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Want to Know How VC’s Calculate Valuation Differently from Founders?

Both Sides of the Table

Things like “ participating preferred stock &# in legalese unsurprisingly never actually call out, “hey, this is the participating preferred language.&# We got a3x participating liquidation preference with interest (not participating with a 3x cap, but 3x participating.

Valuation 405
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Shark Tank Season 4 week 4 breakdown

Lightspeed Venture Partners

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.

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In defence of liquidation preferences

The Equity Kicker

Not by much, but by enough that it makes sense for them to accept a liquidation preference in exchange for a higher valuation. Moreover, in the rare situation where investors offer a choice management almost always go for the higher valuation. Furthermore, provided the instrument is kept simple (i.e.

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Sustainable startup growth and venture capital

The Equity Kicker

On Friday it seemed like everyone in the venture capital industry was again reading about market turmoil, this time the news is that angel investors are pulling back and valuations taking a hit. The best startups capture all the returns so focusing too much on entry valuation is a mistake.

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Model Cap Table

ithacaVC

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).

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Shark Tank Season 4 episode 3 breakdown

Lightspeed Venture Partners

pre money valuation). Cuban has interest in a gluten free diet, and claimed that he liked the company, but his only concern was valuation. Since an early exit caps the upside potential, getting in at the right, low valuation is necessary to be able to make a high multiple on your investment. This would never happen in real life.

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Avoid Offensive Liquidation Preferences

The Startup Lawyer

The amount of the liquidation preference is usually expressed as a multiple, with the most common liquidation preference being “1X non-participating.” Thus, if you see greater than a 1x preference and/or a ‘participatingpreference attached, know that your investor is just negotiating on price.