Both Sides of the Table

SEPTEMBER 18, 2014

At an accelerator … 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. A down round?

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

ReadWriteStart

JUNE 1, 2020

It is going to cost a lot of money just to get the initial batch of products to test the market and would definitely require external funding. If you are facing any problem you can always check out this: Business Loan vs. Equity Financing. You might have seen that valuations of several unicorns were suddenly slashed down.

Startup 150

Startup Elevator Pitch Entrepreneur Seed Stage 150

Berkonomics

MARCH 30, 2010

What most managers miss is that every month cut from the time it takes to perform such tasks cuts the cost by the value of a month’s worth of fixed overhead or burn. It is not a strong bargaining position for the CEO to ask for money to complete a product promised for completion with the previous round of funding.

Silicon Valley 85

Silicon Valley Burn Rate Angel Investor Down Round 85

Lightspeed Venture Partners

OCTOBER 7, 2012

As he said, “Great innovations solve problems or reduce costs. 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. Kevin questioned the use case since bowls are ubiquitous. The company still had $2M in inventory on the books.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

For Entrepreneurs

APRIL 7, 2011

Introduction This post aims to help startup CEOs optimize their funding strategy by examining how investors value startups, and explaining how to avoid the common cash management pitfalls. Note: The concepts in this post will likely be obvious to experienced CEOs and entrepreneurs.

Finance 167

Finance Startup Cost Entrepreneur 167

Both Sides of the Table

FEBRUARY 4, 2016

.” There are a lot of data points that one can observer to get a sense of the venture capital markets – both LP fundings into venture and VC financings of startups. They point to some widely known facts: financings & valuations are up massively over the past 7 years and non-VC money has entered the system.

LP 150

LP Valuation Burn Rate Pre-Money Valuation 150

Gust

SEPTEMBER 17, 2014

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. It’s like we need a finance 101 course for entrepreneurs.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Berkonomics

JUNE 8, 2017

Some businesses require very little capital and the founder can self-finance the enterprise and retain 100% of its ownership and control from ignition through liquidity event (startup through sale). And even with the significant cost of credit card debt, many entrepreneurs aggressively use existing cards to finance a startup.

Private Equity 106

Private Equity Valuation Cap Table Accredited Investor 106

VC Cafe

FEBRUARY 27, 2024

What’s the difference between an angel round and pre-seed round and why do I believe we’ll see more pre-seed rounds taking place in 2024? While the answers are somewhat semantic, the pre-seed funding round is making a comeback in 2024 startup financing. Seed is about showing initial product market fit.

Valuation 186

Valuation Software Review Generative AI Seed Stage 186

Berkonomics

MARCH 28, 2019

This is only a minor problem in that both forms can convert easily into ‘C’ corporations at low cost and little consequence. Also included are “drag-along rights” in which minority shareholders may be forced to obey the vote of the majority in such important votes as to sell the company or take a round of financing at lower share prices.

Limited Liability Company 48

Limited Liability Company Post-Money Valuation Valuation Down Round 48

Both Sides of the Table

FEBRUARY 8, 2016

The smartest companies in the market that I know are working aggressively to lower burn rates through pragmatic cost cutting knowing that the next fund-raising cycle may be unpleasant. I’ve heard enough companies say “we simply can’t cut costs or it will hurt the long-term potential of the business” to get a wry smile.

Burn Rate 150

Burn Rate Cap Table Startup Balance Sheet 150

Both Sides of the Table

SEPTEMBER 27, 2010

What micro VCs need to consider is what happens when several of your companies want to grow and require VC financing? Or when the economy turns downward and they all need financing extensions? My wife worked at Google so while we had good income in Silicon Valley it’s hardly the life of luxury given the costs of housing.

Liquidity Event 308

Liquidity Event Silicon Valley Seed Stage Finance 308

Berkonomics

APRIL 6, 2012

This is only a minor problem in that both forms can convert easily into ‘C’ corporations at low cost and little consequence. Also included are “drag-along rights” in which minority shareholders may be forced to obey the vote of the majority in such important votes as to sell the company or take a round of financing at lower share prices.

Limited Liability Company 79

Limited Liability Company Post-Money Valuation Valuation Down Round 79

Growthink Blog

MAY 23, 2011

The typical wisdom regarding the appropriate financing course for a new company goes as follows: 1. This venture capital financing - usually between $3 and $10 million - is the first of a number of rounds of outside investment over a period of three to five years. There are a lot of dark, hard days.

Angel Investor 112

Angel Investor Venture Capital Sweat Equity Cram Down 112

David Teten

AUGUST 7, 2019

“You could argue that when they were [raising] oversubscribed [VC rounds], Facebook, Google, Amazon, etc., The reverse also holds: a Value investment can become Momentum, and then follow with a down round. If the Founder continues to be weak at follow-on financing, that “value trap” can hinder their continued growth. .

Venture Capital 60

Venture Capital Valuation Stock NDA 60

Berkonomics

JANUARY 20, 2010

Some businesses require very little capital and the founder is able to self-finance the enterprise and retain 100% of its ownership and control from ignition through liquidity event (startup through sale). And even with the significant cost of credit card debt, many entrepreneurs aggressively use existing cards to finance a startup.

Private Equity 69

Private Equity Valuation Cap Table Accredited Investor 69

abovethecrowd.com

APRIL 20, 2016

Why the Unicorn Financing Market Just Became Dangerous…For All Involved. By the first quarter of 2016, the late-stage financing market had changed materially. Investors were becoming nervous and were no longer willing to underwrite new Unicorn-level financings at the drop of a hat. 2015 was the exact opposite.

IPO 40

IPO Term Sheet Valuation Silicon Valley 40

Scalable Startup

OCTOBER 26, 2011

The second round is often for some or all of the following – corporate growth, go to market, turn the prototype into a robust offering, marketing costs, or to hire a sales force. It’s no longer based on a hunch, unless the company is in trouble and needs money to finish what the first round started.

Mezzanine 22

Mezzanine Due Diligence IPO Angel Investor 22

Both Sides of the Table

FEBRUARY 14, 2016

But if you’re a seed investor and you’re worried that the A-round won’t get done if your post-money is too high you suddenly start paying less. Why Financing in Falling Markets is So Damn Difficult. Why Down Rounds are Harder Than You May Think. Down rounds are hard. And so it goes.

Valuation 150

Valuation Down Round Startup Later Stage 150

Both Sides of the Table

MARCH 30, 2016

Like the market, Invoca has learned the importance of pragmatic growth over “growth at all costs” because when markets shift companies that run lean always have more options than those that only have a growth agenda. Great companies get financed.

Balance Sheet 150

Balance Sheet Burn Rate Valuation Forecast 150

Both Sides of the Table

JUNE 5, 2016

In other words, it isn’t that VCs suddenly got smart, it’s that the costs of starting a company went down dramatically. So in companies with high burn rates you can find the following: Seed funds wanting to sell the company / get a return or growth investors pushing for a recap or massive down round. Rise of Angels.

Venture Capital 150

Venture Capital Silicon Valley Burn Rate LP 150

www.quora.com

SEPTEMBER 22, 2011

Even if your company succeeds, there is absolutely no guarantee your equity will not be wiped out in a down round. Even better, executives will negotiate the acquisition price of their company down; in exchange for a larger amount of post-acquisition retentio n equity and accelerated vesting.

Equity 40

Equity Employee Founder Cofounder 40

Both Sides of the Table

OCTOBER 18, 2015

Of course they built protection into many of their financings that allows them downside protection against IPOs if the price is lower than the price they paid. In 2014 3 out of 12 exits were occurred at a lower valuation than the previous round. 25% “down rounds? So eventually rationality has to occur.

IPO 150

IPO Venture Capital LP SEC 150