Both Sides of the Table

AUGUST 30, 2010

Funnily enough I just answered this question yesterday on Quora when somebody asked, “Why would an early-stage investor specifically NOT prefer a convertible note structure to straight equity (e.g. a priced/valued preferred stock financing)?&#. Why many early-stage investors DO price rounds (e.g.

Equity 319

Equity Early Stage Angel Investor Valuation 319

Gust

SEPTEMBER 29, 2011

For a traditional VC financing round structured as a sale of preferred stock, the best resources I can recommend are the Term Sheet Series by Brad Feld and Jason Mendelson and Startup Company Lawyer by Yokum Taku. (For more on working with startup lawyers, see Mark Suster’s classic post, How To Work With Lawyers At A Startup.).

Finance 178

Finance Term Sheet Preferred Stock Bridge Financing 178

Startup Company Lawyer

MARCH 14, 2010

In addition, I think that a “peace treaty&# between early-stage investors and startup companies on standard terms (at least at a term sheet level) is a step in the right direction. To differentiate it from typical “Series A&# preferred stock, which comes with certain expectations with regard to rights.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Startup Professionals Musings

AUGUST 1, 2016

Getting investors to trust you with their money is always a challenge, and it’s even more difficult in the early stages, where you don’t have a significant revenue stream, a few customers, or maybe even a product yet. At these stages, it’s all about you, and your ability to communicate and execute effectively.

Due Diligence 120

Due Diligence Intellectual Property Preferred Stock Seed Stage 120

Gust

OCTOBER 5, 2011

Last week , we gave some attention to the “why” behind convertible note financing for early stage startups. In most cases, an early stage startup will raise seed capital from more than one investor. This “ uncapped note ” example ignores the concept of a valuation cap , which we’ll take up in a future installment.

Finance 79

Finance Preferred Stock Term Sheet Early Stage 79

Both Sides of the Table

SEPTEMBER 5, 2012

What the entrepreneurs were really saying is, “I don’t want to take a lower valuation now, while I don’t have customers or a full team. You rarely find full ratchets in early-stage deals any more. Convertible notes often have multiple liquidation preferences. They’ll get priced soon enough by a VC.”

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

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. I asked him five important questions, which he answered, and I’ve summarized below.

IP 54

IP Intellectual Property Investment Bankers Product 54

Gust

OCTOBER 21, 2011

Assuming a hypothetical $100,000 investment at a 10% interest rate, this kind of payoff would yield a return of $5,000 ( 5% ) six months later – not exactly the kind of return angel investors are looking for when they make risky early stage investments. a mix of cash and stock) received by other equity holders in the transaction.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

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. I asked him five important questions, which he answered, and I’ve summarized below.

IP 48

IP Intellectual Property Investment Bankers Product 48

Feld Thoughts

SEPTEMBER 27, 2011

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. If it’s not a stock deal, then one normally sees one of the above scenarios.

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

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

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. , Anon User, Chad Lomax , Maor Ezer and Jay Liew 1. You can find there here: [link] softhetable.c.

Term Sheet 41

Term Sheet Startup Angel Investor Wiki 41

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

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

Startup Company Lawyer

JANUARY 11, 2010

50%) or warrant coverage are typically more company-favorable than a Series A financing where a valuation is set. I think many sophisticated angel investors realize that convertible bridge notes do not adequately compensate angel investors for the risk that they take in funding early-stage companies.

Angel Investor 39

Angel Investor Valuation Bridge Financing Preferred Stock 39

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

Tim Keane

APRIL 12, 2006

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. How do you approach valuation?

Entrepreneur 60

Entrepreneur Valuation Sweat Equity Common Stock 60

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

www.paulgraham.com

APRIL 28, 2010

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. As a company gets more established,its valuation gets closer to an actual market value.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

abovethecrowd.com

FEBRUARY 24, 2015

As a result, a “late-stage” financing is no longer reserved for high-revenue, pre-profitability companies getting ready for an IPO; it is simply any large round of financing done at a high price. An unprecedented 80 private companies have raised financings at valuations over $1B in the last few years. 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

Depending on the circumstances, they will invest either in the form of a Convertible Note (but with a cap on valuation), or else in a Series Seed or Series A Convertible Preferred stock round, using similar documentation to that used by VCs. From +/- $1.5m

Finance 70

Finance Venture Capital Intellectual Property Early Stage 70

www.paulgraham.com

APRIL 28, 2010

You give a startup money and they give you stock. Youllprobably get either preferred stock, which means stock with extrarights like getting your money back first in a sale, or convertibledebt, which means (on paper) youre lending the company money, andthe debt converts to stock at the next sufficiently big fundinground. [

Angel Investor 63

Angel Investor Syndicate Syndication Dilution 63

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. Sometimes these loans have a valuation cap and/or a discount. Ressi estimates that the debt note now accounts for over 50% of all angel and early stage deals.

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. Seed Stage Valuation Guide. NESTA : They invest in early-stage companies, inform and shape policy, and deliver practical programs that inspire others to solve the big challenges of the future. Preferred Stock Purchase Agreement.

Software Review 53

Software Review Technical Review Startup 53