ithacaVC

NOVEMBER 14, 2014

Funding lets you invest in growing your company faster than revenue growth would normally allow. Revenue is how traditional businesses get valued. Early stage companies often don’t have revenue or have revenue so low, it’s not a real indicator of future potential. This works for revenue or active users.

Valuation 69

Valuation Startup Down Round Early Stage 69

Berkonomics

JUNE 8, 2017

They have been burned too badly during the last decade by overvaluing businesses and finding themselves like friends and family, “stuffed” into a down round of lower valuation when a company takes its next round of financing from the next step, venture capitalists. These include Y-Combinator and TechStars, among others.

Private Equity 106

Private Equity Valuation Cap Table Accredited Investor 106

Hippoland

NOVEMBER 13, 2016

Primarily these things: Companies dissolvingCompanies exitingCompanies raising equity rounds All of these events are concrete events that attach a numerical value to a company. If a company raises a good round, it gets marked up to the new value. And if a company takes a down-round, it gets marked down.

IRR 48

IRR Valuation Portfolio Due Diligence 48

Gust

SEPTEMBER 17, 2014

How will you price the next round? Your A round? Revenue multiple? Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. And now I have to explain to team that they’re taking more dilution than they expected if we do a down round. A down round?

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

The Equity Kicker

JANUARY 22, 2014

To meet growth and revenue targets, you hire and spend like never before. You fall into the spiral of death: head of sales gets replaced (at least once), CEO gets replaced (at least once), a down-round financing happens (if lucky). Investors pay a high valuation to get into a good deal, betting on continued fast growth.

Venture Capital 102

Venture Capital Down Round Valuation Lean 102

Growthink Blog

MAY 23, 2011

An entrepreneur starts a company in classic " bootstrap " fashion - with a combination of sweat equity and their own financial resources. This venture capital financing - usually between $3 and $10 million - is the first of a number of rounds of outside investment over a period of three to five years.

Angel Investor 112

Angel Investor Venture Capital Sweat Equity Cram Down 112

David Teten

AUGUST 7, 2019

Likely signs of a Value investment: the company has challenges in filling out the round; the investors have more negotiating leverage than the founders during the closing process; the company has significantly better metrics (e.g. LTV / CAC, revenue growth, etc.) were clearly Momentum, but [in hindsight] they were also Value.”

Venture Capital 60

Venture Capital Valuation Stock NDA 60

VC Cafe

SEPTEMBER 26, 2022

Many startups that raised money in 2021 on inflated valuations that were detached from their actual value, are struggling to raise up-rounds and face difficult choices these days: down rounds, early sellout or failing altogether. A good way to think about valuation in seed/pre-seed is to reverse engineer the next round.

Founder 187

Founder Startup Valuation Pre-Money Valuation 187

Berkonomics

JANUARY 20, 2010

They have been burned too badly during the last decade by overvaluing businesses and finding themselves like friends and family, “stuffed” into a down round of lower valuation when a company takes its next round of financing from the next step, venture capitalists.

Private Equity 69

Private Equity Valuation Cap Table Accredited Investor 69

Scalable Startup

OCTOBER 26, 2011

It’s no longer based on a hunch, unless the company is in trouble and needs money to finish what the first round started. This problem often leads to a lowered valuation or “down round” Not a great scenario.) If the company is doing well, the second round is easier to acquire.

Mezzanine 22

Mezzanine Due Diligence IPO Angel Investor 22

Altgate

MARCH 8, 2009

Growth stage investors are usually the Series B or C investors who come in when the product is in the market but there is little or no revenue and the team is probably in the 20-something range with the goal to ramp it up to 40-50 employees with the new money, build out a sales team, etc. trillion as late as last month.

Later Stage 34

Later Stage Early Stage Venture Capital Portfolio 34

abovethecrowd.com

APRIL 20, 2016

A high performing, high-growth SAAS company that may have been worth 10 or more times revenue was suddenly worth 4-7 times revenue. Also, they have a strong belief that any sign of weakness (such as a down round) will have a catastrophic impact on their culture, hiring process, and ability to retain employees.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

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. forward revenue for SaaS businesses when in the years before it had been less than 5x. Why Down Rounds are Harder Than You May Think. Down rounds are hard.

Valuation 150

Valuation Down Round Startup Later Stage 150

Reid Hoffman

JUNE 8, 2021

If I could add one more bonus idea, this is if you’re incorporating your company, I would think about taking 1% or 2% equity and setting it aside for other stakeholders. But now our hosts are really angry, and they have a huge revenue shortfall. And I said, I think it’s going to be a down round, because people are scared.

Silicon Valley 69

Silicon Valley Hosting Rhode Island Design 69

Reid Hoffman

JUNE 8, 2021

If I could add one more bonus idea, this is if you’re incorporating your company, I would think about taking 1% or 2% equity and setting it aside for other stakeholders. But now our hosts are really angry, and they have a huge revenue shortfall. And I said, I think it’s going to be a down round, because people are scared.

Silicon Valley 36

Silicon Valley Hosting Rhode Island Design 36

www.paulgraham.com

APRIL 28, 2010

There never has to be atime when you have no revenues. It costs you a little more equity, but being able to play the two firms off each other (as well as ask one if the other is being out of line) is invaluable. 10 ]One new thing the company might encounter is a downround , or a funding round at valuation lower than the previousround.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

Tim Keane

AUGUST 20, 2009

"  The problem has been that too-high valuations and too generous terms have spawned painful down rounds that squash the entrepreneur and his early investors.    New money, usually VC money, comes in and crams down those early investors and takes substantial shares from the entrepreneur. 

Milwaukee 60

Milwaukee Bootstrapping Cram Down Deal Structure 60

VC Cafe

MAY 18, 2022

venture capital and private equity) the VC index (by Refinitiv) shows a nearly 40% decline. Down rounds are coming. David Sacks offers a few benchmarks on growth rates (revenue), gross margins, CAC payback and burn. If they’re down 60%, there’s a good chance you’re in a similar position. Multiples by vertical.

Term Sheet 190

Term Sheet Startup Valuation Ukraine 190