Ratchet and Venture Capital

Praying to the God of Valuation

Both Sides of the Table

DECEMBER 11, 2022

Something happened in the past 7 years in the startup and venture capital world that I hadn’t experienced since the late 90’s — we all began praying to the God of Valuation. How might our next phase of the journey seem brighter, even with more uncertain days for startups and capital markets? What happened?

Valuation

Valuation San Francisco Ratchet Liquidation Preference

Bad Notes on Venture Capital

Both Sides of the Table

SEPTEMBER 18, 2014

On the phone … Me: So, you raised venture capital? We raised a seed round. About $1 million. Me: At what price? Him: It wasn’t priced. We raised a convertible note. Me: With a cap? Him: Yes, $8 million. So you did raise with a price. It’s just a maximum price.

Venture Capital

Venture Capital Liquidation Preference Valuation Term Sheet

Down Rounds: Deal With Reality

Feld Thoughts

JUNE 10, 2022

and a bunch of other things.

Down Round

Down Round Ratchet Liquidation Preference Participating Preferred

Investing Notes From The Inaugural Pre-Seed Summit

Haystack

APRIL 10, 2018

I would bet most of them can barely cut through the flow, and then they have to find the best deals and look over their shoulder for a larger VC who can pick off the deal, give the founder more money, and ratchet up the valuation in the process.

Seed Stage

Seed Stage San Francisco Ratchet Silicon Valley

In Q4 2022, founders face tough choices

VC Cafe

OCTOBER 31, 2022

Mature startups with proven business models and the potential to reach the public markets within a few years will be the safest place to park any new venture capital that comes into the ecosystem. Venture-Capital Firms Buy Up Public Tech Stocks as Startup Market Stalls (Source: WSJ ). CVCs have participated in 25.6%

Founder

Founder Technical Review Down Round Liquidation Preference

On the Square and Match IPOs and hopes for a correction

The Equity Kicker

NOVEMBER 20, 2015

They had a ‘ratchet’ which repriced their investment in the event of a down round to give them a 20% return. I say that because investors in the $6bn round in Square have still made money on the deal.

IPO

IPO Matching Ratchet Valuation

Startup Outlook from Silicon Valley Bank

Growthink Blog

APRIL 25, 2011

On Friday Silicon Valley Bank released a survey of 375 executives at startup technology companies in the 4 core venture capital investment sectors – Software/Internet, Hardware, Life Science, and Cleantech. Here is what they found: Tech. Are Bullish. Our outlook is solely dependent on the FDA.

Silicon Valley

Silicon Valley Ratchet Private Equity Startup

Bad Notes on VC

Gust

SEPTEMBER 17, 2014

Me: So, you raised venture capital? 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. On the phone ….

Liquidation Preference

Liquidation Preference Valuation Term Sheet Stock

Term-sheets and Valuations: Thinking about Negotiations - Startups.

Tim Keane

JANUARY 12, 2010

I’ve sat down with entrepreneurs and a copy of a term sheet guide I like [ “Term Sheets & Valuations - A Line by Line Look at the Intricacies of Venture Capital Term Sheets & Valuations ” by Alex Wilmerding, Aspatore Press.] and walked through each proposed term and why it is or isn’t important.

Term Sheet

Term Sheet Valuation Dividend Liquidation Preference

Founders – Use Your Down Round To Clean Up Your Cap Table

Feld Thoughts

FEBRUARY 9, 2016

I watched, participated, and suffered through every type of creative financing as companies were struggling to raise capital in this time frame. I’ve seen every imaginable type of liquidation preference structure, pay-to-play dynamic, preferred return, ratchet, share/option bonus, option repricing, and carveout.

Cap Table

Cap Table Down Round Liquidation Preference Founder

How VCs Make Money….Hopefully

ithacaVC

MAY 10, 2011

That is a hefty sum (and over the life of a fund, can amount to a large amount of management fee; most funds have a life of 10 years and the management fee often ratchets down after 5 years). This is one area that is often overlooked by people not familiar with venture capital. So, for VC1, that would be $2mm a year.

Carried Interest

Carried Interest Ratchet Limited Partner Due Diligence

On the Road to Recap:

abovethecrowd.com

APRIL 20, 2016

In Silicon Valley boardrooms, where “growth at all costs” had been the mantra for many years, people began to imagine a world where the cost of capital could rise dramatically, and profits could come back in vogue. Competition also has access to capital. Anxiety slowly crept into everyone’s world. 2015 was the exact opposite.

IPO

IPO Term Sheet Silicon Valley Valuation

So You Wanna be a VC?

Professor VC

JUNE 6, 2016

I can just picture Mr. Rogers saying "Children, can you say participating preferred stock with an uncapped 3x liquidation preference and a full ratchet?" However, in my 25 years in the Silicon Valley startup ecosystem, I've experienced the VC corollary to the golden rule much more often: "He has the gold makes the rules!"

Syndicate

Syndicate Syndication Cap Table Ratchet

Raise Capital With The Skin You’re In: Blunt Truth from Don Charlton, CEO, The Resumator

David Teten

JANUARY 13, 2015

Yes, you like hip-hop, “urban” clothing and “ ratchet television”, but all that sinks you deeper into stereotypes. The best way you can help them is build a big business with their backing, and that requires you to appear self-made. [I should mention that disclosure of participation in the Venture Capital Access Program is optional.].