Gust

OCTOBER 21, 2011

To account for scenarios in which the startup is acquired before it has a chance to complete a priced equity financing round, most term sheets and deal documents contain a “ change in control ” provision. Suppose the notes converted as if the acquisition were an eligible financing round. Most would agree this is not a fair outcome.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Both Sides of the Table

SEPTEMBER 5, 2012

To better understand the arguments for / against convertible equity I suggest you read my posts on those topics: Is convertible debt preferable to equity? Was Paul Graham right in his “high resolution” financing post? You rarely find full ratchets in early-stage deals any more. That’s not possible.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Berkonomics

DECEMBER 20, 2018

Why are you so strongly sold on royalty licensing as the most effective way to finance a tech-based early stage company? That party is only concerned with its royalty revenues and growth – and not profit from or valuation of its business. The argument for royalties from an expert and advocate.

IP 54

IP Intellectual Property Investment Bankers Product 54

K9 Ventures

MAY 14, 2011

In my view the terminology being used for early stage investors by the press and the media is not as clear as it should be. I’ve talked about this on several occasions when I’ve been at conference and on panels, but I figured it would make sense to do a post explaining my taxonomy of the early-stage investing world.

Preferred Stock 125

Preferred Stock Seed Stage Incubator Early Stage 125

Berkonomics

DECEMBER 20, 2018

Why are you so strongly sold on royalty licensing as the most effective way to finance a tech-based early stage company? That party is only concerned with its royalty revenues and growth – and not profit from or valuation of its business. The argument for royalties from an expert and advocate.

IP 48

IP Intellectual Property Investment Bankers Product 48

Feld Thoughts

SEPTEMBER 27, 2011

Usually we see 2-3x, but in later stage companies, this multiple can be even higher. In the case of an early-stage startup that hasn’t issued preferred stock yet, the debt converts into stock of the acquiring company (if it’s a stock deal) at a valuation subject to a cap.

Conversion 96

Conversion Sales Later Stage Preferred Stock 96

ReadWriteStart

JANUARY 28, 2022

This article will assist you in gaining a fundamental understanding of equity valuation, kinds of equity, and other related topics. These characteristics, comparable to those found in the fixed income market, can convert into common stock, call clauses, and other features. Importance of equity valuation. What is Company Equity?

Valuation 108

Valuation Equity Warrant Common Stock 108

The Startup Lawyer

FEBRUARY 4, 2011

The following are some issues to consider and actions to take before accepting an incubator’s offer: (1) Calculate Valuation and Determine Value. Pre-money valuations startups receive from incubators are typically low…really low. The “revised for the cash investment only&# pre-money valuation is $600,000. (2)

Incubator 105

Incubator Pre-Money Valuation Option Pool Advisory Board 105

www.quora.com

JANUARY 16, 2011

I did a short video at BothSidesoftheTable th at talks about the key terms in the term sheet you need to know about AND how VCs calculate valuation differently than entrepreneurs and what to look out for. Fenwick & West has a great, very thorough document about financings, term sheets and so forth: https://docs.google.com/v iewer?u.

Term Sheet 41

Term Sheet Startup Angel Investor Wiki 41

Scott Edward Walker

SEPTEMBER 21, 2011

Finally, unless the startup is raising at least approximately $750,000, it generally is not in the company’s interest to issue shares of preferred stock. Moreover, the company would need to be valued at the time of the investment, which is obviously difficult at an early stage and could be extremely dilutive to the founders.

Preferred Stock 45

Preferred Stock Angel Investor Entrepreneur Common Stock 45

Professor VC

JANUARY 17, 2008

Another comment which probably deserves more discussion is around valuation. One of the panelists mentioned that they have gotten very valuation sensitive (nothing wrong with that) and like to purchase preferred stock rather than invest in convertible notes. Labels: angel groups , valuation. See you next time.

Pre-Money Valuation 28

Pre-Money Valuation Angel Investor Angel Groups Valuation 28

Startup Company Lawyer

JANUARY 11, 2010

I seem to be doing a lot of pre-Series A convertible bridge note financings these days. 50%) or warrant coverage are typically more company-favorable than a Series A financing where a valuation is set. If the investor had invested $500K in a Series A Preferred Stock at a $4.5M

Angel Investor 39

Angel Investor Valuation Bridge Financing Preferred Stock 39

www.payne.org

SEPTEMBER 22, 2011

Your offer will almost surely be for common stock. Preferred stock classes typically go to investors, and in some cases founders (usually where the founders have already invested some of their own money to build the company). If the company is acquired or liquidated, the preferred stock holders will get paid first.

Equity 56

Equity Employee Vesting Preferred Stock 56

Up and Running

SEPTEMBER 20, 2021

Furthermore, there are various forms of equity, such as preferred stock, common stock, and convertible notes, which influence the present and potential future investors. For instance, the cap table will help you with various possibilities while running business activities like available options and pre-money valuations faster.

Cap Table 112

Cap Table Pre-Money Valuation Stock Options Option Pool 112

Hunter Walker

SEPTEMBER 29, 2022

As an early stage fund, often buying 10–15% of a company during its seed financing, this meant we were often being asked if we wanted to sell portions of our stakes to other approved investors (let alone the random pings from market-makers unaffiliated with the company).

Venture Capital 122

Venture Capital Cap Table LP Equity 122

Tim Keane

APRIL 12, 2006

What’s your attitude about “next round” financing? We are open to them and prefer to begin to co-invest at. this stage when the company can justify a higher. valuation than the previous round. We don’t like them and would prefer not to be involved. Fewer investors will take common stock in early stage transactions.

Entrepreneur 60

Entrepreneur Valuation Sweat Equity Common Stock 60

abovethecrowd.com

FEBRUARY 24, 2015

Historically, different financial institutions specialized in different stages, because the assessment of risk and opportunity was considered unique at each stage — for example, a seed investor was unlikely to do late-stage financing, and vice versa. We are in a risk bubble.

IPO 40

IPO Liquidation Preference Valuation Technical Review 40

Startup Company Lawyer

JANUARY 9, 2011

Convertible debt with a price cap seems to be the preferred structure for early-stage financings. Over the last 12 months, I’ve noticed a trend where early-stage startup companies raise seed financings of between $250K and $1M using a convertible note with a price cap.

Liquidation Preference 57

Liquidation Preference Finance Preferred Stock Common Stock 57

Gust

OCTOBER 3, 2011

For a first time entrepreneur trying to figure out the arcane world of startup financing, it can be very confusing to understand the roles that different types of investors play in funding promising companies, as well as the point in a company’s life at which they enter the stage. From +/- $1.5m

Finance 70

Finance Venture Capital Intellectual Property Early Stage 70

techcrunch.com

SEPTEMBER 2, 2012

There has been no shortage of controversy and criticism around the convertible note, a popular investing vehicle that’s used by seed stage and angel investors. As a refresher, a convertible note is a loan that automatically converts into equity upon the closing of a Series A round of financing.

Equity 87

Equity San Francisco Technical Review Angel Investor 87

www.vccafe.com

MARCH 11, 2013

VC Cafe covers early stage Israeli and European tech & mobile startups. easy business finance software. YCombinator Series AA Equity Financing Documents. Seed Stage Valuation Guide. Venture Capital Cafe > Startup Resources (Updated Mar 2013). VC & Startup Resources. Seed Startups. Startup Threads.

Software Review 53

Software Review Technical Review Startup 53