Berkonomics

AUGUST 10, 2023

The last money has the first say – in valuation and in sometimes forcing draconian terms that require prior investors to contribute a proportional new investment to retain a semblance of their original rights and avoid dilution or worse yet, involuntary conversion to a lower class of stock. Draconian terms?

Liquidity Event 116

Liquidity Event Initial Public Offering Dividend Valuation 116

This is going to be BIG.

MAY 4, 2015

Do the expected returns make sense, given typical entry valuations for their stage, reasonable mortality rates, potential ownership, and rational exit sizes? Will the experience of partnering with this individual be a positive one? Does the firm have access to quality deal flow? Why would anyone want to take their money?

Limited Partner 60

Limited Partner Partner Deal Flow Valuation 60

Both Sides of the Table

OCTOBER 12, 2014

” If you invested at $8m pre-money and put $2m in (thus you own 20% of a company at a $10m post-money valuation) and if you put another $2m into a round at a $40m valuation raising $10m ($50m post) you end up with half your money at $8m pre and half at $40m pre thus your average price goes up dramatically.

Technical Review 336

Technical Review Later Stage Early Stage LP 336

ithacaVC

JULY 10, 2013

I have posted on startup valuations a couple of times. On June 27th Fred Wilson wrote a post called Valuation vs. Ownership. Here is the good news: if you read my prior posts and Fred’s post, I think you are about 99% of the way there in solving any mystery behind startup valuations for early stage financing rounds (i.e.,

Valuation 49

Valuation Startup Limited Partner Early Stage 49

Both Sides of the Table

SEPTEMBER 23, 2010

At what valuation? So if two investors even go so far as to agree to fix prices, which is issue 1, the company should say no thanks to that valuation and keep shopping for other lenders, of which there are many, to get a better price. Have you looked at competition? How well financed is the competition? What is their market traction?

Entrepreneur 292

Entrepreneur Technical Review Stealth Valuation 292

Both Sides of the Table

FEBRUARY 6, 2019

Valuations are out of control” is the mantra of others. Yes, VC / Startup Funding is up Massively If you look at how much VC firms have raised from Limited Partners (LPs) over the past 2 decades you’ll see that we’ve returned to a level that we haven’t seen since 1999. We’re in a new tech bubble!” some have pronounced.

Venture Capital 292

Venture Capital IPO Mezzanine Early Stage 292

David Teten

SEPTEMBER 23, 2017

A more efficient approach is to mine the data exhaust from the Limited Partner universe to identify those LPs most likely to find your fund attractive, and focus all your energy on them. Relationship Science makes it easier to understand and map social networks into potential limited partners. 2) Raise capital.

Private Equity 60

Private Equity Venture Capital Equity Technical Review 60

Both Sides of the Table

AUGUST 25, 2015

When they’re bullish venture valuations go up, LPs put more money into VCs, more angels want to get involved, new entrants (hedge funds, mutual funds) feel their missing out and the overall venture market goes us. private valuations go down (slowly because they only adjust at funding intervals or M&A); 0r. So now what?

Balance Sheet 150

Balance Sheet Valuation Burn Rate Stock 150

David Teten

JANUARY 19, 2021

Similar to the explosion of seed funds in the past decade, we (and some limited partners too ) believe these Flexible VCs are on the forefront of what will become a major segment of the venture ecosystem. Capacity Capital, Greater Colorado Venture Fund, Indie.VC, Reformation Partners, UP Fund, Versatile VC.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

Steve Blank

FEBRUARY 10, 2016

If you’re a venture capitalist … you have limited partners that give you money to invest on their behalf, and you’re responsible for giving them outsize returns. Keen Home appeared on the TV show, Shark Tank , in 2012, landing one of the highest valuations in the show’s history. Nayeem : (Nods.)

Silicon Valley 120

Silicon Valley Ohio Columbus Entrepreneur 120

Both Sides of the Table

FEBRUARY 4, 2016

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. Limited Partners (LPs) who invest in VC funds have continued to pour money into venture – with the market returning to pre-recession levels. State of the Market.

LP 150

LP Valuation Burn Rate Pre-Money Valuation 150

BeyondVC

JANUARY 5, 2022

We are truly to our founders, limited partners, co-investors, and friends for another year of growth and learning. With COVID raging at the beginning and end of the year, it is all the more amazing what our portfolio companies have accomplished the last twelve months. 1/ We started @boldstartvc in 2010 w/ $1m.

Stealth 78

Stealth Cofounder SQL Open Source 78

Both Sides of the Table

FEBRUARY 6, 2017

And it’s not just that VCs cut their investment pace but they also indicated overwhelmingly that valuations of investments had dropped with 76% of all VCs surveyed suggesting 2016 had lower valuations than 2015. So if funding from VCs slowed, valuations dropped and burn rates were slashed, WTF happened to winter again?

Venture Capital 150

Venture Capital Saudi Arabia Kuwait Burn Rate 150

Both Sides of the Table

SEPTEMBER 1, 2016

Scott Kupor of A16Z responded with a comprehensive overview of valuation methodology in a post that while accurate feels more targeted at sophisticated Limited Partners (LPs) who invest in funds. Rolf Winkler wrote a piece in the WSJ about A16Z’s returns in which he says they “lag behind Sequoia, Benchmark and Founders Fund.”

LP 264

LP Jordan Cofounder Limited Partner 264

Berkonomics

JUNE 15, 2017

The last money has the first say – in valuation and in sometimes forcing draconian terms that require prior investors to contribute a proportional new investment to retain a semblance of their original rights and avoid dilution or worse yet, involuntary conversion to a lower class of stock.

Liquidity Event 97

Liquidity Event Initial Public Offering Dividend Valuation 97

David Teten

JULY 12, 2017

GPs strategically invite trusted [Limited Partners and others] to co-invest, often based on the LP’s ability to add value or when the amount of capital required to complete an attractive transaction is larger than they are able to invest alone.”. 2) Investors with very specific value-add. Economic benefit.

Syndicate 60

Syndicate Syndication Institutional Investors LP 60

Agile VC

DECEMBER 6, 2012

1) LP Bases Change Over Time – Most healthy VC firms tend to have stable relationships with the limited partners investing with them. Well at this juncture Startup X’s valuation is presumably a lot higher than it was at the Series A, maybe even 5-10x+ higher. Why wouldn’t Fund IV invest at this stage?

LP 178

LP Balance Sheet Differentiation Limited Partner 178

The Equity Kicker

JUNE 9, 2016

Perhaps the biggest story in venture capital from 2012-2015 was the rise in late stage valuations. That’s clearly not sustainable and the catalyst for change came when auditors at Fidelity and other new entrants to the VC market started writing down the valuations of their private company holdings in late summer last year.

Valuation 60

Valuation Venture Capital Limited Partner IPO 60

David Teten

AUGUST 20, 2019

Greater transparency to limited partners. The RBI VC is valuing a set of debt instruments, as opposed to a traditional VC who primarily relies on valuations markups attributed to a company by outside VCs. For an RBI investor, valuation depends on how the RBI security is structured.

Revenue 60

Revenue SBIC Cofounder Venture Capital 60

Steve Blank

JULY 15, 2010

VC’s invested their limited partners’ “risk capital” in a portfolio of startups in exchange for illiquid stock. Some of the old-line venture firms have changed their strategy, but some are still locked into last decade’s model while the partners are living off of their management fees and go through cargo cult like rituals.

Venture Capital 297

Venture Capital IPO Liquidity Event Entrepreneur 297

The Startup Magazine

MARCH 22, 2019

Venture capitalists act as limited partners, providing help to build successful companies in a market they have deemed has potential. Investor Involvement. They are less likely than angel investors to provide capital to companies that don’t have at least some proven success in their markets.

Angel Investor 122

Angel Investor Venture Capital Accredited Investor Equity 122

Eric Friedman

AUGUST 18, 2021

From who we hire to the way we go to market, from how we engage with our limited partners to how we engage with founders, it’s all about being very focused on quality and consistency so as to affect strategies to generate meaningful carry for ourselves and our limited partners.

Silicon Valley 88

Silicon Valley Venture Capital Cofounder Africa 88

Hippoland

NOVEMBER 13, 2016

But as we’ve seen, these valuations can be hocus-pocus — even at later stage rounds, we’ve seen lots of companies of late fall from grace and become massively devalued overnight when they cannot raise their next round at a higher valuation. Shouldn’t they get a bump up in valuation? Intuitively, you might think, “Yes!

IRR 48

IRR Valuation Portfolio Due Diligence 48

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). They are still individual investors, they invest on a full-time basis as professionals, but they have funds with Limited Partners.

Preferred Stock 125

Preferred Stock Seed Stage Incubator Early Stage 125

This is going to be BIG.

JULY 30, 2015

Do seed investors have Limited Partners with different return expectations than Series A and beyond investors? I've never heard any limited partner ask me if I can generate a better return than their Series A funds. I assumed the following: Seeds are done as a $1mm round on a pre-money valuation of $5mm.

Venture Capital 60

Venture Capital Pre-Money Valuation IRR Valuation 60

This is going to be BIG.

NOVEMBER 7, 2011

Valuations. There are a ton of companies being funded at $500+ million valuations--seriously limiting exit opportunities. Many of the private companies like AirBnb, Dropbox, and Square and that have been rumored to have big valuations are real, growing businesses. Are their valuations justified?

Angel Investor 104

Angel Investor Valuation Startup Revenue 104

ithacaVC

FEBRUARY 23, 2012

It is the time of year when VC firms do year end valuations for their portfolio company holdings. FAS 157 and other accounting rules require such a valuations be done, but what is the real value of doing them? Some VC firms use the art of Level 3 inputs to mark up their valuations, which has a tendency to make limited partners happy.

Valuation 49

Valuation Institutional Investors Marketing Down Round 49

VC Cafe

MARCH 27, 2022

Yuga Labs, the team behind the Bored Ape Yacht Club (BAYC), announced earlier this week that it had raised $255 million seed round led by A16Z at a $4 billion pre valuation. Regardless of the space, Limited Partners, investors in venture funds, want to know the ESG (environmental, social and governance) impact of their investments.

Cofounder 179

Cofounder Venture Capital Equity 179

David Teten

DECEMBER 12, 2017

Our proprietary data science tool cumulatively looks at 100+ factors within 6 macroscopic categories: Team, Financial Performance, Customer and PR traction, Industry and Competition, Product and Brand value, Valuation, and Exit probability, to quantify an investment “Merit Score”. How do funds use tech to monitor and report investments?

Early Stage 60

Early Stage Technical Review Software Review Venture Capital 60

Austin Startup

JULY 23, 2010

The cash looks good on the balance sheet, and venture investors want to pile on money at low valuations before the valuation increases by 10x as a public stock. It’s common for even profitable companies to raise a large round in preparation for an IPO. Or both things could be happening.

Balance Sheet 67

Balance Sheet Private Equity LP IPO 67

Babbling VC

JANUARY 7, 2011

Valuations were also therefore lower and I believe you could extrapolate that exit valuations too were lower. Exits with "homerun valuations" such as Skype, MySql, Bebo and so forth are far more outliers in the EU than they ever would be in the US. . The fear of failure is truly holding back the risk takers!

Finance 76

Finance LP Europe Valuation 76

Both Sides of the Table

OCTOBER 1, 2009

But you can’t keep your pocketbook on the sidelines forever and still expect LPs (limited partners or the people who invest their money in VC funds) to pay you 2% management fees every year. So eventually the money has to start flowing.

IPO 255

IPO Investment Bankers Venture Capital Marketing 255

Both Sides of the Table

MAY 23, 2010

The traditional way that this type of financing is offered is what is known as “convertible debt.&# This means that the investment does not have a valuation placed on it. VC’s money comes from mostly institutional investors called LPs (limited partners). It starts as a debt instrument (e.g.

Startup 290

Startup Burn Rate Warrant Bankruptcy 290

David Teten

APRIL 30, 2018

While fundraising of US VCs has dropped slowly as a percentage of global limited partner allocations over the last decade, non-US startups are receiving a more rapidly increasing percentage of that money. Source: NVCA, Pitchbook. Fortunately, virtually all of these local VCs want to coinvest with reputable US VCs. .

United States 60

United States Silicon Valley Canada Offshore 60

David Teten

APRIL 30, 2018

While fundraising of US VCs has dropped slowly as a percentage of global limited partner allocations over the last decade, non-US startups are receiving a more rapidly increasing percentage of that money. Source: NVCA, Pitchbook. Fortunately, virtually all of these local VCs want to coinvest with reputable US VCs. .

United States 60

United States Silicon Valley Canada Offshore 60

Berkonomics

JANUARY 27, 2010

The last money has the first say – in valuation and in sometimes forcing draconian terms that require prior investors to contribute a proportional new investment to retain a semblance of their original rights and avoid dilution or worse yet, involuntary conversion to a lower class of stock.

Liquidity Event 67

Liquidity Event Initial Public Offering Dividend Valuation 67

onstartups.com

JULY 11, 2012

One of the major issues in Angel investing is that a successful company often goes through many rounds of funding at higher and higher valuations. Without lowering valuation, this conflicts with founders who also wish to keep as much ownership as they can. Avoid Dilution to Nothing. Provide VCs with More Ownership.

Angel Investor 77

Angel Investor Dilution Investment Bankers Valuation 77