Up and Running

SEPTEMBER 19, 2017

That’s because obtaining a pre-money valuation for a concept level technology company in excess of $1 million is difficult, particularly for a startup founder without a proven track record. Takeaway lesson: A shocking number of technology startups never even get their first product out the door.

Private Equity 94

Private Equity Pre-Money Valuation Equity Startup 94

View from Seed

OCTOBER 21, 2014

Using NextView as an example, since we both seek to lead the seed round and only lead during this round, I’ve seen this trend manifest in one of two ways: In a priced round, the entrepreneur will often share their valuation ask (or a stated floor) for the pre-money valuation of their company much sooner in the process.

Valuation 336

Valuation Founder Seed Stage Angel Investor 336

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. In addition to FOMO it is partly driven by massive increase in valuations for earlier-stage companies who raised money at bit seed prices but who still have product risk. Have a cushion.

Saudi Arabia 309

Saudi Arabia Valuation IPO Technical Review 309

Scott Edward Walker

APRIL 22, 2012

This post is the second part of a three-part primer on convertible note seed financings. Part 1, entitled “ Everything You Ever Wanted To Know About Convertible Note Seed Financings (But Were Afraid To Ask) ,” addressed certain basic questions, such as (i) what is a convertible note? (ii) What Is a Conversion Discount?

Pre-Money Valuation 72

Pre-Money Valuation Finance Liquidation Preference Founder 72

Altgate

DECEMBER 16, 2010

@altgate Startups, Venture Capital & Everything In Between Skip to content Home Furqan Nazeeri (fn@altgate.com) ← Pre-Money Valuation vs Number of Founders Where Do Tech VCs Invest? The first thing I noticed was that the vast majority (76%) of financings have a “one x&# preference.

Liquidation Preference 39

Liquidation Preference Pre-Money Valuation Term Sheet Valuation 39

Hunter Walker

AUGUST 7, 2017

Employee options pools, typically created at the point of financings, shouldn’t be treated as haggling over dilution, but rather a strategic resource that will help founders build the best team and, by extension, a more valuable company.

Equity 94

Equity Pre-Money Valuation Option Pool Founder 94

Startup Professionals Musings

NOVEMBER 26, 2012

Two founders have spent $200K of personal and family funds over a one year period to start the company, get a prototype site up and running, and have already generated some “buzz” in the Internet community. How much is NewCo worth to investors at this point (pre-money valuation)? This one doesn’t help NewCo just yet.

Valuation 270

Valuation Pre-Money Valuation NPV Intellectual Property 270

Startup Professionals Musings

JANUARY 27, 2012

As the company grows and the second or third group of investors comes in, the terms of each subsequent financing grow in size, scope, and the number of lawyers’ fingerprints on them. The price is the percent of ownership given to the investor, calculated as “investment/post-money valuation.” Seat on the board.

Term Sheet 223

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

Startup Professionals Musings

SEPTEMBER 30, 2011

Two founders have spent $200K of personal and family funds over a one year period to start the company, get a prototype site up and running, and have already generated some “buzz” in the Internet community. How much is NewCo worth to investors at this point (pre-money valuation)? This one doesn’t help NewCo just yet.

Pre-Money Valuation 246

Pre-Money Valuation Valuation NPV Intellectual Property 246

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

Lightspeed Venture Partners

OCTOBER 7, 2012

The founders were very sympathetic; a man, laid off from his job, and his very pregnant wife, who sold their house and investing $150k into the business and are working hard to make a go of it. The two founders invested $40k in the business, and plan to license it rather than manufacture it because manufacturing seems too hard.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

Startup Professionals Musings

SEPTEMBER 14, 2010

As the company grows and the second or third group of investors comes in, the terms of each subsequent financing grow in size, scope, and the number of lawyers’ fingerprints on them. The price is the percent of ownership given to the investor, calculated as “investment/post-money valuation.” Seat on the board.

Term Sheet 227

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

Both Sides of the Table

JUNE 5, 2015

I am reminded of this problem every time my firm does a financing where a note went before us but more specifically I was reminded by this great post by Brad Feld to talk about the pre-money vs. post-money conversion issue. In the old days VCs funded off of a “pre-money” valuation.

Pre-Money Valuation 150

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

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

Gust

OCTOBER 21, 2011

To account for scenarios in which the startup is acquired before it has a chance to complete a priced equity financing round, most term sheets and deal documents contain a “ change in control ” provision. In descending order of preference from the founders’ point of view: 1. What happens to the outstanding convertible notes?

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Gust

NOVEMBER 18, 2012

Two founders have spent $200K of personal and family funds over a one year period to start the company, get a prototype site up and running, and have already generated some “buzz” in the Internet community. How much is NewCo worth to investors at this point (pre-money valuation)? This one doesn’t help NewCo just yet.

Valuation 187

Valuation Pre-Money Valuation NPV Intellectual Property 187

Startup Professionals Musings

SEPTEMBER 6, 2010

Two founders have spent $200K of personal and family funds over a one year period to start the company, get a prototype site up and running, and have already generated some “buzz” in the Internet community. How much is NewCo worth to investors at this point (pre-money valuation)? This one doesn’t help NewCo just yet.

Valuation 234

Valuation Pre-Money Valuation NPV Startup 234

YoungUpstarts

SEPTEMBER 4, 2017

by Paul Towers, founder & CEO of Task Pigeon. For startup founders and CEO’s it’s also just as common to see them place too much focus on the amount of money raised, and the pre-money valuation, rather than the value that each investor can bring to the table. Plus, founders and entrepreneurs talk.

Pre-Money Valuation 187

Pre-Money Valuation Seed Stage IP Deal Flow 187

Both Sides of the Table

SEPTEMBER 29, 2009

I’m not saying all their companies were bad but I guarantee you they spent an inordinate amount of their time on “triage” meaning trying to determine which companies to shut down, which to do “internal rounds” of financing and which were strong enough to try to raise external capital. It is no wonder why they had less time for new deals.

Burn Rate 263

Burn Rate Valuation Pre-Money Valuation Private Equity 263

Both Sides of the Table

JULY 27, 2014

(not in video but late stage valuations have grown 24% compounded years for the past 4 years which is higher than any segment. Four years ago people paid $66m median pre-money valuation and are now paying $155m. This can’t all be driven by increased company performance).

Valuation 309

Valuation Pre-Money Valuation Later Stage Non-Compete 309

Gust

OCTOBER 17, 2011

As the company grows and the second or third group of investors comes in, the terms of each subsequent financing grow in size, scope, and the number of lawyers’ fingerprints on them. The price is the percent of ownership given to the investor, calculated as “investment/post-money valuation.” Seat on the board.

Term Sheet 158

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

Gust

OCTOBER 12, 2011

Last week , we took the plunge and began dissecting an example term sheet for a convertible debt financing round piece by piece. In Part II, we looked at the mandatory conversion language that is at the heart of any convertible debt financing. First, a word about the maturity date.

Finance 107

Finance Term Sheet Pre-Money Valuation Early Stage 107

Tim Keane

JANUARY 12, 2010

For angel groups, the distinction between groups and VCs on this issue is dwindling, especially as angel groups do bigger rounds of financing.   You can vary both valuation and term-sheet assumptions (in the gray boxes) to assess the impact on the values of the business. stake in the company. The Consideration of Risk.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Gust

SEPTEMBER 27, 2014

To begin with, it is important to understand some basic facts about the world of entrepreneurial finance: There are many more entrepreneurs than there are investors, with the result that only one company out of every 400 that seeks venture funding actually receives it.

Angel Groups 159

Angel Groups Elevator Pitch Software Review Deal Flow 159

Both Sides of the Table

FEBRUARY 4, 2016

.” There are a lot of data points that one can observer to get a sense of the venture capital markets – both LP fundings into venture and VC financings of startups. They point to some widely known facts: financings & valuations are up massively over the past 7 years and non-VC money has entered the system.

LP 150

LP Valuation Burn Rate Pre-Money Valuation 150

The Startup Lawyer

FEBRUARY 4, 2011

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. The following are some issues to consider and actions to take before accepting an incubator’s offer: (1) Calculate Valuation and Determine Value. 3) Research the Mentors.

Incubator 105

Incubator Pre-Money Valuation Option Pool Advisory Board 105

ithacaVC

DECEMBER 13, 2013

There are many reasons for this, but fundamentally, it is impossible to calculate a share price for the investment round unless you have complete agreement on how many shares are outstanding pre-money. The share price is calculated by taking the pre-money valuation and dividing it by the number of shares outstanding pre-money.

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

K9 Ventures

MARCH 23, 2011

The convertible note was really intended as an instrument for a “bridge financing” – when an equity round was imminent, and likely to occur, but the company needed some money in between. In that case, it made good sense to have a debt instrument, where the note holder then converted into equity when the financing occurred.

Pre-Money Valuation 132

Pre-Money Valuation Valuation Equity Liquidation Preference 132

Scott Edward Walker

APRIL 9, 2012

Introduction We are in the golden age of seed financing. 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. and (iii) what are the advantages of issuing convertible notes?

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Professor VC

JANUARY 17, 2008

Again, I see nothing wrong with this, although entrepreneurs often prefer convertible debt as it defers the valuation discussion and leaves the Series A price for the venture firm to set. He also said they typically only invest at a $1 million pre-money valuation or less. for a total of $10.5M

Pre-Money Valuation 28

Pre-Money Valuation Angel Investor Angel Groups Valuation 28

Gust

NOVEMBER 4, 2011

Entrepreneurs and investors who have spent any time dealing with convertible debt seed financing transactions are likely to have encountered the subject of valuation caps. The cap is irrelevant if the next equity financing is at a valuation below the cap amount.) MySpace became its own company, MySpace, Inc.,

Valuation 98

Valuation Pre-Money Valuation Merger Vesting 98

The Startup Lawyer

JUNE 22, 2010

compensate the angel for the early risk), the convertible promissory note will have an automatic conversion discount feature by which the angel investor will exchange the convertible debt for shares of the Series A Preferred Stock at a discount to the price per share paid by the venture capital fund at a Qualified Financing.

Pre-Money Valuation 82

Pre-Money Valuation Angel Investor Preferred Stock Valuation 82

The Startup Lawyer

JANUARY 10, 2012

In most equity financing rounds, an investor will ask for (and get) a term called a liquidation preference. founders, option holders, etc.). A liquidation preference is the amount that must be paid to a preferred stock holder before any sale proceeds may be paid to the holders of common stock (i.e.,

Liquidation Preference 73

Liquidation Preference Pre-Money Valuation Participating Preferred Preferred Stock 73

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. If you are a company that is fundraising, keep in mind that there are a few different levers you can pull to change the amount of dilution that the founders will experience.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

Seeing Both Sides

JULY 15, 2009

VCs have an unfair advantage when it comes to financings. A typical start-up company will do 2-4 venture capital financings before a successful exit (or, conversely, an ignomious ending). In contrast, the typical venture capitalist, either individually or across their partnership, will do 5-10 financings in any given year.

Pre-Money Valuation 49

Pre-Money Valuation Option Pool Stock Options Post-Money Valuation 49

David Teten

FEBRUARY 9, 2015

I would hope that a competent founder could easily educate herself about what information an investor wants with some basic research. The cover note should include: name, website, location, revenues (if any), detailed financing history (if any), and precise terms on which you are seeking to raise capital.

Venture Capital 60

Venture Capital Pre-Money Valuation Prospectus Early Stage 60

Both Sides of the Table

SEPTEMBER 5, 2012

Was Paul Graham right in his “high resolution” financing post? Some thoughts on raising angel money. In fact, most early investor work hard to help their startups get to the next level so it makes no sense for the angel investor and founders to be at odds. Convertible debt WITH a cap is stupid for founders.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354