Both Sides of the Table

JULY 29, 2010

We received so much positive feedback from our This Week in Venture Capital show walking through valuation calculations & term sheets that we decided to do a Q&A show this week to address topics that entrepreneurs want to learn about. The best thing to get is a “right sized&# valuation. A: It’s not best.

Venture Capital 282

Venture Capital Term Sheet Valuation Stock Options 282

ReadWriteStart

JUNE 1, 2020

If you are facing any problem you can always check out this: Business Loan vs. Equity Financing. The bridge or exit stage is generally of very large transactions and for companies with substantial valuation. Point number 3: Never raise money with an increased valuation. Stages of Equity-based funding. ? Inception stage.

Startup 150

Startup Elevator Pitch Entrepreneur Seed Stage 150

Berkonomics

AUGUST 3, 2023

Some businesses require very little capital and the founder can self-finance the enterprise and retain 100% of its ownership and control from ignition through liquidity event (startup through sale). And even with the significant cost of credit card debt, many entrepreneurs aggressively use existing cards to finance a startup.

Private Equity 118

Private Equity Valuation Cap Table Accredited Investor 118

Startup Company Lawyer

MARCH 14, 2010

After the recent announcement of the Series Seed Financing documents by Marc Andreesen, Brad Feld points out that there are now four sets of “open source&# equity seed financing documents: TechStars Model Seed Funding Documents (by Cooley). Y Combinator Series AA Equity Financing Documents (by WSGR). under $500K).

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

ithacaVC

NOVEMBER 14, 2014

I have written about startup valuations previously. If you are advising startup founders, I strongly suggest having them read all 4 of the posts to get the lay of the startup valuation land. A founder is about to raise their first round and asking me how to value their company. [1]. Valuations of other companies like you.

Valuation 69

Valuation Startup Down Round Early Stage 69

Both Sides of the Table

SEPTEMBER 18, 2014

At an accelerator … Me: Raising convertible notes as a seed round is one of the biggest disservices our industry has done to entrepreneurs since 2001-2003 when there were “full ratchets” and “multiple liquidation preferences” – the most hostile terms anybody found in term sheets 10 years ago. A down round?

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

ReadWriteStart

NOVEMBER 22, 2010

The survey looks at the valuations and the terms of financing for over 100 technology companies in Silicon Valley that reported raising capital in the third quarter of this year. And not surprisingly, perhaps, the survey found that valuations are up. The full survey can be downloaded here.

Silicon Valley 115

Silicon Valley Venture Capital Valuation Down Round 115

Lightspeed Venture Partners

OCTOBER 7, 2012

That’s why most entrepreneurs do not make a specific ask on valuation, but wait to hear offers from investors. As Cuban pointed out, this is a “down round” Zomm is seeking $2M for 10% of the company, implying an $18M pre money valuation today. The last company was a bit of a puzzler.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

Hunter Walker

AUGUST 8, 2023

At the time, this is last quarter and the stock market has trended upwards nicely since then (a potential leading indicator of private tech valuations), we all agreed venture portfolios were probably still 25-40% overvalued. Valuations. Restructures, Down Rounds, and Pay to Plays.

Portfolio 98

Portfolio Cap Table LP Valuation 98

Both Sides of the Table

FEBRUARY 4, 2016

.” There are a lot of data points that one can observer to get a sense of the venture capital markets – both LP fundings into venture and VC financings of startups. They point to some widely known facts: financings & valuations are up massively over the past 7 years and non-VC money has entered the system.

LP 150

LP Valuation Burn Rate Pre-Money Valuation 150

VC Cafe

FEBRUARY 27, 2024

What’s the difference between an angel round and pre-seed round and why do I believe we’ll see more pre-seed rounds taking place in 2024? While the answers are somewhat semantic, the pre-seed funding round is making a comeback in 2024 startup financing. Seed is about showing initial product market fit.

Valuation 186

Valuation Software Review Generative AI Seed Stage 186

Startup Professionals Musings

JANUARY 27, 2012

As the company grows and the second or third group of investors comes in, the terms of each subsequent financing grow in size, scope, and the number of lawyers’ fingerprints on them. The price is the percent of ownership given to the investor, calculated as “investment/post-money valuation.” Seat on the board. Anti-dilution protection.

Term Sheet 223

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 223

Gust

SEPTEMBER 17, 2014

Me: Raising convertible notes as a seed round is one of the biggest disservices our industry has done to entrepreneurs since 2001-2003 when there were “full ratchets” and “multiple liquidation preferences” – the most hostile terms anybody found in term sheets 10 years ago. It’s like we need a finance 101 course for entrepreneurs.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Startup Professionals Musings

SEPTEMBER 14, 2010

As the company grows and the second or third group of investors comes in, the terms of each subsequent financing grow in size, scope, and the number of lawyers’ fingerprints on them. The price is the percent of ownership given to the investor, calculated as “investment/post-money valuation.” Seat on the board. Anti-dilution protection.

Term Sheet 227

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 227

www.mattbartus.com

DECEMBER 9, 2012

How to pump up your VC valuation. Let’s say you receive a term sheet for a $1 million investment at a $3 million fully diluted pre-money valuation, and you’re kind of disappointed. You have a 20% option pool, so you know this will take your ownership down from 80% to 60%, and the VC will get 25%. — 23 Comments.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

Gust

OCTOBER 17, 2011

As the company grows and the second or third group of investors comes in, the terms of each subsequent financing grow in size, scope, and the number of lawyers’ fingerprints on them. The price is the percent of ownership given to the investor, calculated as “investment/post-money valuation.” Seat on the board. Anti-dilution protection.

Term Sheet 158

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 158

ithacaVC

FEBRUARY 1, 2018

The treatment of the friends, family and angels (FFA) as the startup matures and raises larger rounds of financing over time is interesting. In short, they own a smaller piece of a larger valuation pie. causing valuation bumps. Without friends and family and angels there would not be many companies for VCs to look at!

Preemptive Right 45

Preemptive Right Cap Table Valuation Dilution 45

Ben's Blog

JULY 16, 2013

You probably thought that valuations would be roughly the same as they were the last time you raised money. And those are big companies with real earnings, so you can imagine how a private company’s valuation might fluctuate. In June of 2000, I raised money at an $820M post-money valuation. Yes, we did a down round.

Down Round 78

Down Round Marketing Preferred Stock Post-Money Valuation 78

Berkonomics

JUNE 8, 2017

Some businesses require very little capital and the founder can self-finance the enterprise and retain 100% of its ownership and control from ignition through liquidity event (startup through sale). And even with the significant cost of credit card debt, many entrepreneurs aggressively use existing cards to finance a startup.

Private Equity 106

Private Equity Valuation Cap Table Accredited Investor 106

Berkonomics

MARCH 28, 2019

First: Is the price paid for shares by previous investors excessive, creating a post-money valuation too high for the actual value of the company? No one wants to face this, but the need for money and the possible overpricing of the first rounds may have created an unsustainable valuation. The enlightened professional investor.

Limited Liability Company 48

Limited Liability Company Post-Money Valuation Valuation Down Round 48

The Equity Kicker

JANUARY 22, 2014

It all comes down to probabilities in the end – anyone can get lucky – the trick is getting a handle on how lucky your plan requires you to be… The article describes how it goes wrong in two ways, firstly: Your company is growing and scaling well, often on little invested capital.

Venture Capital 102

Venture Capital Down Round Valuation Lean 102

Feld Thoughts

APRIL 21, 2016

Bill Gurley wrote an incredible post yesterday titled On the Road to Recap: Why the unicorn financing market just became dangerous … for all involved. 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.

Marketing 70

Marketing Down Round Startup IRR 70

Both Sides of the Table

FEBRUARY 8, 2016

The startup industry may be “resetting,” which doesn’t mean a “crash” but rather just a resetting of valuations, timescales, winners/losers, capital sources and the relative emphasis of growth rates vs. burn rates. Don’t assume that you can “just do a down round” if necessary.

Burn Rate 150

Burn Rate Cap Table Startup Balance Sheet 150

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. than comparable companies in the same sector that raised at a higher valuation. Why, yes, they are.

Venture Capital 60

Venture Capital Valuation Stock NDA 60

Berkonomics

APRIL 6, 2012

Is the price paid for shares by previous investors excessive, creating a post-money valuation too high for the actual value of the company? No one wants to face this, but the need for money and the possible overpricing of the first rounds may have created an unsustainable valuation. Email readers, continue here.]

Limited Liability Company 79

Limited Liability Company Post-Money Valuation Valuation Down Round 79

ithacaVC

FEBRUARY 23, 2012

It is the time of year when VC firms do year end valuations for their portfolio company holdings. Luckily, I am not in charge of the internal finance function at our fund. FAS 157 and other accounting rules require such a valuations be done, but what is the real value of doing them? I get that and understand it.

Valuation 49

Valuation Marketing Institutional Investors Down Round 49

For Entrepreneurs

APRIL 7, 2011

Introduction This post aims to help startup CEOs optimize their funding strategy by examining how investors value startups, and explaining how to avoid the common cash management pitfalls. Note: The concepts in this post will likely be obvious to experienced CEOs and entrepreneurs.

Finance 167

Finance Startup Cost Entrepreneur 167

Ben's Blog

JULY 16, 2013

You probably thought that valuations would be roughly the same as they were the last time you raised money. And those are big companies with real earnings, so you can imagine how a private company’s valuation might fluctuate. In June of 2000, I raised money at an $820M post-money valuation. Yes, we did a down round.

Marketing 46

Marketing Preferred Stock Post-Money Valuation Down Round 46

Berkonomics

JANUARY 20, 2010

Some businesses require very little capital and the founder is able to self-finance the enterprise and retain 100% of its ownership and control from ignition through liquidity event (startup through sale). And even with the significant cost of credit card debt, many entrepreneurs aggressively use existing cards to finance a startup.

Private Equity 69

Private Equity Valuation Cap Table Accredited Investor 69

abovethecrowd.com

APRIL 20, 2016

Why the Unicorn Financing Market Just Became Dangerous…For All Involved. The pressures of lofty paper valuations, massive burn rates (and the subsequent need for more cash), and unprecedented low levels of IPOs and M&A, have created a complex and unique circumstance which many Unicorn CEOs and investors are ill-prepared to navigate.

IPO 40

IPO Term Sheet Valuation Silicon Valley 40

VC Cafe

JANUARY 2, 2023

On a global level, venture financing of private companies dropped 33% year over year, from a record $733B in 2021 to $490B in 2022. There are 85 Israeli unicorns, but only about 50% them justify a billion Dollar valuation, according to Viola’s report. Lower valuations , especially in later stage. ” Fred Wilson.

Valuation 158

Valuation Down Round Venture Capital 158

Rob Go

JUNE 1, 2016

We’ve been in a period of unnatural financings, both in terms of valuation and the amount of capital that has gone into companies relatively early in their life. Where I think funds do start having hard conversations around follow-ons is when they need to lead inside rounds or protect themselves in down rounds.

Term Sheet 28

Term Sheet Portfolio Valuation Warrant 28

Both Sides of the Table

FEBRUARY 14, 2016

I have been talking about my concerns about valuations for the past couple of years because, well, they’ve been rising very rapidly the past two years! ” “Mark has a vested interest in talking down valuations of startups.” Do Investors WANT Valuations to Drop? The Motive for Speaking Up.

Valuation 150

Valuation Down Round Startup Later Stage 150

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

Both Sides of the Table

MARCH 30, 2016

Investors had grown too used to the idea that any deal you funded would get marked up to a higher valuation in the next round and that’s clearly not always true. Mutual funds had begun marking down the valuations of their private investments in high-profile deals. Great companies get financed. 2015 turned to 2016.

Balance Sheet 150

Balance Sheet Burn Rate Valuation Forecast 150

NZ Entrepreneur

JULY 30, 2020

One common challenge arises when founders are presenting their opportunity to multiple investors or are considering alternative financing strategies. Focus on the value of the deal, not just the valuation. Valuation is a common sticking point in investment negotiations, but other terms are likely to have far more impact down the road.

Term Sheet 67

Term Sheet Due Diligence Valuation Down Round 67

Both Sides of the Table

JUNE 5, 2016

This led median valuations to triple in 3 years and led to this stupid phenomenon that people refer to as “unicorns ,” which I am convinced will the the thing most historians laugh most about in this era. It had come on the heels of a long, public slide at Twitter and the beginning of a questioning about valuations overall.

Venture Capital 150

Venture Capital Silicon Valley Burn Rate LP 150