Growthink Blog

JANUARY 24, 2011

The question is whether they need to issue common or preferred stock. The answer depends on how and what rights are defined in the preferred stock. The liquidation preference means what is sounds - namely that preferred stock holders with this right get all of their money back (i.e. read more.

Preferred Stock 93

Preferred Stock Stock Common Stock Liquidation Preference 93

View from Seed

SEPTEMBER 14, 2021

Both early- and late-stage startup valuations are currently elevated. For context, seed-stage pre-money valuations are up 24% from H1 2020 to H1 2021. Early-stage valuations are up 70%, and late-stage valuations are up 103% (source Pitchbook ). US VC versus stocks. The answer is likely a mix of both.

Valuation 319

Valuation Pre-Money Valuation Distribution Early Stage 319

View from Seed

SEPTEMBER 14, 2021

Both early- and late-stage startup valuations are currently elevated. For context, seed-stage pre-money valuations are up 24% from H1 2020 to H1 2021. Early-stage valuations are up 70%, and late-stage valuations are up 103% (source Pitchbook ). US VC versus stocks. The answer is likely a mix of both.

Valuation 295

Valuation Pre-Money Valuation Distribution Early Stage 295

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. Seat on the board.

Term Sheet 223

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

Both Sides of the Table

JULY 27, 2014

(not in video but late stage valuations have grown 24% compounded years for the past 4 years which is higher than any segment. Four years ago people paid $66m median pre-money valuation and are now paying $155m. This can’t all be driven by increased company performance).

Valuation 309

Valuation Pre-Money Valuation Later Stage Non-Compete 309

Berkonomics

JANUARY 7, 2021

Email readers, continue here…] Often, if not co-founders, this group is rewarded through issuance of stock options from a pool of available options that usually totals 15-20% of the total company’s equity divided among all employees. So, co-management is the second group to share in the bounty upon a liquidity event.

Liquidity Event 96

Liquidity Event Pre-Money Valuation Cofounder Initial Public Offering 96

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. Seat on the board.

Term Sheet 227

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

Both Sides of the Table

JUNE 22, 2011

In addition to FOMO it is partly driven by massive increase in valuations for earlier-stage companies who raised money at bit seed prices but who still have product risk. million pre-money valuation is now raising $1 million at a $12 million valuation the next investor has nowhere to go but up (or sit out the investment).

Saudi Arabia 309

Saudi Arabia Valuation IPO Technical Review 309

Both Sides of the Table

SEPTEMBER 29, 2009

The professor plotted data and showed us statistically that most people buy stocks when they are booming (e.g. The pricing problem – So an investor put $5 million at a $10 million pre-money valuation in a company with a great beta product but no real customers. The best MBA class I took was an investment strategy class.

Burn Rate 263

Burn Rate Valuation Pre-Money Valuation Private Equity 263

View from Seed

SEPTEMBER 14, 2021

Both early- and late-stage startup valuations are currently elevated. For context, seed-stage pre-money valuations are up 24% from H1 2020 to H1 2021. Early-stage valuations are up 70%, and late-stage valuations are up 103% (source Pitchbook ). US VC versus stocks. The answer is likely a mix of both.

Valuation 156

Valuation Pre-Money Valuation Distribution Early Stage 156

Lightspeed Venture Partners

OCTOBER 7, 2012

Week three’s breakdown covered topics like how hard momentum is to turn around, and how participating preferred stock works. As Cuban pointed out, this is a “down round” Zomm is seeking $2M for 10% of the company, implying an $18M pre money valuation today. BACK 9 DIPS.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

Gust

OCTOBER 17, 2011

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. Seat on the board.

Term Sheet 158

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

Tim Keane

JANUARY 12, 2010

An average of these ranges results in a pre-money valuation of about $4MM.   If similarly situated companies are seeing $3.5MM pre-money valuations, this might become the target valuation.   Say I invest $1MM in a company and receive 40% of the stock. stake in the company.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

YoungUpstarts

SEPTEMBER 4, 2017

Investing in startups is a lot more than just buying “stock” in a company. For startup founders and CEO’s it’s also just as common to see them place too much focus on the amount of money raised, and the pre-money valuation, rather than the value that each investor can bring to the table.

Pre-Money Valuation 187

Pre-Money Valuation Seed Stage IP Deal Flow 187

The Startup Lawyer

FEBRUARY 4, 2011

The following are some issues to consider and actions to take before accepting an incubator’s offer: (1) Calculate Valuation and Determine Value. Pre-money valuations startups receive from incubators are typically low…really low. 2) Scrutinize the Investment Structure.

Incubator 105

Incubator Pre-Money Valuation Option Pool Advisory Board 105

ithacaVC

DECEMBER 13, 2013

There are many reasons for this, but fundamentally, it is impossible to calculate a share price for the investment round unless you have complete agreement on how many shares are outstanding pre-money. The share price is calculated by taking the pre-money valuation and dividing it by the number of shares outstanding pre-money.

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

Both Sides of the Table

FEBRUARY 4, 2016

The result of all of this new money? Median pre-money valuations skyrocketed – shooting up 3x in just three years as investors competed to christen imaginary animals with imaginary valuations. And then at once the market felt constipated – just look at Q415. Sentiment of the Market. So what happened?

LP 150

LP Valuation Burn Rate Pre-Money Valuation 150

Scott Edward Walker

APRIL 22, 2012

ii) why are convertible notes issued instead of shares of common or preferred stock? 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 Discount?

Pre-Money Valuation 72

Pre-Money Valuation Finance Liquidation Preference Founder 72

ithacaVC

APRIL 25, 2014

For example, cell E2 is the spot to put in the negotiated pre-money valuation. The larger the preferred stock liquidation preference the larger the impact of participating preferred. The green box at row 45 just provides a nice double check on post-money valuation calculations. So… enjoy the model.

Cap Table 79

Cap Table Preferred Stock Pre-Money Valuation Liquidation Preference 79

Agile VC

MAY 26, 2011

round which closed in November 2003, and the pre-money valuation between $10 million and $15 million. And obviously all the liq prefs went away in the IPO when pref stock converted to common. It was a $4.7M So from start to finish our fundraise took roughly four to five months. The rest, as they say, is history.

Term Sheet 178

Term Sheet Silicon Valley Technical Review Social Network 178

Gust

APRIL 11, 2014

Suppose it raises $2 million at a $6 million pre-money valuation. The measurable economic value of new shares issued to investors (“net tangible book value per share” in Accountantese) is immediately diluted by the existing shares, which make up the majority of the company’s stock.

Dilution 162

Dilution Equity Pre-Money Valuation Prospectus 162

The Startup Lawyer

JUNE 22, 2010

For this article, let’s assume this equity is the Series A Preferred Stock purchased by a venture capital fund. For example, if a venture capital fund purchases Series A Preferred Stock at $1.00 per share, the discount may allow the angel investor to purchase the same Series A Preferred Stock at $0.75

Pre-Money Valuation 82

Pre-Money Valuation Angel Investor Preferred Stock Valuation 82

Lightspeed Venture Partners

OCTOBER 1, 2012

pre money valuation). Cuban has interest in a gluten free diet, and claimed that he liked the company, but his only concern was valuation. The company came back and offered him 20% of the company for the $200k (an $800k pre money valuation). They were seeking $200k for 10% of the company (a $1.8M

Pre-Money Valuation 158

Pre-Money Valuation Valuation Participating Preferred Preferred Stock 158

Gust

OCTOBER 21, 2011

i) Preferred Stock (if a Preferred Financing is pending at the time of the transaction) or, (ii) if no Preferred Financing is pending, to Common Stock at a price per share equivalent to a fully diluted pre-money valuation of $3 million, to be paid in the same form of consideration (e.g.,

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Early Growth Financial Services

JUNE 26, 2014

Valuation — Know what these terms mean: Fully-diluted — This includes all issued stock and anything that could be converted into common stock (typically after an acquisition or IPO), such as your stock option pool.

Pre-Money Valuation 51

Pre-Money Valuation Option Pool Dilution Common Stock 51

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

ithacaVC

MARCH 11, 2016

Here is the post, which focused mostly on how 409A valuations are used for stock option purposes. And I think that early stage companies should take the risk and not use 409A valuations. As companies move to later stages and have meaningful revenues and profits then 409A valuations begin to make more sense.

Pre-Money Valuation 40

Pre-Money Valuation Stock Options Valuation Later Stage 40

Berkonomics

JUNE 12, 2014

Often, if not co-founders, this group is rewarded through issuance of stock options from a pool of available options that usually totals 15-20% of the total company’s equity divided among all employees. So co-management is the second group to share in the bounty upon a liquidity event.

Liquidity Event 85

Liquidity Event Pre-Money Valuation Cofounder Initial Public Offering 85

The Startup Lawyer

JANUARY 10, 2012

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., In most equity financing rounds, an investor will ask for (and get) a term called a liquidation preference. founders, option holders, etc.).

Liquidation Preference 73

Liquidation Preference Pre-Money Valuation Participating Preferred Preferred Stock 73

K9 Ventures

MARCH 23, 2011

Let’s say the company raises $1M ($900K in new money, plus the $100K for the note, just to keep the math simple) at a pre-money valuation of exactly $1M (assume at $1 per share) – same as the pre-money cap in the note. What percent of the company should the note holder get on conversion?

Pre-Money Valuation 132

Pre-Money Valuation Valuation Equity Liquidation Preference 132

Gust

NOVEMBER 4, 2011

In brief, a cap acts to place a limit on the conversion price of a convertible note such that investors are guaranteed a minimum number of shares for their bridge loans if the startup does a priced equity round at a high pre-money valuation – “high” meaning above the cap, which is often a heavily negotiated term. (The

Valuation 98

Valuation Pre-Money Valuation Merger Vesting 98

ithacaVC

APRIL 10, 2012

They have raised some money from 12 friends and family (let’s assume the friends and family have purchased common stock). So, talk to them about adjusting the cap table prior to our investment – have the board grant you stock options (to avoid a tax issue) prior to our investment to compensate you for the deferred comp.”

Cap Table 49

Cap Table Pre-Money Valuation Stock Options Due Diligence 49

Both Sides of the Table

APRIL 14, 2010

Liquidation preference is the amount of money that an investor gets paid before the common stock (e.g. management, founders, angel investors) get any money. And it sometimes it creates “ flat spots &# where some investors become indifferent to the ultimate price you sell your company between wide ranges of outcomes.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

Early Growth Financial Services

JULY 17, 2014

First off, how do funding, pricing, and valuations compare to those in previous periods? Looking at private markets: Valuations have risen across all funding stages — Series A pre-money valuations have soared from 4 times in 2009 to 7 times in 2014. While buyout multiples are at 10.7 times versus 6.8

Pre-Money Valuation 38

Pre-Money Valuation Valuation Deal Flow Stock 38

Professor VC

JANUARY 17, 2008

One of the panelists mentioned that they have gotten very valuation sensitive (nothing wrong with that) and like to purchase preferred stock rather than invest in convertible notes. He also said they typically only invest at a $1 million pre-money valuation or less.

Pre-Money Valuation 28

Pre-Money Valuation Angel Investor Angel Groups Valuation 28

Both Sides of the Table

SEPTEMBER 5, 2012

But that’s hardly fair compensation when your former cube mate gave you $25,000 of money she didn’t really have to invest in you, took tons of risks with her money, and now has to pay a VC price for that money a year after she invested it. I want 100% of my stock to convert at that lower price.”

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Seeing Both Sides

JULY 15, 2009

Entrepreneurs often mistakenly focus solely on the pre-money valuation while VCs look at multiple knobs in the negotiation to drive to a set of terms that, in total, they find acceptable. The first, and most focused on, is something called the pre-money valuation. What is the promote? Life isn’t fair.”).

Pre-Money Valuation 49

Pre-Money Valuation Option Pool Stock Options Post-Money Valuation 49