Feld Thoughts

JUNE 10, 2022

[Brad Feld] says his “strong belief” that “just doing a clean resetting — at whatever the valuation so that everybody is aligned and dealing with reality — is much, much better for a company.” especially when many existing investors are currently willing to add on additional dollars at the most recent valuation.

Down Round 162

Down Round Ratchet Liquidation Preference Participating Preferred 162

Altgate

DECEMBER 15, 2010

@altgate Startups, Venture Capital & Everything In Between Skip to content Home Furqan Nazeeri (fn@altgate.com) ← No one wants to tell you your baby is ugly More on Liquidation Preferences → Pre-Money Valuation vs Number of Founders Posted on December 15, 2010 by admin Here’s a chart of the day worth sharing.

Pre-Money Valuation 66

Pre-Money Valuation Valuation Cofounder Founder 66

Both Sides of the Table

SEPTEMBER 18, 2014

At an accelerator … Me: Raising convertible notes as a seed round is one of the biggest disservices our industry has done to entrepreneurs since 2001-2003 when there were “full ratchets” and “multiple liquidation preferences” – the most hostile terms anybody found in term sheets 10 years ago.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Startup Professionals Musings

JANUARY 27, 2012

Remember a term sheet agreement is not a deal until the check clears. However, there is no set pattern of terms an entrepreneur might be able to anticipate from either. Your best strategy is to bring your own term sheet to the negotiation as a starting point. Liquidation preference. Seat on the board.

Term Sheet 223

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

The Startup Lawyer

JANUARY 22, 2013

Most convertible notes have a price cap as a feature term. 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.

Liquidation Preference 54

Liquidation Preference Pre-Money Valuation Valuation Equity 54

Both Sides of the Table

FEBRUARY 15, 2016

There is much talk these days that startup valuations have decreased and may continue to do so and that the amount of time it takes to fund raise may take longer. The earlier the round, the less capital you need and the more reasonable your valuation the less time that is needed generally to raise capital. Only you know.

Burn Rate 150

Burn Rate Cap Table Valuation Software Review 150

Both Sides of the Table

MARCH 1, 2016

The good news for our industry is that the LPs who fund the VC industry are still very big believers in the long-term gains they will get from venture and are still allocating capital to the industry in good times and bad. LPs See The Over-Valuations and Don’t Like It. That’s money that fuels our startup ecosystems.

Venture Capital 150

Venture Capital LP Silicon Valley Marketing 150

Startup Professionals Musings

SEPTEMBER 26, 2015

Perhaps they're way off in their valuation (usually far too high), or paralyzed by fear at seeing the other terms, because they have no idea what's normal, and what's worth a fight to the death (their startup's). Still, no one wants the terms to be so complex that the deal never closes.

Term Sheet 120

Term Sheet Demand Preferred Stock Liquidation Preference 120

Both Sides of the Table

SEPTEMBER 5, 2012

I can’t say it much simpler than this: “What if I took some of the worst, most egregious terms in a standard term sheet and made them the defacto standard in most convertible debt deals? Let me explain it more clearly in equity terms. That’s right. They’ll get priced soon enough by a VC.”

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Startup Professionals Musings

SEPTEMBER 14, 2010

Remember a term sheet agreement is not a deal until the check clears. However, there is no set pattern of terms an entrepreneur might be able to anticipate from an angel, either. Your best strategy is to bring your own term sheet to the negotiation as a starting point. Liquidation preference. Seat on the board.

Term Sheet 227

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

Both Sides of the Table

MAY 30, 2015

When you do a convertible note with a cap that converts into the next round of funding one of the unintended consequences is that if you’re successful and raise at a larger price than your cap the early angels often get “multiple liquidation preferences” on their dollars in.

Liquidation Preference 150

Liquidation Preference Ratchet Angel Investor Entrepreneur 150

Gust

OCTOBER 17, 2011

Remember a term sheet agreement is not a deal until the check clears. However, there is no set pattern of terms an entrepreneur might be able to anticipate from either. Your best strategy is to bring your own term sheet to the negotiation as a starting point. Liquidation preference. Seat on the board.

Term Sheet 158

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

ReadWriteStart

SEPTEMBER 2, 2011

Tip 4: Really Understand Key Terms. Once you get the term sheet make sure you know how to read it. This will give you tons of information on all the terms you'll encounter when raising a venture round and how they could impact your deal. Once you have a term sheet you are happy with, don't over negotiate.

Cap Table 125

Cap Table Term Sheet Liquidation Preference Technical Review 125

The Next Web

FEBRUARY 15, 2015

If you haven’t read the first part on equity term sheets, I strongly recommend doing so before moving on. For a general introduction to term sheets and the trade-off between high valuation and complex investment structure, please refer to the introductory post to the guide. Entrepreneur Analysis and Opinion'

Term Sheet 60

Term Sheet Equity Liquidation Preference Valuation 60

Gust

SEPTEMBER 17, 2014

Me: Raising convertible notes as a seed round is one of the biggest disservices our industry has done to entrepreneurs since 2001-2003 when there were “full ratchets” and “multiple liquidation preferences” – the most hostile terms anybody found in term sheets 10 years ago. People seem concerned about valuation.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

The Startup Lawyer

JANUARY 10, 2011

There’s a lot of advice about (1) how to attract VCs, and (2) how to negotiate a venture capital term sheet. 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. I refer to this waiting period as “term sheet purgatory.&#.

Term Sheet 64

Term Sheet Pre-Money Valuation Liquidation Preference Option Pool 64

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

Feld Thoughts

FEBRUARY 9, 2016

Much of it is very short term focused and, like a giant tractor beam, draws the conversation into a very short time horizon (as in days or weeks). One of my favorite lines in buried in the middle: “I’ve heard enough companies say “we simply can’t cut costs or it will hurt the long-term potential of the business” to get a wry smile.

Cap Table 70

Cap Table Down Round Liquidation Preference Founder 70

Both Sides of the Table

MAY 13, 2013

If the money comes from professional investors it usually has a “liquidation preference” meaning that their money comes out before the founders or common stock. (If That’s why liquidation preferences exist – downside protection. Almost certainly the startup would have raised some capital.

Liquidation Preference 357

Liquidation Preference Early Stage Retention Lock-up Period 357

Startup Company Lawyer

MARCH 14, 2010

Founders Institute Plain Preferred Term Sheet (by WSGR – disclaimer, I represent the Founders Institute and was involved in drafting this document). This post assumes that you have a basic understanding of Series A financing terms. Y Combinator Series AA Equity Financing Documents (by WSGR). under $500K).

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

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

Scott Edward Walker

SEPTEMBER 14, 2011

Introduction This post originally appeared in the “ Ask the Attorney ” column I am writing for VentureBeat ; it is part of my ongoing series regarding venture capital term sheets. The Investors’ Right to Walk VC Term Sheets Are Non-Binding. VC Term Sheets Are Conditional.

Term Sheet 76

Term Sheet Due Diligence Liquidation Preference Redemption 76

Altgate

DECEMBER 18, 2008

@altgate Startups, Venture Capital & Everything In Between Skip to content Home Furqan Nazeeri (fn@altgate.com) ← Holiday Cards Year End Management Changes → The 3X Liquidation Preference Is Back! Let’s recap how expensive a 3x liquidation preference really is. Bookmark the permalink.

Liquidation Preference 31

Liquidation Preference Venture Capital Post-Money Valuation Participating Preferred 31

K9 Ventures

JUNE 5, 2015

Low supply of companies with traction drove the valuations and deal sizes up. Valuations are rising to match. A typical seed round valuation may be $6M pre, raising $2M for an $8M post, or even as high as an $8M pre, raising $2M for a $10M post. The risk here is what I refer to as the curse of over-capitalization. The Epilogue.

Seed Stage 48

Seed Stage Venture Capital Early Stage Valuation 48

Feld Thoughts

SEPTEMBER 9, 2015

Some will demonstrate strategically justifiable metrics and have fantastic ‘up round’ exits; others may see liquidation preferences kick in which will negatively impact founders and employees; others may fulfill the adage “IPO is the new down round” , which has been the case for more than half of the public companies on our list. “We

Liquidation Preference 70

Liquidation Preference Burn Rate Balance Sheet .Net 70

Scott Edward Walker

JULY 7, 2011

Introduction This post originally appeared in the “ Ask the Attorney ” column I am writing for VentureBeat ; it is part of my ongoing series regarding venture capital term sheets. Moreover, there are significant restrictions under applicable State law regarding redemptions if the company does not have the legally-available capital.

Term Sheet 49

Term Sheet Redemption Venture Capital Preferred Stock 49

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.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

www.readwriteweb.com

DECEMBER 29, 2011

Tip 4: Really Understand Key Terms. Once you get the term sheet make sure you know how to read it. This will give you tons of information on all the terms you'll encounter when raising a venture round and how they could impact your deal. Once you have a term sheet you are happy with, don't over negotiate.

Cap Table 47

Cap Table Term Sheet Liquidation Preference Technical Review 47

ithacaVC

JUNE 3, 2015

Post-Money Confusion with Convertible Notes “ Mark’s post warned of the often unintentional punishment that founders inflict on themselves when doing a convertible debt deal that contains a valuation cap. per share (calculated by taking $10mm premoney valuation/10mm shares outstanding fully diluted = $1.00).

Liquidation Preference 40

Liquidation Preference Pre-Money Valuation Dilution Valuation 40

Up and Running

DECEMBER 30, 2015

Setting too high a valuation. Setting too high a valuation during a funding round can set you up for failure, setting expectations too high for ensuing rounds. It might be difficult to exceed your valuation, making investor relations difficult. – Phil Chen, Systems Watch. Timing is everything for valuation, market, and team.

Due Diligence 84

Due Diligence Valuation Liquidation Preference Redemption 84

Feld Thoughts

JUNE 2, 2015

Or, if you just want the paragraph, it’s: “If this note converts at a price higher than the cap that you have been given you agree that in the conversion of the note into equity you agree to allow your stock to be converted such that you will receive no more than a 1x non-participating liquidation preference plus any agreed interest.”.

Liquidation Preference 70

Liquidation Preference Cap Table Angel Investor Post-Money Valuation 70

Up and Running

MAY 21, 2015

In this article, we’ll introduce you to some of the most important contract terms to watch out for when negotiating an agreement to accept outside investments, and explain why they’re worth worrying about. So you need to make sure you understand what they’re getting, and what you’re giving up in terms of control and profits.

Covenant 60

Covenant Liquidation Preference Ratchet Dilution 60

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. What is a Conversion Valuation Cap? and (iii) what are the advantages of issuing convertible notes?

Pre-Money Valuation 72

Pre-Money Valuation Finance Liquidation Preference Founder 72

Startup Company Lawyer

JANUARY 31, 2011

I had a chance to review the terms of the convertible debt documents used in the transaction. This also seems to be fairly company favorable as most convertible debt seems to have a one year term.). Optional maturity conversion : into Series AA Preferred Stock based on a $5M valuation.

Preferred Stock 60

Preferred Stock Liquidation Preference IPO Common Stock 60

Berkonomics

MAY 22, 2014

Like most angel investors, I have preferences for the terms and conditions of investment and intend to negotiate with entrepreneurs on those terms, such as valuation, company structure, the makeup of the board of directors, liquidation preferences and others. Sounds simple, huh?

Early Stage 79

Early Stage Accredited Investor SEC Private Placement 79

Both Sides of the Table

SEPTEMBER 28, 2013

The don’t understand VC liquidation preferences or multiple return expectations. But we departed on good terms. Dilution / valuation. I hate when companies publish too much information about the total stock option allocations, the company valuations, the dilution faced in every round, etc.

Startup 417

Startup Dilution San Diego Stock Options 417

Scott Edward Walker

APRIL 9, 2012

Part 2 will discuss the two most significant issues for founders in connection with the issuance of convertible notes: (i) the valuation cap and (ii) the discount (and how they interrelate). A convertible note is short-term debt that converts into equity. and (iii) what are the advantages of issuing convertible notes?

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87