Altgate

DECEMBER 15, 2010

@altgate Startups, Venture Capital & Everything In Between Skip to content Home Furqan Nazeeri (fn@altgate.com) ← No one wants to tell you your baby is ugly More on Liquidation Preferences → Pre-Money Valuation vs Number of Founders Posted on December 15, 2010 by admin Here’s a chart of the day worth sharing.

Pre-Money Valuation 66

Pre-Money Valuation Valuation Cofounder Founder 66

Both Sides of the Table

JANUARY 21, 2010

I recently read a post over on VentureHacks titled, “ Top Ten Reasons Entrepreneurs Hate Lawyers &# written by Scott Walker (who blogs on legal issues for entrepreneurs ). Because many great entrepreneurs work with lawyers in registering their companies they have their ear to the pavement on the earliest of company formations.

Southern California 318

Southern California Silicon Valley IP Stock Options 318

Tim Keane

JANUARY 12, 2010

Please see later version of this post on May 16, 2010 Entrepreneurs are often not experts in the area of term-sheet negotiations and all of the surrounding issues.   Investors sometimes “present” the terms they’d like and expect the entrepreneurs to react. Term-sheets and Valuations: Thinking about Negotiations.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Gust

SEPTEMBER 17, 2014

Me: Raising convertible notes as a seed round is one of the biggest disservices our industry has done to entrepreneurs since 2001-2003 when there were “full ratchets” and “multiple liquidation preferences” – the most hostile terms anybody found in term sheets 10 years ago. How will the lead determine a value?

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

The Equity Kicker

JANUARY 18, 2013

If you’ve been paying attention you will know that Nicholas Lovell and I are writing a book for entrepreneurs who want to raise venture capital. We are now preparing to shoot a promotional video which opens with five frustrations that entrepreneurs frequently encounter when they embark on the fundraising process, expressed as questions.

Liquidation Preference 159

Liquidation Preference Venture Capital Dilution Video 159

The Equity Kicker

JUNE 28, 2013

Simply put, a company should aim to get to exit raising only a small fraction of the value that it hopes to exit for. Otherwise the investors won’t make the multiple on their investment that they want and after liquidation preferences are paid the amount left for the entrepreneur may well also be disappointing.

Liquidation Preference 116

Liquidation Preference Valuation Portfolio Operations 116

Startup Professionals Musings

JANUARY 27, 2012

Entrepreneurs sometimes assume an initial agreement with an Angel is a commitment, so they start spending before any money is received. It’s true that Angel investors typically do not present entrepreneurs with overly complicated deal structures, especially when compared to venture capitalists. Liquidation preference.

Term Sheet 223

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 223

Growthink Blog

JANUARY 24, 2011

I get the same question a lot from entrepreneurs raising equity capital (venture capital or angel funding). The question is whether they need to issue common or preferred stock. The answer depends on how and what rights are defined in the preferred stock. If, then the company were to be sold for $5,000,000 (i.e. read more.

Preferred Stock 93

Preferred Stock Stock Common Stock Liquidation Preference 93

Startup Professionals Musings

SEPTEMBER 14, 2010

Entrepreneurs sometimes assume an initial agreement with an angel is a commitment, so they start spending before any money is received. It’s true that angel investors typically do not present entrepreneurs with overly complicated deal structures, especially when compared to venture capitalists. Liquidation preference.

Term Sheet 227

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 227

Startup Company Lawyer

MARCH 14, 2010

Founders Institute Plain Preferred Term Sheet (by WSGR – disclaimer, I represent the Founders Institute and was involved in drafting this document). My general opinion is that anything that makes the financing process faster and easier or otherwise educates entrepreneurs is a good thing. (A Dividend preference.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

www.readwriteweb.com

DECEMBER 29, 2011

Therefore, going down the fundraising path is something many technology entrepreneurs will need to do and is a critical step in the development of their business. Too many entrepreneurs focus exclusive on the valuation number and this book can really help you understand all the implications around the term sheet you receive.

Cap Table 47

Cap Table Term Sheet Liquidation Preference Technical Review 47

Gust

OCTOBER 17, 2011

Entrepreneurs sometimes assume an initial agreement with an angel is a commitment, so they start spending before any money is received. It’s true that angel investors typically do not present entrepreneurs with overly complicated deal structures, especially when compared to venture capitalists. Liquidation preference.

Term Sheet 158

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 158

Both Sides of the Table

SEPTEMBER 6, 2010

But if you’re the CEO who is spinning up a story about how the options for non-founders, non-VPs is going to be worth a lot some day then you’re probably doing some young entrepreneur a disservice at your expense.** And when they figure it out some day they’re not likely to be very loyal moving forward. I choose my way.

Stock Options 294

Stock Options Stock Valuation Liquidation Preference 294

Both Sides of the Table

NOVEMBER 4, 2009

I often have career discussions with entrepreneurs – both young and more mature – whether they should join company “X&# or not. BTW, this ignores liquidation preferences which actually mean you’ll earn less. Tags: Entrepreneur Advice Startup Advice. This is part of my Startup Advice series.

Stock Options 418

Stock Options Stock Liquidation Preference Option Pool 418

K9 Ventures

JUNE 5, 2015

The founders of these funds are entrepreneurs in their own right and every entrepreneur has an innate desire to make things grow. The thinking is that since these companies will always be valued higher than the liquidation preference of the investment, therefore there is downside protection, and so they’re only playing for the upside.

Seed Stage 48

Seed Stage Venture Capital Early Stage Valuation 48

Scott Edward Walker

APRIL 9, 2012

Third, the issuance of shares of common stock may cause potential problems with respect to stock option grants because the underlying value of the shares of common stock (i.e., They are also typically granted certain additional economic rights (like Series A investors), such as pro-rata rights and a liquidation preference.

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

ithacaVC

FEBRUARY 13, 2013

And on the 8th day God looked down on his planned paradise and said, “I need a caretaker for all those entrepreneurs – the crazy ones!” And then go to a demo-day and stay past midnight listening to more pitches, empathizing with entrepreneurs about how hard it is to start a company. Gospel for the VC ages. By Mahendra Ramsinghani.

Liquidation Preference 55

Liquidation Preference IRR Due Diligence LP 55

Both Sides of the Table

JULY 19, 2011

Yet a critical mistake I see many entrepreneurs make is that they hand over too much control to their third-parties. I don’t doubt her integrity, I just think we value the outcome differently. I value the service they provide. As an entrepreneur I have one company to sell. Recruiters. Real Estate professionals.

Term Sheet 319

Term Sheet PR Liquidation Preference Stock Options 319

Both Sides of the Table

SEPTEMBER 2, 2009

A friend of mine is a serial entrepreneur and is running a high-profile, early stage company in NorCal. We exchanged ideas when I was an entrepreneur along side him in NorCal in 05-07 and my point-of-view on founder / VC relationships hasn’t shifted even 1% since I went to the dark side. I believe this is wrong.

Founder 329

Founder Liquidation Preference Term Sheet Participating Preferred 329

Scott Edward Walker

JULY 27, 2011

There is, however, another set of rights with which many entrepreneurs may not be familiar: State law rights. These are rights granted to stockholders pursuant to the respective laws of the company’s State of incorporation and are often the only rights that minority common stockholders have. Conclusion I hope the foregoing is helpful.

Delaware 49

Delaware Liquidation Preference Redemption Los Angeles 49

VC Adventure

AUGUST 30, 2010

I think the answer to these questions are that 1) it’s not at all clear that this trend is as definitive as Graham suggests; 2) it’s a mixed bag for entrepreneurs (more positive in the short run, potentially negative in the long term); and 3) it’s clearly not a positive trend for early-stage investors. Good for investors?

Angel Investor 103

Angel Investor Early Stage Equity Valuation 103

SoCal CTO

JULY 13, 2010

Creating Incremental Strategic Value - Ask the Angels , June 17, 2010 We can easily overlook the level of demand pull when we are assessing strategic value. liquidation preference. You’re Not a Real Entrepreneur - Steve Blank , June 10, 2010 Who is an entrepreneur really? Yes, even bootstrappers.

Cofounder 175

Cofounder Technical Cofounder Term Sheet Startup 175

K9 Ventures

MARCH 23, 2011

Before the era of capped notes, entrepreneurs preferred to do notes because the note essentially deferred the valuation of the company. It is in essence equivalent to being a Liquidation Preference that is typically seen in a preferred equity financing. There are multiple issues at hand here.

Pre-Money Valuation 132

Pre-Money Valuation Valuation Equity Liquidation Preference 132

Both Sides of the Table

FEBRUARY 14, 2016

Valuing any company can be difficult because it requires a degree of forecasting future growth & competition and ultimately the profits of the organization. ” “This will be great for VCs and bad for entrepreneurs.” What is the True Sentiment of VCs? ” “Sure, prices are dropping. All of these are false.

Valuation 150

Valuation Down Round Startup Later Stage 150

Professor VC

JULY 25, 2013

This is the feeling you get from watching the venture capitalists talk about the entrepreneurs and other investors in the film. In investment parlance, it strictly means that new classes of stock have equal rights with prior classes in terms of liquidation preference, voting rights, etc.

Term Sheet 46

Term Sheet Silicon Valley Syndicate Syndication 46

www.mattbartus.com

DECEMBER 9, 2012

This is not all bad for the VC, since they will only exercise if the warrant is “in the money”, meaning the point in the future if and when the Series A value is higher than $0.50. My question is, can you elaborate on the benefits you see for the entrepreneur in trying to sell this to the investors? 1,333,333 warrants x $0.50

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

www.founderinstitute.com

MARCH 2, 2010

Its measuring our value by your standards. He has been actively involved in merger, acquisition and disposition transactions with a combined value of over $1 billion, and financing/investment transactions and securities offerings worth over $600 million. Its understanding your business and your needs almost as well as you do.

Term Sheet 40

Term Sheet Liquidation Preference Vesting San Diego 40

Gust

MAY 24, 2012

Yet I’m skeptical that a widespread shift will occur anytime soon, and for reasons discussed below, as much as I admire and advocate for talented entrepreneurs, I believe it would be a losing proposition for nearly all involved.

IPO 159

IPO Equity Common Stock Stock 159

abovethecrowd.com

FEBRUARY 24, 2015

Buying into such a notion is dangerous – dangerous for the entrepreneur and dangerous for the investor. As a simple example, many investors and entrepreneurs do not realize that coupon or discount use is a contra-revenue event when it comes to revenue recognition. You must subtract it from your top-line revenue.

IPO 40

IPO Liquidation Preference Valuation Technical Review 40

Both Sides of the Table

MARCH 3, 2013

We talked about how business school historically hasn’t positioned entrepreneurs well for success. I wrote about that before in a post about “ whether MBAs are necessary for entrepreneurs. His class reading lists could be a primer for any entrepreneur, not just MBAs. Liquidity is a process not an event.

Bankruptcy 403

Bankruptcy Offshore Liquidation Preference Balance Sheet 403

Austin Startup

AUGUST 1, 2017

TL;DR: In a market that has historically idolized huge, splashy financings and exits, an increasing number of entrepreneurs are realizing that everyone else’s definition of success — particularly among certain large VCs — isn’t necessarily aligned with their own. Most individual VCs can only support about 7–10 companies at a time.

Liquidation Preference 48

Liquidation Preference Common Stock Valuation Silicon Valley 48

dondodge.typepad.com

JANUARY 15, 2011

Entrepreneurs face some pretty tough questions at a very early stage. Both the entrepreneur and the investor have much higher expectations than just "even money" on their bet. The entrepreneur expects the company to be worth many times this valuation and so does the investor. Should I take Angel or VC money?

Equity 40

Equity Employee Dilution Valuation 40

thestartuplawyer.com

FEBRUARY 24, 2010

Entrepreneurs often believe their startup company faces legal threats from only external sources. Even so, I believe the negative experience can end up producing a better entrepreneur if he or she applies lessons learned to current and future startups. He obviously never launched a startup and got shafted by a co-founder.

Cofounder 40

Cofounder Founder Preferred Stock Startup 40

Board Effect

MAY 10, 2019

Such metrics can include an investor’s liquidation preference, option exercise windows and expiry dates, and shareholders’ fully diluted ownership percentages. Dilution: Equity Value & Percentages. Liquidation Preferences. Some cap tables list shareholders’ liquidation preferences.

Cap Table 40

Cap Table Liquidation Preference Dilution Liquidity Event 40

abovethecrowd.com

APRIL 20, 2016

In February of last year, Fortune magazine writers Erin Griffith and Dan Primack declared 2015 “ The Age of the Unicorns ” noting — “Fortune counts more than 80 startups that have been valued at $1 billion or more by venture capitalists.” Next came Rolfe Winkler’s deep dive “ Highly Valued Startup Zenefits Runs Into Turbulence. ”

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

The Equity Kicker

DECEMBER 30, 2013

Another example of optionality is cash held by a disciplined patient value investor with the temperament to not buy until Mr. Market is fearful. Seth Klarman, Howard Marks and other value investors use dry powder in the form of cash to harvest optionality since Mr. This is all from the perspective of the venture investor.

Finance 129

Finance Liquidation Preference Valuation Harvest 129

Professor VC

JUNE 6, 2016

I can just picture Mr. Rogers saying "Children, can you say participating preferred stock with an uncapped 3x liquidation preference and a full ratchet?" I work hard on mine and you work hard on yours and we all win (entrepreneurs, angels, and upstream VC's). It's great for entrepreneurs! I got over it.

Syndicate 28

Syndicate Syndication Cap Table Ratchet 28