Gust

NOVEMBER 18, 2012

Once you have a potential investor excited about your team, your product, and your company, the investor will inevitably ask “What is your company’s valuation?” How much is NewCo worth to investors at this point (pre-money valuation)? This is the most concrete valuation element, usually called the asset approach.

Valuation 187

Valuation Pre-Money Valuation NPV Intellectual Property 187

Gust

OCTOBER 12, 2011

During the summer of 2010, I developed a workshop, A New ACEF Valuation Workshop for Angels and Entrepreneurs. To provide some reference points, I surveyed thirteen angels groups in North American to determine their recent experience in negotiating the pre-money valuation of pre-revenue companies. Current Average. up slightly.

Angel Groups 125

Angel Groups Valuation Pre-Money Valuation St. Louis 125

Gust

DECEMBER 6, 2011

Milestones are accomplishments that demonstrate the viability of the business; hence, they increase the valuation of the company. The funding gaps can create a bumpy fundraising road for entrepreneurs.

Angel Investor 179

Angel Investor Venture Capital Valuation Software Engineering 179

Gust

JULY 23, 2014

So even if my own mother asked me to meet with you, and you were pitching me a biotech opportunity for a $10 million investment at a $90 million valuation, I might take the meeting, but it wouldn’t be particularly useful for either of us. Now comes the really tricky part: getting me to review all that stuff you just neatly uploaded.

Angel Investor 153

Angel Investor Elevator Pitch Pre-Money Valuation Technical Review 153

Gust

JUNE 17, 2012

Just don’t quit your day job before your new company is producing revenue. Use this approach before you have a real valuation, a real product, or any real customers. The advantage is no time and effort searching and preparing for the other alternatives, and you don’t have to encumber yourself or give up control of your company.

Technical Review 164

Technical Review Bootstrapping Venture Capital Incubator 164

Gust

NOVEMBER 4, 2011

Entrepreneurs and investors who have spent any time dealing with convertible debt seed financing transactions are likely to have encountered the subject of valuation caps. Valuation caps can come into play in settings other than seed-stage convertible note financing rounds. Read on for a fuller explanation. by February 2006).

Valuation 98

Valuation Pre-Money Valuation Merger Vesting 98

Gust

SEPTEMBER 17, 2014

Revenue multiple? Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. How do you think they’ll feel if your next round is at a $50 million post money valuation and their hard-earned $25,000 is worth 0.05% of your company? People seem concerned about valuation.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Gust

OCTOBER 18, 2011

Valuation fantasies. But, you can’t look investors straight in the eye with an absolutely preposterous opening offer on valuation. I’ve seen people get around this problem by not specifying valuation, but that’s hard. Investors want new fresh ideas, not battle-scarred victims. This is a tough one. Circled wagons.

Intellectual Property 124

Intellectual Property Valuation Partner Revenue 124

Gust

NOVEMBER 22, 2011

It wouldn’t work anyway, since your valuation at that stage would be less than the funding, meaning you would have to give away all ownership for the money. At this stage, your startup better be selling a commercial offering, have price and cost validated, with significant customer sales and a real revenue stream. Growth stage.

Venture Capital 171

Venture Capital Investment Bankers Angel Investor Initial Public Offering 171

Gust

NOVEMBER 3, 2013

Even a non-profit has to generate revenue (or donations) to offset operating costs. Intellectual property is also often the largest element of early-stage company valuations for professional investors. Don’t quit your day job until new revenue is flowing. Business model doesn’t make money. Inexperienced team.

Intellectual Property 183

Intellectual Property Startup Viral Early Stage 183

Gust

AUGUST 5, 2012

Clearly define the customer, channel, and revenue model associated with this solution. In this section, you need to be passionate about revenue, profit, and volume growth. Many people seem to use the social network advertising model for revenue, but forget it assumes at least 100M users and $50M investment. Exit strategy.

Business Plan 182

Business Plan Sweat Equity Exit Strategy Intellectual Property 182

Gust

DECEMBER 7, 2014

Even a small investor in the early days will take a large equity percentage, due to that pesky valuation challenge. At least wait until later, when you ready to scale, and have some “leverage” based on a proven business model, some real customers, and real revenue. You will squeeze harder on your own dollars than investor dollars.

Bootstrapping 191

Bootstrapping Entrepreneur Startup Burn Rate 191

Gust

AUGUST 19, 2012

In this section, you need to be passionate about recurring revenue, profit margin, and volume growth. Project both revenues and expense totals for next five years, and past three years. What is the current valuation of the company? You need data from industry experts like Forrester or Gartner for credibility. Business model.

Elevator Pitch 146

Elevator Pitch Exit Strategy Burn Rate Merger 146

Gust

SEPTEMBER 5, 2012

Turn the question on its head: How could it make sense to lend money to a brand new, seed-stage company with no revenue, no products, and no collateral? (You Advising investors, I would advocate for traditional convertible notes (with a valuation cap) over this new structure. How can this possibly make sense?

Finance 134

Finance Convertible Security Equity Seed Stage 134

Gust

JULY 10, 2012

Narrow the market, narrow the business offering, and shorten the time from zero to revenue. Lower your valuation. Go back into your plan and find the core components that drive the rest. Reduce the risk on the big questions of viability and market. Create smaller milestones for the short term. . Partner up.

Bootstrapping 165

Bootstrapping Valuation Restful Sales 165

Gust

OCTOBER 12, 2011

The agreement contains language providing that, at the Company’s option , the notes may be converted to shares of Common Stock at a predetermined valuation. Entrepreneurs generally prefer #2, provided it’s at a valuation that wouldn’t be absurdly dilutive given the amount of notes outstanding. First, a word about the maturity date.

Finance 107

Finance Term Sheet Pre-Money Valuation Early Stage 107

Gust

DECEMBER 16, 2012

It should answer every question an investor or associate might ask, including current valuation, funding needed, and exit strategy. In most cases, a Microsoft Excel spreadsheet is adequate, with projection formulas for revenue, costs, and cash flow over the next five years. Finalize your financial model.

Angel Investor 179

Angel Investor Intellectual Property Elevator Pitch Angel Groups 179

Gust

NOVEMBER 28, 2011

The most common solution is that you “bootstrap” your business, or fund it yourself, at least to the point that your “traction” is evident (you have a product, you have customers, you have revenue). Another alternative is to rely on that famous first tier of investors, called friends, family, and fools.

Startup 147

Startup Bootstrapping Social Network Internet 147