Both Sides of the Table

JUNE 22, 2011

Ah, but today’s Internet companies have real revenue! New investors hate down rounds. Huge structural under-employment in much of the country and full employment in some niche tech markets where it’s impossible to hire developers, designers or sales professionals. I said that at the Founder Showcase, too.

Saudi Arabia 309

Saudi Arabia Valuation IPO Technical Review 309

Berkonomics

MARCH 30, 2010

Since this number is budgeted and pre-authorized, managers tend to focus upon other things such as sales, marketing and product development issues. There is an art to efficient management of a process, whether that is the process of bringing a product to market from R&D to production or developing a new product’s launch program.

Silicon Valley 85

Silicon Valley Burn Rate Angel Investor Down Round 85

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). For those of you who fit that description, nice work. There is a lot to say about retaining control.

Private Equity 118

Private Equity Valuation Cap Table Accredited Investor 118

NZ Entrepreneur

SEPTEMBER 16, 2020

For example, “How will unit cost affect our capital requirements and how will product pricing affect revenue?” It isn’t good enough to just say ‘what does halving my revenue do to the business?’ Key Variables to Consider: Sales units. Founders are typically ambitious when projecting sales volumes.

Startup 69

Startup Sales Cycle Down Round Revenue 69

The Equity Kicker

JANUARY 22, 2014

To meet growth and revenue targets, you hire and spend like never before. A few quarters in, you realize that product/market fit is not quite there, or you’re not as far up the sales learning curve as you thought, or your LTV/CAC is suddenly in the toilet. You rush a few key hires, overbuild the team, ramp marketing spend.

Venture Capital 102

Venture Capital Down Round Valuation Lean 102

View from Seed

FEBRUARY 19, 2015

In 2010, we were recruiting for a Senior Vice President of Sales and Marketing for Backupify, and it was clear that many of the people I was interviewing wanted the CEO role. I called the recruiter running the search and told him I was going to step down and hire a CEO. Disclosure: NextView was not an investor in Backupify.).

Founder 120

Founder Startup Cofounder Business Model 120

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). For you who fit that description, nice work. There is a lot to say about retaining control.

Private Equity 106

Private Equity Valuation Cap Table Accredited Investor 106

Seeing Both Sides

JANUARY 9, 2009

Although attendence was down, it is still an insanely large audience of 130,000 attendees and 2,700 companies. CEA head Gary Shapiro reported in his keynote that industy sales were up over 5% and that 2009 will be flat or slightly down. But Intel Capital will be happy to invest in their down rounds.

Down Round 20

Down Round Forecast Portfolio Government 20

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

Steve Blank

NOVEMBER 2, 2009

In times when venture capital is hard to get, investors extract high costs for failure (down-rounds, cram downs , new management teams, shut down the company.) Sales people cost money, and when they’re not bringing in revenue, their wandering in the woods is time consuming, cash-draining and demoralizing.

Lean 250

Lean Silicon Valley Startup RSS 250

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. Companies that exit are valued at whatever the sale is. If a company raises a good round, it gets marked up to the new value. Equity rounds of $10m pre.

IRR 48

IRR Valuation Portfolio Due Diligence 48

Both Sides of the Table

FEBRUARY 8, 2016

If you raised money in the past 2 years and have grown it is possible that your next round valuation might be flat (or lower) even though you have a higher revenue because investors may value your multiple differently. Don’t assume that you can “just do a down round” if necessary.

Burn Rate 150

Burn Rate Cap Table Balance Sheet Dilution 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. LTV / CAC, revenue growth, etc.) were clearly Momentum, but [in hindsight] they were also Value.”

Venture Capital 60

Venture Capital Valuation Stock NDA 60

Growthink Blog

MAY 23, 2011

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. With this capital, the company propels itself to $50 million+ in revenues, and to either a sale to a strategic acquirer or to an initial public offering.

Angel Investor 112

Angel Investor Venture Capital Sweat Equity Cram Down 112

VC Cafe

SEPTEMBER 26, 2022

Sustainable growth: Prioritise sales efficiency over growth at all costs. 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.

Founder 187

Founder Startup Valuation Pre-Money Valuation 187

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). For you who fit that description, nice work. There is a lot to say about retaining control.

Private Equity 69

Private Equity Valuation Cap Table Accredited Investor 69

Scalable Startup

OCTOBER 26, 2011

The second round is often for some or all of the following – corporate growth, go to market, turn the prototype into a robust offering, marketing costs, or to hire a sales force. It’s no longer based on a hunch, unless the company is in trouble and needs money to finish what the first round started.

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. But some will be saved.

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

MARCH 30, 2016

forward sales with some as high as 12x sales. Collectively we chose growth and the market was rewarding high growth rates over any other factor so we felt that we ought to bring in an experienced CEO who had taken companies public, who had led large, international sales organizations and who was poised to take Invoca to the next level.

Balance Sheet 150

Balance Sheet Burn Rate Valuation Forecast 150

Reid Hoffman

JUNE 8, 2021

At the time, they said, it’s not enough to design a product that’s good for sales, it must also be good for the environment. But now our hosts are really angry, and they have a huge revenue shortfall. And I made a decision not to do an equity round, because I thought it would be a down round. Let’s go with debt.

Silicon Valley 69

Silicon Valley Hosting Rhode Island Design 69

www.paulgraham.com

APRIL 28, 2010

There never has to be atime when you have no revenues. 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

Reid Hoffman

JUNE 8, 2021

At the time, they said, it’s not enough to design a product that’s good for sales, it must also be good for the environment. But now our hosts are really angry, and they have a huge revenue shortfall. And I made a decision not to do an equity round, because I thought it would be a down round. Let’s go with debt.

Silicon Valley 36

Silicon Valley Hosting Rhode Island Design 36

VC Cafe

MAY 18, 2022

Down rounds are coming. David Sacks offers a few benchmarks on growth rates (revenue), gross margins, CAC payback and burn. Thomasz Tunguz from Redpoint Capital shared 4 scenarios that startups should be contemplating now depending on their sales efficiency and cash reserves. Source: Pitchbook NVCA Venture Monitor.

Term Sheet 190

Term Sheet Startup Valuation Ukraine 190