Tim Keane

JANUARY 12, 2010

Startups and angels: Along the way to success. Term-sheets and Valuations: Thinking about Negotiations. The Valuation Question. When companies seeking their first round of serious funding are good enough to receive a term-sheet from an investor, the first issue that always arises is valuation. Let’s start at the end.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

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 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

Both Sides of the Table

SEPTEMBER 8, 2012

I recently wrote about my views that startups rounds should be priced. It has both a “full rachet” and “multiple liquidation preferences.” Here is what I recommend very often – privately – to startup entrepreneurs for angel funding. We plan to raise at a $5 million pre-money valuation.

Pre-Money Valuation 294

Pre-Money Valuation Finance Liquidation Preference Warrant 294

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. Liquidation preference.

Term Sheet 223

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

ithacaVC

DECEMBER 14, 2011

Continuing with the “No Mess” theme of commenting on things that give VCs pause, I thought it would be good to touch on liquidation preference. Specifically, “too much” liquidation preference (I will use “LP” for liquidation preference). Ok, enough of the background.

Liquidation Preference 49

Liquidation Preference LP Preferred Stock Liquidity Event 49

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. Liquidation preference.

Term Sheet 227

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

ithacaVC

APRIL 25, 2012

If you want to scare off VCs, start your pitch with “we are looking to raise $X at a pre-money valuation of $Y” Stating how much you want to raise is fine and recommended. However, stating a desired pre-money valuation early in the process is not a good idea. Here is why.

Valuation 49

Valuation Pre-Money Valuation Liquidation Preference Preferred Stock 49

Both Sides of the Table

APRIL 14, 2010

That means that the likely have a minimum of $15 million in liquidation preferences. It will usually be higher because the liquidation preference has a dividend so if the deal is long in the tooth assume that the liquidation preference might be $20-22 million. Take liquidation preferences head on.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

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

ithacaVC

APRIL 25, 2014

This cap table can be used by a pre-funded startup and then a financing can be layered in. In other words, it shows both pre-money and post-money very clearly. For example, cell E2 is the spot to put in the negotiated pre-money valuation. Dealing with VCs Management Startup Life'

Cap Table 79

Cap Table Preferred Stock Pre-Money Valuation Liquidation Preference 79

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

The Startup Lawyer

JANUARY 10, 2011

Both sets of advice tend to ignore the gap between an investor’s expression of investment interest and your startup’s receipt of the term sheet. Term sheet purgatory can seem like is an eternity for a startup, although it may last from one week to over one month. And this has potential negative consequences for the startup.

Term Sheet 64

Term Sheet Pre-Money Valuation Liquidation Preference Option Pool 64

K9 Ventures

MARCH 23, 2011

Since the financing would likely happen in short order, there was no need to have a valuation cap in the note. The founders’ interest is to maximize the valuation of the company at the time of a follow-on financing, thereby minimizing founder dilution. Notes may have fewer rights associated with them, but they come with one big hammer.

Pre-Money Valuation 132

Pre-Money Valuation Valuation Equity Liquidation Preference 132

Scott Edward Walker

APRIL 9, 2012

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? Introduction We are in the golden age of seed financing.

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

ithacaVC

NOVEMBER 1, 2011

When a VC prices an investment transaction, it normally treats all options as “outstanding” for purposes of determining the number of shares outstanding (in order to divide into the pre-money valuation to determine a share price). Last I checked, we VCs love it when a portfolio company is sold for a tidy profit.

Vesting 60

Vesting Pre-Money Valuation Liquidation Preference Stock Options 60

thestartuplawyer.com

FEBRUARY 24, 2010

Contact The Startup Lawyer: Home Page About Contact FAQs Glossary Ryan Roberts Law: Home Page Social Networks: Facebook Twitter LinkedIn Flickr Delicious Digg Last.FM He obviously never launched a startup and got shafted by a co-founder. He obviously never launched a startup and got shafted by a co-founder.

Cofounder 40

Cofounder Founder Preferred Stock Startup 40

www.paulgraham.com

APRIL 28, 2010

When we sold our startup in 1998 I thought one day Id do some angelinvesting. You give a startup money and they give you stock. When youhear people talking about a successful angel investor, theyre notsaying "He got a 4x liquidation preference." Thats how you win: by investing in the right startups.

Angel Investor 63

Angel Investor Syndicate Syndication Dilution 63

dondodge.typepad.com

JANUARY 15, 2011

Both the entrepreneur and the investor have much higher expectations than just "even money" on their bet. The entrepreneur expects the company to be worth many times this valuation and so does the investor. The key is to have several VCs or investors competing for the deal to arrive at a "fair" valuation.

Equity 40

Equity Employee Dilution Valuation 40