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When Should Startup Founders Discuss Valuation with Seed VCs?

View from Seed

Or, in the case of a convertible note, they’ll explicitly state a valuation cap. Lower-Than-Market Value. Market Value. ”).

10 Rules of Thumb for Startup Investment Valuation

Gust

How much is NewCo worth to investors at this point (pre-money valuation)? NewCo might be able to pick up an initial $50K valuation on this item.

5 Ways To Radically Improve Your Company Valuation

YFS Magazine

For business owners, startup valuation is a topic that causes lots of angst, raises tons of questions and definitely gets emotions blazing.

10 Rules of Thumb for Startup Investment Valuation

Startup Professionals Musings

How much is NewCo worth to investors at this point (pre-money valuation)? NewCo might be able to pick up an initial $50K valuation on this item.

Startup Valuation: How Much Is Your Company Worth?

Seed Stage Capital

skip to main | skip to sidebar 19 January 2010 Startup Valuation: How Much Is Your Company Worth? They dazzle. It is analogous to a make-vs.-buy

Making Sense of the Stock Market Drops in Relation to Venture Financing

Both Sides of the Table

So why invest in that period of uncertainty unless it’s early-stage and thus valuation matters less. It was a nerve racking morning.

Stock 142

Convertible Debt: Worst Form Of Seed Financing — Except For All The Others

Gust

How to finance a new seed-stage startup? Equity? Convertible debt? Convertible equity? How can this possibly make sense?

Age of companies when they achieve $1bn valuations

The Equity Kicker

That said, I think that froth in the late stage financing market has contributed in the last couple of years. Startup general interest

Sizing Option Pools In Connection With Financings

A VC : Venture Capital and Technology

Investors like to require that an unissued option pool is in the pre-money valuation calculation when they put money into early stage companies. Then we'll do the same thing at the time of the next financing. And the investors want the option pool to be in the pre-money valuation. Hopefully it will explain the issue.

Finance Fridays: Getting Started – Allocating Equity and Founder’s Investment

Feld Thoughts

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.

Website Valuation Methods

Blogtrepreneur | Entrepreneur Blog

Website Valuation: How to determine Website Value. Regardless of whether you’re a buyer or seller, trying to work out how to do website valuation is a tricky business. What I will say is that the first and most straightforward way to value any kind of website is to find out how the market as a whole determines a website’s valuation.

US startup valuations reach ten year highs

The Equity Kicker

Venturebeat reported yesterday that US startup valuations have reached ten year highs. Venture Capital

Convertible Note Seed Financings: Founders Beware!

Scott Edward Walker

This post is the third part of a three-part primer on convertible note seed financings.  This part will address certain tricky issues.

Investors Beware: Today’s $100M+ Late-stage Private Rounds Are Very Different from an IPO

abovethecrowd.com

An unprecedented 80 private companies have raised financings at valuations over $1B in the last few years. Consider the case of Fab.com.

IPO 62

Notes on raising seed financing

Chris Dixon

sketched some notes for the class which I’m posting below. I’ve written ad nauseum on this blog (see  contents page) about venture financing so hadn’t planned to blog more on the topic. VCs can be less valuation sensitive and have deep pockets but are sometimes buying options so come with some risks ( more ). more ).

Should Investors in the Same Round of Financing Ever Get Different Prices?

Both Sides of the Table

We plan to raise at a $5 million pre-money valuation. And a few others. recently wrote about my views that startups rounds should be priced.

Startup Valuations – Again….

ithacaVC

I have written about startup valuations previously. If you are advising startup founders, I strongly suggest having them read all 4 of the posts to get the lay of the startup valuation land. There’s a reason it’s so difficult to figure out – valuations have little basis in reality for early stage companies. Thanks!

The "Real Valuation" Is About Having Fun

Fresh Inc.: The Staff Blog

Ronen Shilo, founder of software company Conduit, talks about what his company's recent $1 billion valuations means--and doesn't mean--to him.

The "Vig" Working Its Way into VC Financings

Allen's Blog

This post in Techcrunch raises interesting issues around what seems to be a trend in VC financings for "lead" investors to get a better deal than "follower investors" in the same round.  the due diligence, negotiating the term sheet, determining the appropriate valuation, assigning a partner to sit on the board, etc.)

Knowledge Is Power: Convertible Note Financing Terms, Part I

Gust

It should therefore come as no surprise that an asymmetry of information exists, mostly gleaned from experience, between founders and investors in a venture financing deal. We’ll get into specifics and begin dissecting a sample term sheet for a convertible note financing next week. Knowledge is power. There are two principal reasons.

Convertible Debt – Valuation Caps

Ask The VC

Today, in our series on convertible debt, we examine the conversion valuation cap. The valuation cap is typically only seen in seed rounds where the investors are concerned that the next round of financing will be at a price that is at a valuation that wouldn’t reward them appropriately for taking a risk by investing early in the seed round.

The Trap of Relative Value

Feld Thoughts

He’d gotten a random note asking about his valuation when we invested relative to another financing that was just announced. The other company, which was much smaller at the point of investment, got an 11x ARR valuation. My response to the specific situation was: Valuations have increased on a relative basis.

Stock 87

5 Reasons Startups Need Revenue As Well As Users

Startup Professionals Musings

Should they focus on increasing revenues and profitability, or entice more and more users with “free” services, to increase their valuation.

The Valuation Trap

Fresh Inc.: The Staff Blog

The combination of sky high valuations, equally high burn rates, and a disappearing IPO market is not a pleasant one. I am fairly confident that both Square and Box can and will navigate the valuation trap, but it will require making some hard choices in the coming months. Both Square and Box have recently done that.

When In Doubt on Pre-Money Valuation, Smart Guys Procrastinate

Recent Buzzes - VC Experts, Inc.

If there simply is no way to get a handle on the pre-money valuation in an angel round, the trick is to postpone the valuation/pricing decision until a future event. Typically this event is the first professional (some times called the Series A) round of financing, when the company is more mature.

How to Fine-tune Your Small Business Finances—from Funding to Growth [Webinar Recap]

Up and Running

If a small business generally runs their business off invoices perhaps they want to look into invoice financing. John K. John K. John K. John K.

Raising Financing: Convertible Debt vs. Equity

Instigator Blog

Seth Levine from Foundry Group touched off a debate on which is the best way to raise startup financing: convertible debt or equity. So in the Series A, when you now want to raise $2M and the pre-money valuation is $6M, the $500k is measured against a pre-money valuation of $4.8M. All prominent and successful investors.

Everything You Ever Wanted to Know About Convertible Note Seed Financings (But Were Afraid To Ask) – Part 1

Scott Edward Walker

Introduction We are in the golden age of seed financing.  Indeed, as a corporate lawyer for 18+ years, I have seen this development first-hand.

Some thoughts on when to raise money, and the current financing environment

Chris Dixon

Here are some thoughts on this question generally along with some thoughts on today’s venture financing market. - In the private markets, macro tends to dominate micro. Venture valuations have swung by roughly a factor of 4 over the last decade. A key question for founders is when they should try to raise money. startups

Knowledge Is Power: Convertible Note Financing Terms, Part II

Gust

Last week , we gave some attention to the “why” behind convertible note financing for early stage startups.  In this installment, I’ll dig into the “how” by dissecting an example term sheet based on a real deal.  Amount of Financing :  Up to $600,000 may be issued. This paragraph is the heart of the whole deal. 

How do the sample Series Seed financing documents differ from typical Series A financing documents?

Startup Company Lawyer

After the recent announcement of the Series Seed Financing documents by Marc Andreesen, Brad Feld points out  that there are now four sets of “open source&# equity seed financing documents: TechStars Model Seed Funding Documents (by Cooley). Combinator Series AA Equity Financing Documents (by WSGR). “ . Board seat. 

Early Seed Financing Terms Endure… Whether We Like It or Not

Genuine VC

Dharmesh Shah had a great post up last week about the lessons learned from raising a mezzanine round of financing. But the more meaningful reason that early financing terms endure into future rounds is that negotiation away from terms already in place are just that – negotiation. In contrast, valuation always has room to move up.

Founders – Use Your Down Round To Clean Up Your Cap Table

Feld Thoughts

watched, participated, and suffered through every type of creative financing as companies were struggling to raise capital in this time frame. I’ve seen every imaginable type of liquidation preference structure, pay-to-play dynamic, preferred return, ratchet, share/option bonus, option repricing, and carveout. It’s simply not true.

Convertible Debt, Priced Equity Rounds and Deal Timing

Gust

An impromptu Twitter debate arose among Fred Wilson, Dave McClure, Mark Suster, Chris Dixon and others about convertible debt, priced equity rounds, and the nuances of early stage financing.

What Didn’t Happen

A VC : Venture Capital and Technology

As long as the biggest venture backed companies stay private, this dichotomy in valuations may well persist and that’s unfortunate in my view.

Stock 122

Wegner: If You Need To Raise Money, Get Your Financing Done ASAP

Ask The VC

Albert Wegner (Union Square Ventures) has today’s VC Post of the day titled  If You Need To Raise Money, Get Your Financing Done ASAP. In it, Albert expresses his belief that given the current macro economic environment, companies should focus on getting their money raised quickly – as in right now.

How Can This Be A Billion Dollar Company?

Feld Thoughts

Financing Entrepreneurship fundraising unicorn VC came across one from  Nic Brisbourne (Forward Ventures) titled  I’m a stock picker.

Worked Up about Unrealistic Venture Capital Valuation

Growthink Blog

So, Mike tells me he wants to raise a first round of venture capital based on a $100 million valuation. Getting a $100 Million valuation is impossible for a startup. In fact, getting above a $10 Million valuation is also virtually impossible unless you have at least some traction (e.g., So it's worth posting. Maybe $5 million.

NDA 14

Entrepreneurs: It's OK to Divulge Your Last-round Post-money Valuation

Allen's Blog

Most, smart investors will ask you for the post-money valuation of your last round of financing at the conclusion of your first meeting (i ndeed, if a VC doesn''t ask for it during your initial meeting, it''s usually a sign they''ve already decided to pass). . It''s safe to answer the question, and you should do so without hesitation.

Facebook, Twitter, & startup valuations - The best properties always look too expensive

Don Dodge on The Next Big Thing

The experts thought Microsoft was crazy when they invested $240M in Facebook at a $15B valuation. Digital Sky Technologies invested $200M in Facebook in May of 2010 at a $10B valuation. Just 7 months later Goldman Sachs is investing $500M at a $50B valuation. Market valuations are asymmetric. Crazy like a fox.