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. That’s why most entrepreneurs do not make a specific ask on valuation, but wait to hear offers from investors. This time I’ll break down week four of this season. BACK 9 DIPS.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

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. Why Can’t a Startup Issue Shares of Common Stock to Investors?

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

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

Gust

OCTOBER 5, 2011

Last week , we gave some attention to the “why” behind convertible note financing for early stage startups. As with so many subjects in law and finance, mastering the jargon is half the battle. This may seem like a no-brainer now that you understand the basic structure of a convertible debt financing.

Finance 79

Finance Preferred Stock Term Sheet Early Stage 79

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. Suppose the notes converted as if the acquisition were an eligible financing round. Most would agree this is not a fair outcome.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Scott Edward Walker

MAY 15, 2012

This post is the third 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 the basics. Part 2, entitled “ Convertible Note Seed Financings: Econ 101 for Founders ,” addressed the economics.

Finance 64

Finance Founder Accredited Investor Preferred Stock 64

View from Seed

OCTOBER 15, 2014

Examples of housekeeping include the following list, though not every item will appear every time: Finance: Cash out date, burn rate, 409A valuation, cap table, common/preferred stock dashboard. Finance is mission critical, for instance – it just appears on a recurring basis.

Seed Stage 331

Seed Stage Cap Table Metrics Burn Rate 331

Business Plan Blog

APRIL 10, 2012

Techcrunch just began a 3-Part series addressing convertible note seed financing that we feel our readers would be very interested in. But wait, what’s convertible note seed financing?? In layman’s terms, investors will give money to a startup but instead of getting money back, they get preferred stock in return.

Finance 40

Finance Preferred Stock Equity Stock 40

ithacaVC

APRIL 25, 2014

This cap table can be used by a pre-funded startup and then a financing can be layered in. For example, cell E2 is the spot to put in the negotiated pre-money valuation. The model includes a simple waterfall analysis using both participating and non-participating preferred (see line 44 and then columns M and O).

Cap Table 79

Cap Table Preferred Stock Pre-Money Valuation Liquidation Preference 79

Both Sides of the Table

AUGUST 30, 2010

Funnily enough I just answered this question yesterday on Quora when somebody asked, “Why would an early-stage investor specifically NOT prefer a convertible note structure to straight equity (e.g. a priced/valued preferred stock financing)?&#. Here is my answer with some minor editing: _. 20-25% dilution).

Equity 319

Equity Early Stage Angel Investor Valuation 319

www.mattbartus.com

DECEMBER 9, 2012

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. One possibility is to negotiate a higher valuation and offer warrants (i.e., Home About Matt Client references Contact. 10,000,000.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

Startup Company Lawyer

MARCH 12, 2009

Any company that raises venture financing will need to be a C corp in order to issue preferred stock. If founders want the benefit of flow through tax treatment with respect to losses prior to an outside financing, an S corp election may make sense as long as there are no entity or non-U.S. citizen/resident stockholders.

LLC 61

LLC Stock Options Preferred Stock Stock 61

The Startup Lawyer

JUNE 22, 2010

For this article, let’s assume this equity is the Series A Preferred Stock purchased by a venture capital fund. For example, if a venture capital fund purchases Series A Preferred Stock at $1.00 per share, the discount may allow the angel investor to purchase the same Series A Preferred Stock at $0.75

Pre-Money Valuation 82

Pre-Money Valuation Angel Investor Preferred Stock Valuation 82

Berkonomics

DECEMBER 20, 2018

Why are you so strongly sold on royalty licensing as the most effective way to finance a tech-based early stage company? That party is only concerned with its royalty revenues and growth – and not profit from or valuation of its business. I asked him five important questions, which he answered, and I’ve summarized below.

IP 54

IP Intellectual Property Investment Bankers Product 54

The Startup Lawyer

JANUARY 10, 2012

In most equity financing rounds, an investor will ask for (and get) a term called a liquidation preference. 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., founders, option holders, etc.).

Liquidation Preference 73

Liquidation Preference Pre-Money Valuation Participating Preferred Preferred Stock 73

The Next Web

JUNE 17, 2015

But, if you have no other alternatives from professional investors, service providers can be a perfectly acceptable financing resource for you, if that is all you need and it is structured fairly. This typically comes down to the security, voting rights and valuation of the deal. Taking cash from a service provider is often just that.

Equity 60

Equity Valuation Preferred Stock Common Stock 60

Berkonomics

DECEMBER 20, 2018

Why are you so strongly sold on royalty licensing as the most effective way to finance a tech-based early stage company? That party is only concerned with its royalty revenues and growth – and not profit from or valuation of its business. I asked him five important questions, which he answered, and I’ve summarized below.

IP 48

IP Intellectual Property Investment Bankers Product 48

Both Sides of the Table

SEPTEMBER 5, 2012

To better understand the arguments for / against convertible equity I suggest you read my posts on those topics: Is convertible debt preferable to equity? Was Paul Graham right in his “high resolution” financing post? Some thoughts on raising angel money. So let me weigh in more loudly than in the past.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Ben's Blog

JULY 16, 2013

You probably thought that valuations would be roughly the same as they were the last time you raised money. And those are big companies with real earnings, so you can imagine how a private company’s valuation might fluctuate. In June of 2000, I raised money at an $820M post-money valuation. But they most certainly are not.

Down Round 78

Down Round Marketing Preferred Stock Post-Money Valuation 78

Early Growth Financial Services

OCTOBER 2, 2014

In short, convertible equity is a form of financing that gives investors the right to preferred stock once a triggering event occurs. of all financings. So I figured now’s the right time to answer a few questions and fill in some blanks. So what’s that mean?

Equity 44

Equity Preferred Stock Seed Stage Founder 44

Steve Blank

OCTOBER 24, 2017

A 20th century VC was likely to have an MBA or finance background. One last but very important change that guarantees founders can cash out early is “founder friendly stock.” This allows founder(s) to sell part of their stock (~10 to 33%) in a future round of financing. 4. Founder-friendly VCs.

Founder 245

Founder Technical Review CTO Hire IPO 245

ithacaVC

DECEMBER 13, 2013

The share price is calculated by taking the pre-money valuation and dividing it by the number of shares outstanding pre-money. So Share Price (SP) = Pre-Money Valuation (PMV) / Shares Outstanding (SO). That is normal for a pre-money % as it will drop down to about 10% post money depending on size of round and valuation.

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

ReadWriteStart

JANUARY 28, 2022

This article will assist you in gaining a fundamental understanding of equity valuation, kinds of equity, and other related topics. These characteristics, comparable to those found in the fixed income market, can convert into common stock, call clauses, and other features. Importance of equity valuation. What is Company Equity?

Valuation 108

Valuation Equity Warrant Common Stock 108

K9 Ventures

MAY 14, 2011

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). Common Stock. Convertible Note or Preferred Stock. Convertible Note or Preferred Stock. Preferred Stock.

Preferred Stock 125

Preferred Stock Seed Stage Incubator Early Stage 125

Startup Company Lawyer

JANUARY 31, 2011

Automatic conversion: on a $1M equity financing with no conversion discount and no price cap , provided that the transaction documents provide for a right to purchase a pro rata share of future financings. (I Optional equity conversion: on other equity financings with no conversion discount and no price cap.

Preferred Stock 60

Preferred Stock Liquidation Preference IPO Common Stock 60

Feld Thoughts

SEPTEMBER 27, 2011

In the case of an early-stage startup that hasn’t issued preferred stock yet, the debt converts into stock of the acquiring company (if it’s a stock deal) at a valuation subject to a cap. If it’s not a stock deal, then one normally sees one of the above scenarios. Typical language follows.

Conversion 96

Conversion Sales Later Stage Preferred Stock 96

ithacaVC

APRIL 5, 2011

One rule of simple cap tables is to issue “normal” stock to founders (common stock only) and investors (typically preferred stock, but sometimes common stock to early friends and family). For clarity, it is impossible to issue stock without putting a value on the company. Seems like a win-win.

Common Stock 45

Common Stock Stock Cap Table Preferred Stock 45

Both Sides of the Table

APRIL 14, 2010

In straight preferences the investors only get this money in a “downside&# scenario as protection that they get their money back if your company isn’t successful. Take liquidation preferences head on. Talk openly about valuation and what they’ll accept so you know what you’re dealing with. Brain damage.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

The Startup Lawyer

FEBRUARY 4, 2011

The following are some issues to consider and actions to take before accepting an incubator’s offer: (1) Calculate Valuation and Determine Value. Pre-money valuations startups receive from incubators are typically low…really low. The “revised for the cash investment only&# pre-money valuation is $600,000. (2)

Incubator 105

Incubator Pre-Money Valuation Option Pool Advisory Board 105

ithacaVC

DECEMBER 14, 2011

Specifically, “too much” liquidation preference (I will use “LP” for liquidation preference). As most of you probably know, LP is one of the fundamental economic attributes of preferred stock that preferred shareholders enjoy. Yet, it is able to attract more investment capital. It might be.

Liquidation Preference 49

Liquidation Preference LP Preferred Stock Liquidity Event 49

Scott Edward Walker

SEPTEMBER 21, 2011

Finally, unless the startup is raising at least approximately $750,000, it generally is not in the company’s interest to issue shares of preferred stock. This approach will keep the financing relatively simple and inexpensive and will defer the company’s valuation (i.e., What about issuing shares of common stock?

Preferred Stock 45

Preferred Stock Angel Investor Entrepreneur Common Stock 45

K9 Ventures

NOVEMBER 21, 2011

You raised a Series A round, a Series B round, and this year are just about to raise a big Series C round at a great valuation. If there is one piece of advice I would give to the founders of BST, it is to consider selling a part of their personal stock in the company at that stage.

Founder 87

Founder Common Stock Preferred Stock Stock 87

K9 Ventures

NOVEMBER 21, 2011

You raised a Series A round, a Series B round, and this year are just about to raise a big Series C round at a great valuation. If there is one piece of advice I would give to the founders of BST, it is to consider selling a part of their personal stock in the company at that stage.

Founder 84

Founder Common Stock Preferred Stock Stock 84

www.quora.com

JANUARY 16, 2011

I did a short video at BothSidesoftheTable th at talks about the key terms in the term sheet you need to know about AND how VCs calculate valuation differently than entrepreneurs and what to look out for. Fenwick & West has a great, very thorough document about financings, term sheets and so forth: https://docs.google.com/v iewer?u.

Term Sheet 41

Term Sheet Startup Angel Investor Wiki 41

Professor VC

JANUARY 17, 2008

Another comment which probably deserves more discussion is around valuation. One of the panelists mentioned that they have gotten very valuation sensitive (nothing wrong with that) and like to purchase preferred stock rather than invest in convertible notes. Labels: angel groups , valuation. See you next time.

Pre-Money Valuation 28

Pre-Money Valuation Angel Investor Angel Groups Valuation 28

Ben's Blog

JULY 16, 2013

You probably thought that valuations would be roughly the same as they were the last time you raised money. And those are big companies with real earnings, so you can imagine how a private company’s valuation might fluctuate. In June of 2000, I raised money at an $820M post-money valuation. But they most certainly are not.

Marketing 46

Marketing Preferred Stock Post-Money Valuation Down Round 46

Startup Company Lawyer

JANUARY 11, 2010

I seem to be doing a lot of pre-Series A convertible bridge note financings these days. 50%) or warrant coverage are typically more company-favorable than a Series A financing where a valuation is set. If the investor had invested $500K in a Series A Preferred Stock at a $4.5M

Angel Investor 39

Angel Investor Valuation Bridge Financing Preferred Stock 39