Startup Professionals Musings

OCTOBER 7, 2022

One of the big questions that every entrepreneur struggles with is how much funding they should request from investors in the first round. This is all about setting a credible current value on your startup -- not future value. If you ask for more money than your company is now worth, no investor will bite. Marty Zwilling.

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Preferred Stock Exit Strategy Equity Angel Investor 304

YoungUpstarts

JUNE 26, 2020

by Rizwan Virk, author of “ Startup Myths and Models: What You Won’t Learn in Business School “. If you are building a startup, you’ll find no shortage of people who are willing to give you advice, particularly when it comes to raising financing. The real key is to have an entrepreneur that is obsessed with a small market.

Finance 205

Finance Silicon Valley Valuation Startup 205

Both Sides of the Table

JULY 29, 2010

We received so much positive feedback from our This Week in Venture Capital show walking through valuation calculations & term sheets that we decided to do a Q&A show this week to address topics that entrepreneurs want to learn about. The best thing to get is a “right sized&# valuation. A: It’s not best.

Venture Capital 282

Venture Capital Term Sheet Valuation Stock Options 282

Tim Keane

JANUARY 12, 2010

Startups and angels: Along the way to success. Term-sheets and Valuations: Thinking about Negotiations. 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. The Valuation Question.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Startup Professionals Musings

SEPTEMBER 26, 2015

Most entrepreneurs looking for an investor can tell you how much money they need, but few have given much thought to what they are willing to give up for it. In very early startups, which have no valuation, the term sheet may specify a convertible note. Type of stock assigned to the investor.

Term Sheet 120

Term Sheet Demand Preferred Stock Liquidation Preference 120

Lightspeed Venture Partners

OCTOBER 7, 2012

Week three’s breakdown covered topics like how hard momentum is to turn around, and how participating preferred stock works. This does neither, so I’m out” Cuban said, “I see you guys not as entrepreneurs but as wantrepreneurs” I agree with him. The entrepreneur was clearly desperate.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

Agile VC

APRIL 17, 2011

AGILEVC My idle thoughts on tech startups. liquidation preference, 6% accumulated dividend (1). Post-money valuation probably no higher than $12M (2). Series A-1 Preferred. liquidation preference, 6% accumulated dividend. Pre-money valuation was initially set higher but was adjusted to match the Ser B valuation.

Pre-Money Valuation 113

Pre-Money Valuation Liquidation Preference Dividend Common Stock 113

techcrunch.com

SEPTEMBER 2, 2012

Sometimes these loans have a valuation cap and/or a discount. Although these types of notes are relatively easy and cheap to form, many have argued that these types of vehicles are not startup-friendly for a variety of reasons, which we’ll explain below. Enterprise. Smartphones. Digital Cameras. Headphones. CrunchBase.

Equity 87

Equity San Francisco Technical Review Angel Investor 87

Startup Professionals Musings

AUGUST 1, 2016

After many years of working with angel investors seriously trying to find new ventures worthy of their hard-earned money, I find their frustration often exceeds that of entrepreneurs sincerely looking for financial help. Non-credible funding request or unreasonable valuation. Future unproven projections don’t set today’s valuation.

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Due Diligence Intellectual Property Preferred Stock Seed Stage 120

abovethecrowd.com

FEBRUARY 24, 2015

An unprecedented 80 private companies have raised financings at valuations over $1B in the last few years. Buying into such a notion is dangerous – dangerous for the entrepreneur and dangerous for the investor. Despite this, startups commonly highlight “gross revenue” even when 80+% goes out the door for every single transaction.

IPO 40

IPO Liquidation Preference Valuation Technical Review 40

www.vccafe.com

MARCH 11, 2013

Startup Resources (Updated Mar 2013). Venture Capital Cafe > Startup Resources (Updated Mar 2013). VC & Startup Resources. Seed Startups. VC Cafe covers early stage Israeli and European tech & mobile startups. Hundreds of startups featured since 2005, will yours be next? About VC Cafe.

Software Review 53

Software Review Technical Review Startup 53

Gust

SEPTEMBER 29, 2011

The most successful serial entrepreneurs in the world may found three or four, perhaps even eight or ten venture-backed startups over the course of their careers. For more on working with startup lawyers, see Mark Suster’s classic post, How To Work With Lawyers At A Startup.). Knowledge is power.

Finance 178

Finance Term Sheet Preferred Stock Bridge Financing 178

Both Sides of the Table

SEPTEMBER 8, 2012

I recently wrote about my views that startups rounds should be priced. If you do a capped note it’s bad for the entrepreneur. It has both a “full rachet” and “multiple liquidation preferences.” Here is what I recommend very often – privately – to startup entrepreneurs for angel funding.

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

Scott Edward Walker

APRIL 9, 2012

Venture capital funds, seed funds, super angels, angel groups, incubators, and “friends and family” are all playing the seed financing game and investing early in startups in an attempt to land the next Facebook. Why Can’t a Startup Issue Shares of Common Stock to Investors? This post was originally published on TechCrunch.]

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Startup Professionals Musings

MARCH 7, 2015

One of the big questions that every entrepreneur struggles with is how much funding they should request from investors in the first round. This is all about setting a credible current value on your startup -- not future value. entrepreneur funding request investors startup stage'

Preferred Stock 120

Preferred Stock Exit Strategy Equity Angel Investor 120

ithacaVC

APRIL 25, 2012

If you want to scare off VCs, start your pitch with “we are looking to raise $X at a pre-money valuation of $Y” Stating how much you want to raise is fine and recommended. However, stating a desired pre-money valuation early in the process is not a good idea. Here is why.

Valuation 49

Valuation Pre-Money Valuation Liquidation Preference Preferred Stock 49

www.quora.com

JANUARY 16, 2011

Find Questions, Topics and People Add Question Add Question Venture Capital Venture Capital Term Sheets Startups Term Sheets What are examples of good startup term sheets? Entrepreneur. If you can't find what you are looking for, hit enter or click "Add Question" again. Daniel Feygin , Consultant. Technologist.

Term Sheet 41

Term Sheet Startup Angel Investor Wiki 41

Both Sides of the Table

AUGUST 30, 2010

I’ve written about the topic of convertible debt at length before specifically about how angels & entrepreneurs should think about pricing. Clearly this is is a trend and a topic that is interesting entrepreneurs. a priced/valued preferred stock financing)? a priced/valued preferred stock financing)?&#.

Equity 319

Equity Early Stage Angel Investor Valuation 319

Startup Company Lawyer

MARCH 14, 2010

My general opinion is that anything that makes the financing process faster and easier or otherwise educates entrepreneurs is a good thing. (A 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.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

www.mattbartus.com

DECEMBER 9, 2012

Perspectives on issues affecting founders, startups and investors from a veteran startup lawyer in Silicon Valley. How to pump up your VC valuation. Let’s say you receive a term sheet for a $1 million investment at a $3 million fully diluted pre-money valuation, and you’re kind of disappointed. 10,000,000.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

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

Scott Edward Walker

SEPTEMBER 21, 2011

I’ve been helping entrepreneurs raise capital as a securities lawyer for 17+ years, and there are certain fundamental mistakes that I’ve seen entrepreneurs repeatedly make. Accordingly, I thought it would be helpful to share three basic tips for entrepreneurs in connection with raising capital. This is how the game is played.

Preferred Stock 45

Preferred Stock Angel Investor Entrepreneur Common Stock 45

Gust

AUGUST 6, 2014

25 individual angel investors funding a startup on a convertible note. two angel groups investing money in Series Seed Preferred stock purchase. a single venture capital fund putting in the full amount as Series A Convertible Preferred investment. Good personal chemistry with the entrepreneur.

Term Sheet 170

Term Sheet Lead Investor Preferred Stock Common Stock 170

Lightspeed Venture Partners

OCTOBER 1, 2012

pre money valuation). Cuban has interest in a gluten free diet, and claimed that he liked the company, but his only concern was valuation. Price is always a consideration in investing, but particularly so if the entrepreneurs have shown an interest in an early exit. The entrepreneur was seeking $100k for 20% of the company.

Pre-Money Valuation 158

Pre-Money Valuation Valuation Participating Preferred Preferred Stock 158

Gust

OCTOBER 5, 2011

Last week , we gave some attention to the “why” behind convertible note financing for early stage startups. Going back to Part I , recall that although a convertible note is technically a loan made to the startup, in practice these loans are rarely expected to be repaid. These deal terms are simple but significant.

Finance 79

Finance Preferred Stock Term Sheet Early Stage 79

Berkonomics

MAY 22, 2014

In most cases, those entrepreneurs choosing to raise capital using PPMs retain specialists (many of whom are lawyers) to write their PPMs – a rather expensive undertaking. Angels, as group of accredited investors funding startup companies, are assumed to meet a Regulation D exemption for purchasing equity in private companies.

Early Stage 79

Early Stage Accredited Investor SEC Private Placement 79

Both Sides of the Table

APRIL 14, 2010

It’s meant to be a bit provocative but the reality is that I give this advice to entrepreneurs all the the time and I usually leave the “e&# off of the end. I normally offer this advice in the capacity of really wanting to help entrepreneurs so please bear with me. Take liquidation preferences head on. Reputation.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

K9 Ventures

MAY 14, 2011

This is probably the very first group that an entrepreneur who is starting out may approach for some funding for his or her idea. The incubators invest usually for an equity stake and buy equity at a extremely low valuation (for example, 7% for $15,000, which implies a pre-money valuation of less than $200,000).

Preferred Stock 125

Preferred Stock Seed Stage Incubator Early Stage 125

Gust

OCTOBER 21, 2011

This week we move on to something near and dear to the hearts of entrepreneurs and investors alike: The exit, more formally known as a “ liquidity event.” Entrepreneurs generally don’t ask for this kind of language, but most sophisticated investors will insist on it in one form or another.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

The Next Web

JUNE 17, 2015

Giving up equity in your business, as an alternative to paying cash, often sounds like a great idea to cash-starved startups. When you can, raising capital from a professional third-party investor is always preferred. This typically comes down to the security, voting rights and valuation of the deal.

Equity 60

Equity Valuation Preferred Stock Common Stock 60

thestartuplawyer.com

FEBRUARY 24, 2010

Contact The Startup Lawyer: Home Page About Contact FAQs Glossary Ryan Roberts Law: Home Page Social Networks: Facebook Twitter LinkedIn Flickr Delicious Digg Last.FM He obviously never launched a startup and got shafted by a co-founder. He obviously never launched a startup and got shafted by a co-founder.

Cofounder 40

Cofounder Founder Preferred Stock Startup 40

Scott Edward Walker

SEPTEMBER 14, 2011

I have previously discussed this issue in detail, and the importance of choosing solid investors, in my post “ Doing Deals In The New Decade: 7 Tips For Entrepreneurs ” (see tip #1). Indeed, some very pro-entrepreneur investors, like Fred Wilson , do not require no-shop provisions (see rule #4 in Fred’s post “ Competing To Win Deals ”).

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Term Sheet Due Diligence Liquidation Preference Redemption 76

Professor VC

JUNE 6, 2016

However, in my 25 years in the Silicon Valley startup ecosystem, I've experienced the VC corollary to the golden rule much more often: "He has the gold makes the rules!" I can just picture Mr. Rogers saying "Children, can you say participating preferred stock with an uncapped 3x liquidation preference and a full ratchet?"

Syndicate 28

Syndicate Syndication Cap Table Ratchet 28

Tim Keane

APRIL 12, 2006

Startups and angels: Along the way to success. Ten questions the entrepreneur should ask the (prospective) investor. If they’re making it as part of a group that the entrepreneur likes, fine. We are open to them and prefer to begin to co-invest at. valuation than the previous round. How do you approach valuation?

Entrepreneur 60

Entrepreneur Valuation Sweat Equity Common Stock 60

Board Effect

MAY 10, 2019

In the early days, tracking the percentage of ownership in a startup is easy. Things can escalate quickly, however, when a startup decides to seek investors. A well-kept cap table is a necessary ingredient of proper recordkeeping long after a startup has “started up”. Why do cap tables matter?

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Cap Table Liquidation Preference Dilution Liquidity Event 40