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How Investors Think About Valuation of Pre-Revenue Startups

SoCal CTO

They might have some seed money and are thinking or raising a Series A based on success of an early release (MVP). Because of this, I've always tried to stay up-to-speed on how early-stage investors look at valuation of companies. Bill Payne is an expert on how early-stage investors should look at valuation. Not sure why.

How much capital should you raise?

Version One Ventures

Keep funding to a minimum until you have found a product-market fit Early rounds are particularly expensive, because company valuation is low.

The Silliness Of Recapping Seed Rounds

Feld Thoughts

company raises $1m of seed money from angels in a convertible note with a $6m cap. Assuming equity is raised at or above that cap, the total dilution, before the new money, is 16.6% (equivalent to an equity financing of $1m at a $6m post money valuation. ” They are running out of money.

Series Seed or Convertible Note? Which one is more founder friendly? Which one do investors prefer?

Gust

That said, the primary entrepreneur-friendly reason for doing a  Convertible Note (and the reason that no serious investor under regular circumstances will therefore do an uncapped note) is: The valuation negotiation is put off until the next round. million valuation provided by the 20% discount of the note.

How the Seed-Stage VC Trend Began, The Downsides of Unicorns & Much More

Both Sides of the Table

Some quick highlights include: The Role of a Seed Stage VC. Each VC raises money – say $90 million. But not many others.

Don’t get hung up on the valuation of your startup

VC Ready Blog

Many entrepreneurs want to put a value on their company before the ink on their incorporation documents is dry, but valuing an early stage company is as much art as science, and a bad valuation can be worse than no valuation at all. And, of course, there is the entrepreneur’s natural bias that inevitably sneaks into the valuation.

Don’t get hung up on the valuation of your startup

VC Ready Blog

Many entrepreneurs want to put a value on their company before the ink on their incorporation documents is dry, but valuing an early stage company is as much art as science, and a bad valuation can be worse than no valuation at all. And, of course, there is the entrepreneur’s natural bias that inevitably sneaks into the valuation.

How does Convertible Debt work?

Gust

Debt is a fancy word for a “loan” That is, I lend you money, and you agree to pay back the money that I loaned you at some known point in the future, along with a specific additional amount of money (called “interest”) which is your payment to me for having been willing to loan you money in the first place.

Top Startup Advisor Paul Graham Just Warned Against Taking Google's Money

www.businessinsider.com

Your Money. Top Startup Advisor Paul Graham Just Warned Against Taking Googles Money. Money Game Select. Your Money Select.

2009 VC Fundraising Strategy

Startup Economy

Tags: Investment Seed money business model venture capital early stage

The best advice startups will never follow

Berkonomics

Let me tell you a few short hair-raising stories of entrepreneurs who have raised money and regretted it later.  Starting up Raising money

Seed Bubble Watch 1st Half 2013

Possible Insight

Well, it’s been almost three years since I started watching for quantitative evidence of a “bubble” in seed-stage technology funding.

Ungerminated: Trouble with Seeds

Passionate Intensity

Money is available, some will say, easy to get. There’s nothing wrong with seed funding. Tweet. Early signs of trouble. Startup V

Figuring Out FourSquare

Seeing Both Sides

million in its series A financing and kept the burn rate at less than $100k per month to make he money last. Online - offline combination.

API 27

How long will the “seed stage bubble” last?

andrewchen.co

How long will the “seed stage bubble” last? @andrewchen. Read what Im reading · Featured essays. Thanks, and enjoy! Agree?

3 Reasons to Look to the Angels for Start-up Funding

Fresh Inc.: The Staff Blog

But at the initial seed financing stage of your start-up, VCs are not always the better option In fact, angel investors often have more to offer.

Instead of sticking a fork in the venture market, realize. there is no fork

This is going to be BIG.

It's been said that long term returns are bad, but yet, where else are these institutions going to put the money to get growthy returns?

Life As A Startup Consultant

Seed Stage Capital

If you want to optimize your life for money, you should pursue a path in traditional consulting (BCG, McKinsey) or in investment banking.

Entrepreneurs that Got Filthy Rich in 2011

Fresh Inc.: The Staff Blog

Eric Lefkofsky provided $1 million in seed money to Andrew Mason to develop the idea for the coupon buying site. billion in 2004.

5 Reasons to Avoid Silicon Valley

Fresh Inc.: The Staff Blog

Too much seed money. You must be scratching your head now and asking yourself: How can too much money be bad? Waltham, Mass.-based

Diversification – The Alternative to Market Timing

Rob Go

think that over time, this is the best way to handle market swings as a seed stage investor who is a) playing in a highly unpredictable part of the market and b) has a very long time horizon. Valuation Discipline.  We have a pretty strong sense of what realistic valuation ranges are and aren’t for seed stage companies.

The Legal Side of Entrepreneurship

YoungUpstarts

Startups need to understand how to manage the seed money they receive from investors and VCs. Financing. ” The Cost of Financing.

How to Fund a Startup

www.paulgraham.com

typical startup goes throughseveral rounds of funding, and at each round you want to take justenough money to reach the speed where you can shift into the nextgear. At Viaweb we got our first $10,000 ofseed money from our friend Julian, but he was sufficiently richthat its hard to say whether he should be classified as a friendor angel.

The Series A crunch is hitting now. Have we even noticed?

pandodaily.com

We know this: As many as a thousand companies who’ve received seed rounds won’t be around in a year — maybe six months. Video.

How to Start a Startup

www.paulgraham.com

You need three things to create a successful startup: to start withgood people, to make something customers actually want, and to spendas little money as possible. The way a startup makes money is to offer people bettertechnology than they have now. Andyet theres a lot of money at stake. This money isnt revenue. Well, no.

Why You're Not Getting the Most Out of Your Board

Fresh Inc.: The Staff Blog

Should we hire the head of a business unit who has turned out to be a bad seed? Both of the functions are a waste of time.

VCs in seed clothing: Chris Dixon, Mark Suster, and Naval Ravikant interviewed

Venture Hacks

The topic was VC signaling in seed rounds — and how these signals help or hurt your ability to raise money in the next round. Outline.

It Doesn’t Matter How Much Money You’re Raising, It’s Still Hard

Instigator Blog

More and more companies are raising money , and valuations seem to be skyrocketing. And in many cases the amount of money you’re looking to raise isn’t particularly relevant. When VCs are ready to get a new fund off the ground they have to jump to our side of the table and raise the money. Big money.

What you should know about Angel Investors and Convertible Notes

Don Dodge on The Next Big Thing

The average deal size (seed stage) is about $250K. They invest in what they know, where they can apply their experience, and in deals where their money can have impact. Convertible Notes – Some Angel investors will use Convertible Notes to fund seed stage companies. Valuation – Early stage companies are hard to value.

Understanding the Risks of VC Signaling

Both Sides of the Table

recently wrote a blog post on understanding how the size and age of a venture capital fund might affect you when you’re raising money.

The Corrosive Downside of Acquihires

Fresh Inc.: The Staff Blog

Let''s assume $2 million in seed money. They founded their last company with no money in their pocket. And who cares, right?

How You May be Signaling Price without Knowing It

Both Sides of the Table

One problem.  He’s struggling to raise money. His company had raised seed money already. You might just suck.

A Compilation of the Web's Best Advice for Entrepreneurs

Platforms and Networks

skip to main | skip to sidebar Platforms and Networks Thoughts about platforms, network effects and entrepreneurship Wednesday, November 25, 2009 A Compilation of the Webs Best Advice for Entrepreneurs Below, I link to blog posts and other online resources that offer advice for entrepreneurs. Great list. Tom, well done - solid list. Nice list.

Understanding a VC’s Seed Funding Policy is Critical

Both Sides of the Table

There has been much discussion about VCs doing seed funding in the past year.  I’ve written about it myself (Is VC Seed Funding Dead?)

To Follow On or Not to Follow On

This is going to be BIG.

In the late 90's, it wasn't surprising that companies with no revenue that were funded at 100 million dollar valuations didn't survive. That's why I constantly remind companies that when you do an outsized financing price or size-wise, you expose yourself to getting hit bad in a downtown unless you're conservative about how you use the money.

Venture Seed vs Angel Seed

Immersive Web

Among the many great discussions, the most critical one in my mind centered on the impact that the source of money can have on an early, seed startup. The discussion covered two main sources of seed funding: Vc and true angel. Isn’t seed money just seed money? Look for seed money from angels.

LP 0

Full Year 2012 “Seed Bubble” Update

Possible Insight

As regular readers know, I’ve been on the lookout for a bubble in seed stage investing.  Initially, I was troubled.

Venture Seed vs Angel Seed « Immersive Web

Immersive Web

Immersive Web Home About Venture Seed vs Angel Seed I really enjoyed the Boston Angel Boot Camp on June 1. Among the many great discussions, the most critical one in my mind centered on the impact that the source of money can have on an early, seed startup. Isn’t seed money just seed money?

Ungerminated: Trouble with Seeds

Passionate Intensity

Money is available, some will say, easy to get. But these thoughts have been aired before and are now part of the usual rhetoric about the seed bubble. For me, the real danger started to manifest itself over the last couple of months as I saw some very good seed-funded companies looking to raise their Series A. Some advice….

The importance of investor signaling in venture pricing

Chris Dixon

Simple, classical economic models would predict that although there might be multiple VCs interested in investing, at the end of the financing process the valuation will rise to the clearing price where the demand for the company’s stock equals the supply (amount being issued). Word gets around quickly that you are out raising money.