Both Sides of the Table

SEPTEMBER 25, 2010

When I first read Paul Graham’s blog post on “High Resolution&# Financing I read it as a treatise arguing that convertible notes are better than equity. Either would be fine with startups, so long as they can easily change their valuation. He’s fine with equity provided it’s cheap to paper it legally.

Finance 286

Finance Term Sheet Technical Review Warrant 286

Both Sides of the Table

MAY 9, 2011

I covered what I call “the co-founder mythology.&# Either you’re not technical and you think you need a technical co-founder or vice-versa. It is increasingly popular to have “founder dating&# or “startup weekend hackathons&# of some variety or the other. Hire your co-founder.

Cofounder 393

Cofounder Founder Vesting Founder Vesting 393

Both Sides of the Table

APRIL 19, 2011

I recently sat down with Matt Coffin , the founder of LowerMyBills, which sold for $400 million but was very nearly a bankruptcy only a few years early, and talked “startups.&#. Matt is one of the most transparent, focused & honest startup guys you’ll meet. Here’s a summary of our interview.

Acquisition 304

Acquisition Warrant Customer Term Sheet 304

Both Sides of the Table

MAY 28, 2018

There’s a quick litmus-test conversation any early-stage VC will have with the founder and it’s one that you should be as prepared for as your elevator pitch. Founder: “$8–10 million” VC: “What’s your current burn rate?” Founder: “$250k / month.” Founder: “Um. Why are you raising so much?” Let me check my plan.”

Burn Rate 247

Burn Rate Valuation Pre-Money Valuation Dilution 247

Both Sides of the Table

AUGUST 30, 2010

Convertible debt is an investment that “converts&# into equity in the future usually at a discount to your next funding round price and sometimes has a “cap&# (maximum price). prefer equity to convertible debt): If you’re an early stage investor (e.g. Tags: Raising Venture Capital Startup Advice.

Equity 319

Equity Early Stage Angel Investor Valuation 319

Both Sides of the Table

JULY 16, 2010

So even within the “alternative class&# our LPs are looking at other asset investment choices such as distressed buyout funds, private equity or hedge funds. Then there is a certain size market for A round VCs, B round VCs and growth equity investors willing to put $50 million to work. VC will shrink. Oh yes it will.

LP 311

LP Technical Review Early Stage Silicon Valley 311

Both Sides of the Table

JULY 12, 2011

This week I sat down with Chris Dixon, co-founder / CEO of Hunch and Partner at Founder Collective in the most recent installment of This Week in Venture Capital. 2. Chris then discussed his time as founder and CEO of SiteAdvisor, his first venture-backed startup. be the guy that provides them quotes”).

Technical Review 281

Technical Review Artificial Inteligence Cofounder API 281

Both Sides of the Table

AUGUST 3, 2010

There is a telltale sign of an inexperienced startup entrepreneur. As a startup you shouldn’t focus on buying other companies until you’ve figured out your own business. A close friend of mine in LA who is 3 years into his startup called me about 2.5 Tags: Startup Advice. They get premature merge elation.

Merger 276

Merger Technical Review Early Stage Dilution 276

Both Sides of the Table

FEBRUARY 23, 2015

But not everybody has the right skills to build a highly successful and valuable startup from scratch. For some aspiring to be tech entrepreneurs, I often suggest a two-step process, as I argued in this post that “ The First Startup Founder You Need to Invest in Is You.” He still has the dream. He has the hunger.

Technical Review 150

Technical Review Liquidation Preference Silicon Valley IP 150

Both Sides of the Table

MAY 27, 2013

But the thing I am most proud of about Rob is that he has taken a company with a uniquely talented founder & CTO – Nick Halstead – and managed to build a very tight working relationship with Nick where we drive world-class product development without having the usual founder / CEO conflicts. Startup Advice'

Advisory Board 365

Advisory Board CTO Hire Fractional CTO Los Angeles 365

Both Sides of the Table

AUGUST 18, 2009

This is part of my ongoing series, “ Startup Lessons.&#. Yesterday I wrote a blog post ( here ) in which I urged people to not have too many founders. To be clear – it is not about being stingy with or hoarding equity – it is about having a prenuptial agreement. They agreed to all be co-founders.

Founder 251

Founder Cofounder Equity Stock Options 251

Both Sides of the Table

JUNE 30, 2011

Or the Cliff Note’s version: Open Source & Cloud Computing (led by Amazon) drove down tech startup costs by 90%. The result was a massive increase in startups & a whole group of new funding sources: both angels & “micro VCs&#. Continued high pace of startup innovation. I call this “stage drift.&#.

Venture Capital 289

Venture Capital Early Stage Valuation Angel Investor 289

Both Sides of the Table

JULY 26, 2015

Understanding your vulnerability and understanding the power of those with whom you must do business is a very important part of figuring out as a startup how to fit into the broader ecosystem and the art of statecraft is tremendously important in knowing when and how to project power in sales, recruiting, negotiations, fund raising, etc.

Oauth 150

Oauth Software Review Technical Review IPO 150

Both Sides of the Table

SEPTEMBER 10, 2021

Today you have funders focused exclusively on “Day 0” startups or ones that aren’t even created yet. They might be ideas they hatch internally (via a Foundry) or a founder who just left SpaceX and raises money to search for an idea. two founders in a garage?—?(HP The legends of Silicon Valley?—?two HP Style) are dead.

Pre-Money Valuation 471

Pre-Money Valuation Valuation Venture Capital Early Stage 471

Both Sides of the Table

DECEMBER 17, 2012

I wonder sometimes if founders even know about the hours their lawyers or advisers put in on evenings, weekends, vacations. And that person has almost certainly chosen specifically to be a startup lawyer over serving other types of customers because he or she enjoys working with entrepreneurs. And it’s not just lawyers.

Startup 363

Startup PR Venture Capital Angel Investor 363

Both Sides of the Table

MAY 19, 2010

Another topic we debated early in the program was “lean startup” vs. “ fat startup ” where we both took the obvious hedge and said “it depends.” But truthfully both Dana and I are more aligned with the lean startup principles and believe you only go FAT when you’ve really proved out your product / market fit. Time will tell.

Partner 240

Partner New York City Cofounder Syndicate 240

Both Sides of the Table

MARCH 31, 2012

It is with this backdrop that I was really happy to learn from my friend Ethan Anderson (HBS alum & founder of RedBeacon) about an awesome program at HBS run by Tom Eisenmann called Launching Technology Ventures. However, I advocate a more nuanced approach for early-stage startup teams” 1.

Startup 319

Startup Early Stage Sales Cofounder 319

Both Sides of the Table

JUNE 22, 2011

I recently spoke at the Founder Showcase at the request of Adeo Ressi. I said that at the Founder Showcase, too. But this mania to not miss out on the next big thing is driving some investors to pay growth-equity prices for traditional market risk (as in, they’re paying up before it is clear there is product / market fit).

Saudi Arabia 309

Saudi Arabia Valuation IPO Technical Review 309

Both Sides of the Table

DECEMBER 1, 2009

This is part of my ongoing series on Startup Advice. I was reading one of my favorite websites for entrepreneurs, VentureHacks, this weekend and noticed that they are running a long piece on how to pick a co-founder. I advocate treating them like a co-founder in every way except when they join and how much equity they get.

Hiring 289

Hiring Cofounder Dilution Startup 289

Both Sides of the Table

JANUARY 1, 2016

Having time to think about “leadership” at most startups feels like a luxury. The reality of most startups is about survival. Most founders have a strong sense of what they’re trying to achieve. They hire their initial co-founders and early employees and everybody has a sense of “mission.”

Leadership 150

Leadership Southern California Hiring San Diego 150

Both Sides of the Table

SEPTEMBER 5, 2012

This time by the efforts of Adeo Ressi to introduce a new kind of structure called “ convertible equity.” My initial reaction to Adeo when we spoke was that while it may have solved some issues (debt versus equity) it didn’t solve the ones that I’ve been warning entrepreneurs about most loudly.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Both Sides of the Table

APRIL 6, 2014

Whether you’re considering hiring a new employee or as an investor whether you’re looking to do a background check on the founders of a company. I know that in later-stage growth equity deals some firms even hire third-parties who will do the reference calls. Startup Lessons' Reference calls. Negative people.

Technical Review 302

Technical Review Hiring Later Stage Employee 302

Both Sides of the Table

SEPTEMBER 12, 2010

Many of the growth equity firms have had outbound dialing programs for years. Growth equity firms typically target profitable businesses that are often not technical in nature. These kind of companies were seldom startups. Perhaps outbound dialing / emailing programs worked well for growth equity firms in their core business.

Programming 294

Programming Entrepreneur Private Equity Equity 294

Both Sides of the Table

JANUARY 31, 2011

If you’ve taken the roller coaster ride that is a startup – you know what I’m talking about. The truth is that in my experience very, very few people really enjoy the “pure&# startup environment: months with no salary, months with no live product and lots of trial, error & rejection. It’s addicting. 8 beers that night.

Entrepreneur 384

Entrepreneur Startup Salary Egypt 384

Both Sides of the Table

OCTOBER 17, 2019

I had just left Salesforce.com where I was VP, Products, after they had acquired my second startup. It proved to be fortuitous because it allowed me the time & space I needed to get to know tons of founders and VCs and to hone my craft. I became a VC 12 years ago in 2007 when the pace of deals was much slower.

IP 223

IP Intellectual Property IRR Cofounder 223

Both Sides of the Table

JULY 11, 2010

I recently wrote a blog post about why I believe that startup teams in close proximity perform better. The CIC, founded in 1999, is located adjacent to MIT and has more than 100,000 sq ft of space for nearby startups that qualify to be housed there. As they showed me around the CIC I was instantly envious.

San Francisco 285

San Francisco Incubator Silicon Valley Startup 285

Both Sides of the Table

SEPTEMBER 18, 2014

I know how to structure around that to protect the founders from getting screwed on a multiple liquidation preference. But most VCs don’t bother so many convertible note founders get screwed and never know it until they sell their companies. “But lawyers will charge much more for equity.” Startup Lessons'

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Both Sides of the Table

MAY 13, 2018

This is part of a series of advice for founders who need to raise money from venture capitalists. Somehow many first-time founders equate “sales” with something that is beneath them. I always tell founders … “An investors job is to deploy capital and make a return. This is where most founders err.

Term Sheet 332

Term Sheet Due Diligence Campaign Sales 332

Both Sides of the Table

MAY 19, 2018

The buyer is shopping for equity in startups and the seller is looking for cash in exchange for equity and shared governing control of his or her company. I never thought of this until I became the Founder & CEO of my first startup company. For starters you have to realize that fund-raising is a sales process.

Cap Table 336

Cap Table Due Diligence Forecast Churn Rate 336

Both Sides of the Table

SEPTEMBER 2, 2009

If a company has reached a level of success, has been around for a few years and you believe the company has potential to break out into a much bigger company then you should let the founders take money off of the table. Founders however are asked to take low salaries and never really get back the time they worked for free.

Founder 329

Founder Liquidation Preference Term Sheet Participating Preferred 329

Both Sides of the Table

JANUARY 22, 2011

If you’ve taken the roller coaster ride that is a startup – you know what I’m talking about. The truth is that in my experience very, very few people really enjoy the “pure&# startup environment: months with no salary, months with no live product and lots of trial, error & rejection. It’s addicting. 8 beers that night.

Entrepreneur 176

Entrepreneur Startup Salary Egypt 176

Both Sides of the Table

JUNE 5, 2015

Over the years I’ve written extensively about the downsides of convertible notes for startups such as here , here and here. ” Today I want to talk about how a VC thinks about equity pricing on your round and particularly if you’re coming off of a convertible note. ” That is a problem for the founder and the VC.

Pre-Money Valuation 150

Pre-Money Valuation Option Pool Post-Money Valuation Dilution 150

Both Sides of the Table

OCTOBER 14, 2015

The truth is that the brutal reality of public markets is that they self correct much more quickly than our shitty little private equity illiquid corner of the universe. We have an entire generation of startup founders who don’t have muscle memory from getting their burn rates back into shape from 2008/09 or 2001-2005.

Burn Rate 150

Burn Rate San Francisco Private Equity LP 150

Both Sides of the Table

MARCH 17, 2010

Side note: LA seems to have had some success in mega deals led by private equity firms as evidenced by DemandMedia and Chris DeWolf’s latest company backed by more than $20 million in private equity. You don’t have the founders of eBay, LinkedIn, Salesforce.com and Yahoo. You don’t. Get over it.

Silicon Valley 290

Silicon Valley Technology Los Angeles Semantic 290

Both Sides of the Table

APRIL 14, 2012

But a healthy percentage of successful startups have potential buyers “showing interest.” Let me remind readers as I outlined in this post , there are VERY FEW M&A transactions for early-stage startup companies above $100 million. You are either bought for stock or for equity. Think about it.

Valuation 316

Valuation Balance Sheet Dilution Term Sheet 316

Both Sides of the Table

MAY 5, 2011

I’m inspired by the enthusiasm of the young, emerging startup ecosystem that is here. And I think about the “Seattle issue&# as a metaphor for startups and business in general. I was meeting with a first-time CEO of a very promising young startup recently and offering my advice on what his priorities should be.

Seattle 317

Seattle Silicon Valley Technical Review Los Angeles 317

Both Sides of the Table

APRIL 14, 2010

management, founders, angel investors) get any money. It’s frustrating because you did $4 million in revenue last year and have a $7 million run rate for this year and you’re struggling to get financed for even $5 million while other startups are out there with no revenue raising $10 million at a $40 million pre money valuation!

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Pre-Money Valuation 289