Both Sides of the Table

SEPTEMBER 28, 2014

So if your costs are $500,000 per month and you have $350,000 per month in revenue then your net burn (500-350) is equal to $150,000. But those of us with longer memories remember that the revenue line can move south very quickly when the market overall turns south. Net burn is the amount of money you are losing per month.

Burn Rate 383

Burn Rate Balance Sheet .Net Valuation 383

Startup Professionals Musings

OCTOBER 7, 2022

Angel investors will perk up if you have a prototype or a few real customers, while venture capitalists will likely choose to wait until you have achieved several million in revenue or customer count. Here is where projections of cost, pricing, volumes and cash flow are critical. How much equity ownership are you willing to offer?

Preferred Stock 304

Preferred Stock Exit Strategy Equity Angel Investor 304

View from Seed

APRIL 30, 2015

It can be lower cost and can either buy more time or accelerate growth. Glen Mello: Venture debt is a good complement to equity. It’s generally got a lower cost compared to equity capital and can help support growth. Equity doesnt need to be repaid, so it’s a more “permanent” capital source.).

Term Sheet 120

Term Sheet Equity Startup Seed Stage 120

Startup Professionals Musings

JANUARY 4, 2020

Angel investors will perk up if you have a prototype or a few real customers, while venture capitalists will likely choose to wait until you have achieved several million in revenue or customer count. Here is where projections of cost, pricing, volumes and cash flow are critical. How much equity ownership are you willing to offer?

Startup 337

Startup Preferred Stock Exit Strategy Equity 337

Both Sides of the Table

AUGUST 3, 2010

I can save tons of development time and I think I can buy it for all equity. How much dilution should I take for it?&# My friend’s company was pre-revenue. Me: “Zero dilution. I’m not saying there are never reasons to buy another company for cash and/or equity. how to cut redundant costs. -

Merger 276

Merger Technical Review Early Stage Dilution 276

Up and Running

JULY 1, 2020

Operations, marketing, and personnel plans: You’ll outline the details of what operational costs, marketing budget, and additional positions you’ll need for your expansion to be a success. Lenders and equity investors are less emotionally involved in the plan as people within the company. Planning for new regions.

Business Plan 152

Business Plan Forecast Operations Dilution 152

David Teten

AUGUST 21, 2019

Most founders who are raising capital look first to traditional equity VCs. Or should they look to one of the new wave of Revenue-Based Investors? Revenue-Based Investing (“RBI”) is a new form of VC financing, distinct from the preferred equity structure most VCs use. Who are the major Revenue-Based Investing VCs?

Revenue 60

Revenue Liquidation Preference Equity Cofounder 60

Austin Startup

MAY 8, 2018

Background reading: Founder Compensation: Cash, Equity, Liquidity Fatal Errors in Early Startup Hiring Early Hires: Options or Stock Given how deeply involved we are with early-stage startups hiring their first key employees, I figured it would be helpful to outline a few key principles to help entrepreneurs navigate the topic.

Employee 48

Employee Seed Stage Startup Equity 48

ReadWriteStart

JULY 18, 2011

He believes that equity need not be distributed equally, as long as everyone involved is happy with their arrangement. And as long as founders don't have an argument about equity shares in front of the investors they are pitching. That will come at the cost of another 20 to 25% of the company.

Investment Bankers 153

Investment Bankers Technical Review Cofounder Due Diligence 153

David Teten

OCTOBER 1, 2015

Not surprisingly, the list above also is ranked from least to most equity stake in an investment for the investor, relative to the cash they invest. How would one set up such a startup to eventually raise capital from outside VCs, who will be wary of ‘dead equity’ (i.e., equity that belongs to departed cofounders)? The cliffs?

Software Developers 60

Software Developers Software Development Software Review Technical Cofounder 60

Austin Startup

FEBRUARY 13, 2019

Either way, if you know you’re going to fail, it’s much better to do so with your own money on the line than money that also costs you in dilution, perpetuity or more. Consider convertible debt Before diving into a seed round, you may want to consider convertible debt over equity financing. I speak from experience.

Strategic Investors 49

Strategic Investors Austin Angel Investor Bootstrapping 49

Both Sides of the Table

SEPTEMBER 29, 2009

Huge downturns have a real impact on the revenue line of start-ups and therefore the pressure on valuations. This came in part due to the huge influx of money into VC but also because hedge funds and private equity shops with no VC experience wanted part of the action. While the company continues to perform well it has come at a cost.

Burn Rate 263

Burn Rate Valuation Pre-Money Valuation Private Equity 263

Version One Ventures

FEBRUARY 6, 2019

The cost of bringing a drug to market is expensive (hundreds of millions of dollars to billions of dollars) and risky (it simply might not work!). This aggressive ownership target is one reason more and more founders are looking for capital from IT/tech VCs who don’t demand as much equity.

Dilution 132

Dilution Artificial Inteligence IPO Valuation 132

K9 Ventures

JUNE 12, 2012

You get a situation whether investors are incentivized to put in more money into a company, not only to buy more equity, but also to fund the quick growth. Founders typically get their equity in a company once — at the time of founding and then get diluted with each subsequent round of financing.

Venture Capital 117

Venture Capital Silicon Valley Founder Seed Stage 117

Startup Professionals Musings

OCTOBER 29, 2013

Here are the parameters you should use in sizing your request, and be able to explain in justifying your request to investors: Consider implied ownership cost. Angels might be interested during “early stage” if you have a prototype, but VCs won’t bite until you have a product, customers, and revenue. Investment terms.

Valuation 258

Valuation Early Stage Warrant Common Stock 258

Both Sides of the Table

SEPTEMBER 18, 2014

Revenue multiple? And now I have to explain to team that they’re taking more dilution than they expected if we do a down round. Me: More dilution? There are a million ways to do quick, easy, low-cost rounds with prices. “But lawyers will charge much more for equity.” Try doing THAT with equity.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Berkonomics

MARCH 21, 2019

If you are a going business with a track record of revenues, then the importance of accurate current financial statements cannot be overstated. If there is no record of revenues, see the “The Berkus Method” available with any search query for valuing the business before revenues. Let’s start with the basics.

Hockey Stick 63

Hockey Stick Liquidity Event Valuation Balance Sheet 63

K9 Ventures

JUNE 12, 2012

You get a situation whether investors are incentivized to put in more money into a company, not only to buy more equity, but also to fund the quick growth. Founders typically get their equity in a company once — at the time of founding and then get diluted with each subsequent round of financing.

Venture Capital 105

Venture Capital Silicon Valley Founder Seed Stage 105

Startup Professionals Musings

SEPTEMBER 5, 2016

You don’t have to fight for your equity, and no one can slow you down in decision making. Every startup I know has pivoted at least once, so learning from your mistakes should be a positive experience, rather than a painful error that will cost you credibility. Don’t quit your day job until the revenue is flowing.

Bootstrapping 120

Bootstrapping Entrepreneur Startup Exit Strategy 120

Startup Professionals Musings

SEPTEMBER 19, 2012

Here are the parameters you should use in sizing your request, and be able to explain in justifying your request to investors: Consider implied ownership cost. Angels might be interested during “early stage” if you have a prototype, but VCs won’t bite until you have a product, customers, and revenue. Investment terms.

Valuation 236

Valuation Early Stage Warrant Common Stock 236

Austin Startup

MARCH 23, 2017

To briefly recap: 3/12 : Fred Wilson discussed why he dislikes convertible notes and SAFEs, and how priced equity rounds make more sense at the seed level. 3/20 : danprimack provided detail on Wal-mart/Jet.com’s acquisition of ModCloth, and how substituting (rather than supplementing) debt for equity can cause problems. Atlassian).

Dilution 54

Dilution Equity Warrant Distribution 54

Startup Professionals Musings

MARCH 7, 2015

Angel investors will perk up if you have a prototype or a few real customers, while venture capitalists will likely choose to wait until you have achieved several million in revenue or customer count. Here is where projections of cost, pricing, volumes and cash flow are critical. How much equity ownership are you willing to offer?

Preferred Stock 120

Preferred Stock Exit Strategy Equity Angel Investor 120

Up and Running

DECEMBER 9, 2014

The DIY mentality can really bog you down and become a burden eventually, plus it can really cost you more time and money in the grand scheme of things. I just wanted to break down those two pieces real quick the time side and the cost side. Then the second one here which I eluded to is really all about cost. Two, revenue.

Small Business 95

Small Business Finance Forecast Metrics 95

Both Sides of the Table

APRIL 14, 2012

You are either bought for stock or for equity. Is your crappy little 12-person company really worth they and their shareholders diluting by 2% given more than a decade they’ve put in building one of the Internet’s most solid business social networks? You just said, “nobody would take 1-2% dilution.”

Valuation 316

Valuation Balance Sheet Dilution Term Sheet 316

This is going to be BIG.

MARCH 16, 2020

Some key existings who didn’t want to see their prior money get lost wouldn’t budge on a dilutive financing, despite the fact that they knew where we were headed. If you are a turnaround, bankruptcy or private equity investor and have questions about the sale process, you can e-mail me at charlie@brooklynbridge.vc.

Bankruptcy 95

Bankruptcy Private Equity Seed Stage Dilution 95

Startup Professionals Musings

JULY 8, 2011

Here are the parameters you should use in sizing your request, and be able to explain in justifying your request to investors: Consider implied ownership cost. Angels might be interested during “early stage” if you have a prototype, but VCs won’t bite until you have a product, customers, and revenue. Investment terms.

Entrepreneur 234

Entrepreneur Valuation Early Stage Warrant 234

Austin Startup

NOVEMBER 25, 2018

It was there that I met Eric Simone (one of the first investors in Bazaarvoice) as well as Josh Baer (one of the first investors in Bazaarvoice through his team building our first solution and getting paid primarily in equity versus cash). I failed to do that with Coremetrics and I paid dearly for it with dilution. Too much, really.

Bootstrapping 48

Bootstrapping Austin Equity Cofounder 48

Startup Professionals Musings

JUNE 9, 2010

Here are the parameters you should use in sizing your request, and be able to explain in justifying your request to investors: Consider implied ownership cost. Angels might be interested during “early stage” if you have a prototype, but VCs won’t bite until you have a product, customers, and revenue. Calculate what you need.

Valuation 227

Valuation Early Stage Warrant Common Stock 227

Tim Keane

JANUARY 12, 2010

The investors and the entrepreneurs are – or should be – aware that the price of the company’s equity is set by the market – in simplest terms, what an informed buyer is willing to pay.   Note that this applies only to earl stage Series A-type equity financings and assumes no cash dividends are paid to investors.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Up and Running

APRIL 18, 2013

The biggest advantage of alternative finance is that you can find a product that very specifically matches your company’s need, and the cost of the financing is related to value of the project. For example, you don’t have to raise expensive equity to purchase 3 delivery trucks or a CNC machine. Revenue-based finance.

Small Business 89

Small Business Finance Dilution Equity 89

David Teten

NOVEMBER 17, 2011

In particular, this model is designed to help all team members understand the impact of dilution on their options. It is particularly valuable for founders because it allows them (and their employees) to assess equity compensation in the form of options paid out to founding team members and other key employees.

Employee 155

Employee IRR Startup Mexico 155

Transformify

FEBRUARY 1, 2019

Adjusting or customizing, later on, is likely to result in excessive costs and if not done timely, it may even result in fines and penalties. Your own savings and help from family and friends may be enough to develop an MVP ( a minimum viable product), launch it and start generating revenues. Equity Funding.

Affiliate 49

Affiliate Equity Valuation SEO 49

Both Sides of the Table

APRIL 25, 2011

A great recent example of this was a successful group of entrepreneurs who had created a company that will do $10-12 million in revenue at their system integration business (read: services business) in 2011 after having done $5 million or so in 2010 and $2-3 million in 2009. That is $12 million in profits over 3 years. This is a huge mistake.

Silicon Valley 332

Silicon Valley IP Dividend Finance 332

Venture Chronicles

MAY 26, 2010

Venture math is really simple, if you raise $10 million for a company that is valued at $10 million “pre-money&# then you have sold 50% of the equity to the new investors. Those activities cover the full spectrum and are people powered, and people cost money. If you raise $10m for a company that is valued at $3.5m

Lean 40

Lean Early Stage Valuation Startup 40

Lightspeed Venture Partners

OCTOBER 22, 2012

The company has gotten off to a fast start, $150k in revenue in the first two months, with all the marketing coming from social media. The founders have more demand than they know what to do with, and want to raise $55k for 5% equity in the company to buy a second truck. and costs $1.10 Tanya had invested $75k into the company.

Pre-Money Valuation 101

Pre-Money Valuation Valuation Dilution Differentiation 101

Gust

SEPTEMBER 17, 2014

Revenue multiple? And now I have to explain to team that they’re taking more dilution than they expected if we do a down round. Me: More dilution? There are a million ways to do quick, easy, low-cost rounds with prices. But lawyers will charge much more for equity.” Try doing THAT with equity. Your A round?

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

K9 Ventures

OCTOBER 10, 2017

Yes, the infrastructure is cheap (to start), but the human costs have gone up dramatically. Unless every aspect of product development is covered by founders who are only receiving equity, there are other parts of building a product that will require hiring highly qualified people. Those times are long gone.

Seed Stage 82

Seed Stage Finance Later Stage Equity 82