all about setting a credible current value on your startup -- not future value.

Preferred Stock 304

Preferred Stock Exit Strategy Equity Angel Investor 304

The Startup Magazine

FEBRUARY 2, 2021

Successful navigation toward this new, collaborative process requires companies and researchers to reimagine processes of new drug development at each phase, with an understanding of value creation. He designed an asset with commercial potential and the ability to create value, utilizing the preclinical process steps to create efficacy.

Technical Review 116

Technical Review Syria Developer United States 116

View from Seed

AUGUST 17, 2021

This is the implied rate of return of a fund based on the value (mostly unrealized) of a portfolio. at exit due to dilution. It creates dilution, and investing in these rounds increases your effective post-money. We deeply value these relationships, but they were not all perfectly planned.

IRR 136

IRR Dilution Founder Portfolio 136

The Startup Lawyer

MARCH 1, 2011

I hate non-dilution rights and if you are an entrepreneur you should, too. I’m not talking about price-based anti-dilution protection that is typical in an angel or VC round. But the fact that the startup’s founders are being diluted by such an issuance should provide enough protection.

Dilution 89

Dilution Equity Stock Startup 89

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%.

Valuation 405

Valuation Liquidation Preference Pre-Money Valuation Term Sheet 405

Startup Professionals Musings

JANUARY 14, 2015

A common practice is to hire local employees who know the geographic culture, even though this may well dilute the company culture. This usually marks the end of organic growth, as partnerships and alliances aid growth, but again dilute the focus on culture. Product-line expansion. Efficiency and scale. Consolidation.

Matching 120

Matching Marketing Dilution Startup 120