Startup Professionals Musings

NOVEMBER 25, 2020

Lack of checks and balances on startup valuations. A startup that is listed on a crowdfunding platform gets no formal pushback or negotiation on its declared valuation. Unreasonably high early valuations hurt the entrepreneurs, as well as professional investors, later when a second round becomes a down round or can’t be negotiated.

Equity 411

Equity Angel Groups Accredited Investor Due Diligence 411

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

Berkonomics

MARCH 5, 2020

So, it is important for the entrepreneur to identify, address and mitigate each of these in order to increase valuation and decrease the risk of ultimate loss of the business. Third: Management risk. . Professional investors will probe these five risk areas and make the decision to invest based upon comfort with each.

Valuation 62

Valuation Down Round Early Stage Demand 62

VC Cafe

MAY 29, 2022

I’ll take the opportunity to share a nugget by Konvoy Ventures on the current impact they’re observing across stages in the next 12 months: Pre-Seed / Seed: These rounds will be impacted the least and will generally continue to be filled and oversubscribed. The key messages: “This is not a time to panic.

Venture Capital 183

Venture Capital Early Stage Valuation Startup 183

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

Berkonomics

AUGUST 3, 2023

Money from these sources is relatively easy to come by, and most often comes with no strings as to oversight by a formal board composed of these investors and management. Better yet, the valuation of your enterprise is often higher than if the same investment were taken from a professional investor.

Private Equity 118

Private Equity Valuation Cap Table Accredited Investor 118

Berkonomics

MARCH 15, 2012

So it is important for the entrepreneur to identify, address and mitigate each of these in order to increase valuation and decrease the risk of ultimate loss of the business. Email readers, continue here.] Third: Management risk. A great idea often fails from the inexperience or inability of management to bring the idea to market.

Valuation 80

Valuation Down Round Demand Management 80

Berkonomics

OCTOBER 18, 2018

For investors, a subsequent down round at a lower valuation than the last, or an exit opportunity at a loss are all opportunities for the affected stakeholder to show a side that can sometimes shock an entrepreneur or CEO. The chasm between management and employees. Investor loyalty is most tenuous of all.

Valuation 96

Valuation Dilution Down Round Employee 96

VC Cafe

OCTOBER 31, 2022

Many companies are now having to resort to tough measures in order to stay afloat, including layoffs, down rounds and tough terms from current investors. The market for pre-seed and seed rounds should remain relatively active, since those companies are many years away from even thinking about going public.

Founder 173

Founder Technical Review Down Round Liquidation Preference 173

Startup Professionals Musings

MAY 20, 2016

Lack of checks and balances on startup valuations. A startup that is listed on a crowdfunding platform gets no formal pushback or negotiation on its declared valuation. Unreasonably high early valuations hurt the entrepreneurs, as well as professional investors, later when a second round becomes a down round or can’t be negotiated.

Angel Groups 136

Angel Groups Accredited Investor Equity Due Diligence 136

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

MARCH 14, 2019

Of course, we are speaking of increased valuation of your company when we speak of “wealth.” So, it is important for you to identify, address and mitigate each of these in order to increase valuation and decrease the risk of ultimate loss of the business. Third: Management risk. . So, let’s examine them and mitigate them.

Valuation 48

Valuation Down Round Early Stage Demand 48

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.

Limited Liability Company 48

Limited Liability Company Post-Money Valuation Valuation Down Round 48

Feld Thoughts

APRIL 21, 2016

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. Their own ego is also a factor – will a down round signal weakness?

Marketing 70

Marketing Down Round Startup IRR 70

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

JUNE 8, 2017

composed of these investors and management. It is most common to greatly overprice such a round of financing, valuing the enterprise well above what it may be worth at the moment for friends or related investors who do not have the sophistication or willingness to challenge the valuation.

Private Equity 106

Private Equity Valuation Cap Table Accredited Investor 106

VC Cafe

SEPTEMBER 26, 2022

For other mistakes to avoid as a product manager, check out my recent Linkedin post on the top 10 mistakes product managers make and read everything you can by Marty Cagan. ValuatIon should be a function of value, not ego. But valuations, especially those in the private market, are not necessarily a predictor of growth/ success.

Founder 187

Founder Startup Valuation Pre-Money Valuation 187

View from Seed

FEBRUARY 19, 2015

Yes, it is hard to manage. It’s nice to get great valuations and hire A-players. Sometimes the only path forward is to fill a gap with a down round of funding, a B-player, or some other non-ideal option. The next time around, I’ll manage for capital efficiency. Backupify was managed for momentum.

Founder 120

Founder Startup Cofounder Business Model 120

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

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

OCTOBER 7, 2011

For investors, a subsequent down round at a lower valuation than the last, or an exit opportunity at a loss are all opportunities for the affected stakeholder to show a side that can sometimes shock an entrepreneur or CEO.

Valuation 54

Valuation Dilution Down Round Employee 54

ithacaVC

FEBRUARY 23, 2012

It is the time of year when VC firms do year end valuations for their portfolio company holdings. FAS 157 and other accounting rules require such a valuations be done, but what is the real value of doing them? Some VC firms use the art of Level 3 inputs to mark up their valuations, which has a tendency to make limited partners happy.

Valuation 49

Valuation Institutional Investors Marketing Down Round 49

Tim Keane

SEPTEMBER 17, 2009

.  (WAN is a trade group of angel organizations in Wisconsin; I'm on their board.)  Joe, a friend and colleague, is writing about the "great deals" in venture valuations that have been created by economic conditions.   It's inarguable that valuations are lower. Managing Company Growth.

Wisconsin 60

Wisconsin Valuation Angel Investor Startup 60

Business Plan Blog

OCTOBER 8, 2013

In order to launch a successful business and raise the capital needed to do so, a startup needs to consider several aspects of the business including the management team , the size of the opportunity, the product/service/technology, the market/sales/distribution channels, the competitive environment and several other factors.

Business Plan 67

Business Plan NDA Exit Strategy Valuation 67

Berkonomics

JANUARY 20, 2010

Money from these sources is relatively easy to come by, and most often comes with no strings as to oversight by a formal board composed of these investors and management. Better yet, the valuation of your enterprise is often higher than if the same investment were taken from a professional investor.

Private Equity 69

Private Equity Valuation Cap Table Accredited Investor 69

abovethecrowd.com

APRIL 20, 2016

One key to this population growth has been the remarkable ease of the Unicorn fundraising process: Pick a new valuation well above your last one, put together a presentation deck, solicit offers, and watch the hundreds of million of dollars flow into your bank account. By January of 2016, that number had ballooned to 229.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

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

VC Cafe

JANUARY 29, 2024

That’s the case for most companies that are already in the market, especially if they raised funding at imaginary valuations before. Dealroom global tech report ( source ) As a result, 2023 has also seen a 43% decline in mega rounds of over $100M, though they still exist. In many ways, Edward is right.

Generative AI 171

Generative AI Global Venture Capital Valuation 171

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

www.paulgraham.com

APRIL 28, 2010

And if trouble withinvestors is one of the biggest threats to a startup, managing themis one of the most important skills founders need to learn. Lets start by talking about the five sources of startup funding.Then well trace the life of a hypothetical (very fortunate) startupas it shifts gears through successive rounds. Better how?

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

NZ Entrepreneur

JULY 30, 2020

Investors will be watching closely how you manage this process as it is an excellent indicator for how your team will manage challenging decisions moving forward. Focus on the value of the deal, not just the valuation. a down round or the company falls over), the investors have some special protection of their investment.

Term Sheet 67

Term Sheet Due Diligence Valuation Down Round 67

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. Fall turned to winter. 2015 turned to 2016. FOMO was NOMO.

Balance Sheet 150

Balance Sheet Burn Rate Valuation Forecast 150

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

Altgate

MARCH 8, 2009

Later stage funds will end up owning more of their portfolio companies via down rounds and ultimately should see ok returns. What I can tell you is that total private equity assets under management was reported as $2.5 trillion of unrealized returns is by and large the valuation based on the price paid or the most recent round.

Later Stage 34

Later Stage Early Stage Venture Capital Portfolio 34

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