Gust

APRIL 11, 2014

Let’s get right down to business: Dilution of founders’ and other early shareholders’ equity in startups is frequently a subject of intense interest and debate. The simplest illustration is the first VC funding round of a new startup. Suppose it raises $2 million at a $6 million pre-money valuation.

Dilution 162

Dilution Equity Prospectus Pre-Money Valuation 162

YoungUpstarts

SEPTEMBER 15, 2018

Startup valuation, under no circumstances, can be described as a simple affair. While valuing a publicly traded company is more or less straightforward, the case with a rarely profit making startup is not quite the same. Here are several factors that are taken into account while these startups are evaluated.

Pre-Money Valuation 124

Pre-Money Valuation Valuation Sweat Equity Startup 124

ReadWriteStart

OCTOBER 7, 2010

Bottom line, early stage equity is very, very expensive. So at any point, if you are trying to raise money, and you are hearing from investors that you are too early and have too little validation, it may be a good thing. Sub-$2 million pre-money, it is better to bootstrap. Tags: StartUp 101. Photo by lco.

Valuation 119

Valuation Silicon Valley Pre-Money Valuation Bootstrapping 119

Berkonomics

JANUARY 7, 2021

Think of startups and early stage businesses whose entrepreneurs you know. Dividing equity among those that fill the management gap. How much equity to early investors? It starts with sharing the opportunity and upside. So, co-management is the second group to share in the bounty upon a liquidity event. Reward for early risk.

Liquidity Event 96

Liquidity Event Pre-Money Valuation Cofounder Initial Public Offering 96

Feld Thoughts

JULY 29, 2011

Finance Friday’s gets off the ground with today’s post by introducing you to an imaginary startup, the entrepreneurs that we’ll being following throughout the series, and their first challenges: splitting up the founders’ equity and addressing the case where one of the founders provides the initial seed capital for the business.

Equity 137

Equity Finance Pre-Money Valuation Denver 137

The Startup Magazine

SEPTEMBER 12, 2019

Most startups view venture capital funding as a blessing from above — eager to take it as soon as they can get it. Tempted by large sums of money and the perceived validation that comes along with being funded, founders turn to venture capitalists to accelerate their company’s growth. This is often the case when it comes to VC funding.

Early Stage 85

Early Stage Venture Capital Bootstrapping Pre-Money Valuation 85

The Startup Lawyer

FEBRUARY 4, 2011

Great news — your startup just got accepted to an incubator! But before your startup signs up and cashes that $[XX,000] check, your startup’s co-founders should sit down and evaluate the incubator’s offer. Pre-money valuations startups receive from incubators are typically low…really low.

Incubator 105

Incubator Pre-Money Valuation Option Pool Advisory Board 105

Both Sides of the Table

JUNE 22, 2011

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). For others it feels like a two-speed economy, where rules apply to hot tech startups that don’t apply elsewhere.

Saudi Arabia 309

Saudi Arabia Valuation IPO Technical Review 309

View from Seed

SEPTEMBER 14, 2021

Both early- and late-stage startup valuations are currently elevated. For context, seed-stage pre-money valuations are up 24% from H1 2020 to H1 2021. Early-stage valuations are up 70%, and late-stage valuations are up 103% (source Pitchbook ). The answer is likely a mix of both.

Valuation 319

Valuation Pre-Money Valuation Distribution Early Stage 319

David Cohen

AUGUST 1, 2018

The reason the entrepreneur want a high cap is to signal a high price for the next equity financing of a larger amount of money. If they accept convertible notes now at a low cap, how could they possibly justify a higher equity price in a few short months when this larger financing is bound to happen? What a deal!

Pre-Money Valuation 83

Pre-Money Valuation Valuation Equity Finance 83

View from Seed

SEPTEMBER 14, 2021

Both early- and late-stage startup valuations are currently elevated. For context, seed-stage pre-money valuations are up 24% from H1 2020 to H1 2021. Early-stage valuations are up 70%, and late-stage valuations are up 103% (source Pitchbook ). The answer is likely a mix of both.

Valuation 295

Valuation Pre-Money Valuation Distribution Early Stage 295

Startup Professionals Musings

JANUARY 27, 2012

The price is the percent of ownership given to the investor, calculated as “investment/post-money valuation.” The pre-money valuation is company value today, while the post-money valuation is the pre-money valuation plus the investment amount. Define equity type.

Term Sheet 223

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

Startup Professionals Musings

SEPTEMBER 14, 2010

The price is the percent of ownership given to the investor, calculated as “investment/post-money valuation.” The pre-money valuation is company value today, while the post-money valuation is the pre-money valuation plus the investment amount. Define equity type.

Term Sheet 227

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

Tim Keane

JANUARY 12, 2010

Startups and angels: Along the way to success. Term-sheets and Valuations: Thinking about Negotiations. The investors and the entrepreneurs are – or should be – aware that the price of the company’s equity is set by the market – in simplest terms, what an informed buyer is willing to pay. stake in the company.

Term Sheet 68

Term Sheet Valuation Dividend Pre-Money Valuation 68

ithacaVC

OCTOBER 16, 2012

Doug is an older guy with lots of startup experience both as entrepreneur and investor. Doug’s lecture was on startup company valuations. So, you want to raise $500,000, well guess what, your pre-money valuation will be between $930,000 and $2mm. Period, the end. Yeah, it is that simple.

Valuation 58

Valuation Pre-Money Valuation Startup Equity 58

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. I can boil it down to how this tension plays out.

Pre-Money Valuation 150

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

Early Growth Financial Services

OCTOBER 23, 2014

Median pre-money valuations have increased by 43% so far in 2014 compared to 2013. More … Continue reading → Equity / Debt / Venture Funding' The trend continued in 2014: with activity during the six months through June the strongest since the comparable period of 2001.

Pre-Money Valuation 59

Pre-Money Valuation Equity Valuation Startup 59

View from Seed

SEPTEMBER 14, 2021

Both early- and late-stage startup valuations are currently elevated. For context, seed-stage pre-money valuations are up 24% from H1 2020 to H1 2021. Early-stage valuations are up 70%, and late-stage valuations are up 103% (source Pitchbook ). The answer is likely a mix of both.

Valuation 156

Valuation Pre-Money Valuation Distribution Early Stage 156

K9 Ventures

MARCH 23, 2011

I may be well be in the minority in the Valley to think this way — especially so as a seed stage investor — but I have a strong preference for doing priced equity rounds for funding companies at any stage. Since the financing would likely happen in short order, there was no need to have a valuation cap in the note.

Pre-Money Valuation 132

Pre-Money Valuation Valuation Equity Liquidation Preference 132

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

Lightspeed Venture Partners

NOVEMBER 19, 2012

Interestingly, this new deal actually lowered the pre money valuation for the company. 75,000 for 10% implies a $675,000 pre money valuation. 150,00 for 20% implies a $600,000 pre money valuation. Kevin agreed to this, as did the founder, and a deal was struck.

Pre-Money Valuation 161

Pre-Money Valuation Valuation Alabama Churn Rate 161

Gust

OCTOBER 21, 2011

For convertible notes, the only liquidity event we need be concerned with is an acquisition of the startup in the near future, before the maturity date; otherwise, the notes will convert to equity of one kind or another, and the eventual sale of that equity (in a public offering, acquisition, or private sale) is a different subject for another day.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

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. The company came back and offered him 20% of the company for the $200k (an $800k pre money valuation). There is a lot of momentum in startups.

Pre-Money Valuation 153

Pre-Money Valuation Valuation Participating Preferred Preferred Stock 153

The Startup Lawyer

JUNE 22, 2010

If you follow this blog, you know that I think convertible debt is a good structure for a startup’s angel round. The main feature of the convertible note is that the debt investment made by the angel investor will typically later convert into equity. of the startup immediately after the Series A round.

Pre-Money Valuation 82

Pre-Money Valuation Angel Investor Preferred Stock Valuation 82

The Startup Lawyer

JANUARY 22, 2013

Depending on the delta between the price cap and the pre-money valuation of the qualified equity financing, the convertible note investors could receive a windfall in terms of liquidation preference. The Potential Problem Let’s say Series A investors invest at a pre-money valuation that [.].

Liquidation Preference 54

Liquidation Preference Pre-Money Valuation Valuation Equity 54

Lightspeed Venture Partners

OCTOBER 22, 2012

The founders have more demand than they know what to do with, and want to raise $55k for 5% equity in the company to buy a second truck. This implies a pre money valuation of $1.045M. See my breakdown of week 2 for more on how to calculate pre money valuation.).

Pre-Money Valuation 101

Pre-Money Valuation Valuation Dilution Differentiation 101

Scott Edward Walker

APRIL 22, 2012

This part 2 will address the economics of a convertible note seed financing and the three key economic terms: (i) the conversion discount, (ii) the conversion valuation cap and (iii) the interest rate. Part 3 will cover certain special issues, such as (i) what happens if the startup is acquired prior to the note’s conversion to equity?

Pre-Money Valuation 72

Pre-Money Valuation Finance Liquidation Preference Founder 72

VC Cafe

SEPTEMBER 26, 2022

The past year was a wild ride for startups and founders, giving a whole new meaning to the ”rollercoaster” aspect of being an entrepreneur. A combination of competition for top talent and an effort to bring employees back to the office drove startups in Israel to throw extravagant parties and all-inclusive retreats abroad.

Founder 187

Founder Startup Valuation Pre-Money Valuation 187

This is going to be BIG.

JULY 30, 2015

You don't want the "average" fund, because average funds don't do well--just like you don't want to model the average startup, because you might as well draw a big flaming hole in the ground. Comparatively, if you look at long term private equity results, I think most investors are winding up with high teens returns. Exits are $250mm.

Venture Capital 60

Venture Capital Pre-Money Valuation IRR Valuation 60

Gust

NOVEMBER 4, 2011

In brief, a cap acts to place a limit on the conversion price of a convertible note such that investors are guaranteed a minimum number of shares for their bridge loans if the startup does a priced equity round at a high pre-money valuation – “high” meaning above the cap, which is often a heavily negotiated term. (The

Valuation 98

Valuation Pre-Money Valuation Merger Vesting 98

Gust

OCTOBER 20, 2011

Individual accredited investors in typical angel deals put personal capital at risk for an equity share of growth-oriented, start-up companies. In 2011, the valuation of pre-revenue, start-up companies is typically in the range of $1.5–$2.5 As can be seen the average (mean) pre-money valuation for recent pre-revenue deals is $2.1

Valuation 146

Valuation Pre-Money Valuation Intellectual Property Technical Review 146

The Startup Lawyer

JANUARY 10, 2012

In most equity financing rounds, an investor will ask for (and get) a term called a liquidation preference. If it were up to me, I’d rather have the startup and investor come to terms on the pre-money valuation rather than toying with anything other than a 1x non-participating liquidation preference.

Liquidation Preference 73

Liquidation Preference Pre-Money Valuation Participating Preferred Preferred Stock 73

Gust

OCTOBER 12, 2011

That is obviously a challenge for the typical cash-strapped early stage startup that is seeking to raise more capital and is not in any kind of position to be repaying loans. Thus, it’s in everyone’s best interest to see the startup raise more capital rather than declaring default and demanding repayment.

Finance 107

Finance Term Sheet Pre-Money Valuation Early Stage 107

The Startup Lawyer

AUGUST 24, 2010

Just like the preferred equity financing process, the convertible debt financing process can start with a term sheet, rather than a full set of financing documents. Here are terms that are typically found in a convertible note term sheet: Amount of the Offering : How much capital can the startup raise via the convertible debt offering?

Term Sheet 62

Term Sheet Liquidity Event Pre-Money Valuation Warrant 62

dondodge.typepad.com

JANUARY 15, 2011

Community is more powerful than money or technology » August 11, 2007 How much equity for investors and employees? Should I take Angel or VC money? How much money should I raise? How much equity should I give up? How much equity should I grant to early employees?

Equity 40

Equity Employee Dilution Valuation 40

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.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

Both Sides of the Table

APRIL 14, 2010

Or you find out that management has been through a few rounds of dilution such that the management team only has 10-15% of the total equity of the company and as a new investor you know a priori that management is either going to quit soon after your investment or are going to ask you for a big increase in their equity package.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Pre-Money Valuation 289