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]. Here is a post from October 2012.

Valuation 69

Valuation Startup Down Round Early Stage 69

YoungUpstarts

JUNE 26, 2020

To do that you have to show how your market is big enough (a multi-billion dollar market) to support that kind of valuation. When a VC’s website says they do “early stage” – to a VC that means a product has already been built and generating some revenue, while to an entrepreneur it means “just an idea.”. I was wrong.

Finance 205

Finance Silicon Valley Valuation Startup 205

VC Cafe

MAY 29, 2022

Snap’s stock plunged 40% last week after Evan Spigel announced the company will miss revenue targets, which raises questions about other ‘advertising powered’ social networks. Additionally, given the valuation entry points, the return upside remains quite substantial regardless of macro conditions.

Venture Capital 183

Venture Capital Early Stage Valuation Startup 183

Berkonomics

AUGUST 3, 2023

My experience with early valuations by founders for friends… I’ve arrived at a significant number of companies that were looking for additional growth capital after a “friends and family” round and had to “clean up” the cap table more than a few times over the years.

Private Equity 118

Private Equity Valuation Cap Table Accredited Investor 118

Lightspeed Venture Partners

OCTOBER 7, 2012

They won a design award at a trade show, but have no revenue and no orders. 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.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

Both Sides of the Table

SEPTEMBER 18, 2014

Revenue multiple? Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. How do you think they’ll feel if your next round is at a $50 million post money valuation and their hard-earned $25,000 is worth 0.05% of your company? A down round?

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

VC Cafe

FEBRUARY 27, 2024

A founder asked me what makes a $2M round “pre-seed”? especially if the startup already has a product and revenue? And why do we still sometimes hear about pre-seed rounds that look more like a series A in pricing and size? That’s yet another reason for micro funds to move earlier in the fundraising timeline.

Valuation 186

Valuation Software Review Generative AI Technical Review 186

Gust

SEPTEMBER 17, 2014

Revenue multiple? Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. How do you think they’ll feel if your next round is at a $50 million post money valuation and their hard-earned $25,000 is worth 0.05% of your company? A down round?

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

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. Perhaps you are caught in the “Series A crunch” or perhaps you are a consumer company and expected that you would be valued on users rather than revenue like the last time. Yes, we did a down round. Things change.

Down Round 78

Down Round Marketing Preferred Stock Post-Money Valuation 78

The Equity Kicker

JANUARY 22, 2014

Investors pay a high valuation to get into a good deal, betting on continued fast growth. 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).

Venture Capital 102

Venture Capital Down Round Valuation Lean 102

Hippoland

NOVEMBER 13, 2016

But as we’ve seen, these valuations can be hocus-pocus — even at later stage rounds, we’ve seen lots of companies of late fall from grace and become massively devalued overnight when they cannot raise their next round at a higher valuation. If a company raises a good round, it gets marked up to the new value.

IRR 48

IRR Valuation Portfolio Due Diligence 48

Berkonomics

JUNE 8, 2017

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. Do not expect grand valuations of your enterprise from these professional angels.

Private Equity 106

Private Equity Valuation Cap Table Accredited Investor 106

VC Cafe

JUNE 10, 2022

According to new research by Pitchbook , the trickle down effect has already started in seed and series A startups with round sizes and valuations shrinking in size compared to 2021. But recently those round sizes and valuations have tumbled to about $10 million and $50 million, respectively, he said.

Valuation 151

Valuation Marketing Venture Capital 151

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.) THEREFORE: we don’t need to be valuation-sensitive.

Venture Capital 60

Venture Capital Valuation Stock NDA 60

View from Seed

FEBRUARY 19, 2015

Rob,” he said, “no offense, but you aren’t going to get a world class, been-there-done-that CEO into a company with less than $1 million in revenue. 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.

Founder 120

Founder Startup Cofounder Business Model 120

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 Balance Sheet Dilution 150

Feld Thoughts

SEPTEMBER 9, 2015

Some will demonstrate strategically justifiable metrics and have fantastic ‘up round’ exits; others may see liquidation preferences kick in which will negatively impact founders and employees; others may fulfill the adage “IPO is the new down round” , which has been the case for more than half of the public companies on our list.

Liquidation Preference 70

Liquidation Preference Burn Rate Balance Sheet .Net 70

VC Cafe

SEPTEMBER 26, 2022

ValuatIon should be a function of value, not ego. Kawasaki’s Law of Pre-Money Valuation: for every full-time engineer, add $500,000; for every full-time M.B.A., But valuations, especially those in the private market, are not necessarily a predictor of growth/ success. Our goals, their goals. subtract $250,000. 9M Seed: $20M ?

Founder 187

Founder Startup Valuation Pre-Money Valuation 187

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. Perhaps you are caught in the “Series A crunch” or perhaps you are a consumer company and expected that you would be valued on users rather than revenue like the last time. Yes, we did a down round. Things change.

Marketing 46

Marketing Preferred Stock Post-Money Valuation Down Round 46

Business Plan Blog

OCTOBER 8, 2013

If you are pre-revenue then it will be difficult to portray market traction unless you have the budget to conduct customer surveys. Investors want to see a growth/revenue model that uses sales data and assumptions that predict sales by product and region. Unrealistic Valuation. Ignoring Market Need/Traction. Ignoring Milestones.

Business Plan 67

Business Plan NDA Exit Strategy Valuation 67

Berkonomics

JANUARY 20, 2010

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 friend or related investors who do not have the sophistication or willingness to challenge the valuation. Do not expect grand valuations of your enterprise from these professional angels.

Private Equity 69

Private Equity Valuation Cap Table Accredited Investor 69

VC Cafe

JANUARY 2, 2023

There are 85 Israeli unicorns, but only about 50% them justify a billion Dollar valuation, according to Viola’s report. As growth investments (and valuations) go down, unicorns might struggle to survive, according to Globes. Large LPs are signalling the need to slow down, and funds realise it may take longer to fundraise.

Valuation 158

Valuation Down Round Venture Capital 158

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

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

VC Cafe

NOVEMBER 30, 2022

According to Pitchbook’s Q3 2022 European VC Valuations Report , Europe minted 40 unicorns in the first 3 quarters of 2022. Atomico’s founder Nicklas Zennstrom recently called the end of the high valuations era and urged founders and VCs to remove the stigma from down rounds.

Europe 97

Europe Balance Sheet Valuation 97

www.paulgraham.com

APRIL 28, 2010

There never has to be atime when you have no revenues. Another concept we need to introduce now is valuation. I say "in theory" because in early stageinvesting, valuations are voodoo. As a company gets more established,its valuation gets closer to an actual market value. Startups valuations aresupposed to rise over time.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

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. Also, the $1.5

Later Stage 34

Later Stage Early Stage Venture Capital Portfolio 34

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. 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.

Balance Sheet 150

Balance Sheet Burn Rate Valuation Forecast 150

This is going to be BIG.

SEPTEMBER 7, 2012

In the late 90's, it wasn't surprising that companies with no revenue that were funded at 100 million dollar valuations didn't survive. That wasn't a bubble bursting issue--that was a poor financing strategy issue of people getting caught with their pants down, hands in the cookie jar, and all the metaphors you can think of at once.

Later Stage 99

Later Stage Down Round Pre-Money Valuation Early Stage 99

NZ Entrepreneur

JULY 8, 2019

Soon after that first investment, I started my first business, and am now on my fifth (all $1m+ in revenue, but not all ‘successful’). I personally funded my first ventures, then led the two rounds that have seen Ambit take in $2.2m Valuations. I later discovered that this investment form gathered a name – angel investing.

New Zealand 42

New Zealand Entrepreneur Valuation Dilution 42

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

It's not "cheap" because it is down 70%. 2) Valuation multiples are always a hack proxy. Down rounds are coming. David Sacks offers a few benchmarks on growth rates (revenue), gross margins, CAC payback and burn. Re-evaluate your valuation. Forget those prices happened. Dangerous to use.

Term Sheet 190

Term Sheet Startup Valuation Ukraine 190

Both Sides of the Table

OCTOBER 18, 2015

“Trade in an asset at a price that strongly deviates from an asset’s intrinsic value” The arguments against that, “This time the startups have real revenues!” Either we’ve discovered magical beans and elixir or perhaps we’ve gotten ahead of ourselves on valuation. 25% “down rounds?

IPO 150

IPO Venture Capital LP SEC 150