We expect there to be an increase in down rounds, flat rounds, inside rounds and various pay-to-play scenarios. These companies shut down. These shut downs are likely to happen when companies are funded solely by seed funds and angel investors that have not reserved significant capital for follow-on investments. A 5% equity stake could get cut down to 1%. Every single one of them had either a flat, down, or inside round during their history. MORE

Last week we started the blog series (written by Roger Glovsky), How to Wind Down Your Company. This week we tackle the hardest problem of all: deciding when to shut down your company. The last thing an entrepreneur wants to do is to shut down his or her dream. So, how do you make the decision to shut down your company? When do you decide to shut down your company? Shutting down a business is really a process, not a decision. Tags: Wind Downs MORE

recapping, taking out early investors, letting founders take money off the table, wash-outs or cram downs, etc.), A trade taught to the young by those with more experience, and passed down over the years. MORE

"  The problem has been that too-high valuations and too generous terms have spawned painful down rounds that squash the entrepreneur and his early investors.    New money, usually VC money, comes in and crams down those early investors and takes substantial shares from the entrepreneur.    New money, usually VC money, comes in and crams down those early investors and takes substantial shares from the entrepreneur.  MORE

Cram Down : When a new funding round is done at a lower valuation than the previous one, meaning the original investors (or Founders) end up with a much smaller percentage ownership. In his fabulous Thinking, Fast and Slow , Daniel Kahneman clarifies a distinction about the learnability of environments. Where can you be an expert, and where is it impossible? Kahneman de-mythologizes the idea of intuition by linking it to memory and learnability. MORE

This combo all too often leads to various forms of deal unpleasantness, like cram-down rounds, liquidation preferences, and change of control provisions, which in turn, often lead to unhappy founders and angel investors even in somewhat successful exits. The typical wisdom regarding the appropriate financing course for a new company goes as follows: 1. MORE

Terms like “cram-down” or “down-round” originated from such events over the last 10 years or so. Clearly, this form of dilution harmed those not participating because of the down-rounds. What is the dollar value of your ownership in the company? MORE

Performance means follow-on round of funding without cramming down founders :) (Dave? Last year it was fun to make predictions for 2012. Reading back on them, it strikes me what was on my mind that day--mobile phones and service because I was ditching ATT and wanted to try Android for the first time, startups, and venture capital. MORE

But overall, I think there is one major issue at work, and it does come down to the culture and high-brow intellectualism of this market. Angels don’t want to look stupid by having the large number of losses required to catch winners, or get crammed down by VCs investing big dollars ahead of them. VC’s don’t want to look stupid by investing in things too early, or trying to use capital as a weapon only to go down in flames. MORE

And a lot will shut down because they didn't focus on revenue. Performance means follow-on round of funding without cramming down founders :) Go read Fred's post and the comments--good stuff Fred has a great post on following through with your promises. The context is important to note as well--a ton of startups raised seed rounds from angels over the past 18 months. Some of them have or will raise a follow-on round from the angels; fewer will raise a formal venture round. MORE

They chose the name First Round Capital because they thought capital would be deployed most efficiently at smaller seed stage rounds considering the cost to build an internet business had come down drastically. If you read this blog often you'll know that I'm a huge fan of First Round Capital. MORE

Performance means follow-on round of funding without cramming down founders :) I'll finally ship Jawaya, rename it, and get some decent traction, and I will close a seed round by May. Hey, everybody's doing it, why not me? What follows is absolutely armchair conjecture. Android 4.0 will roll out more slowly than expected, and only the wealthy and technorati will be able to enjoy it. The Nexus is $299 with a contract, only on Verizon. MORE

In times when venture capital is hard to get, investors extract high costs for failure (down-rounds, cram downs , new management teams, shut down the company.) MORE

Most likely you will experience a “CRAM DOWN ROUND&# if you get money at all. They do not like the Down Rounds. Startup Blog Steps to consider to start and grow a company. Basics are provided to help entrepreneurs. MORE

Getting Crammed Down. If a), you reduce the cram-down risk, but also reduce the fund’s upside because you own less of your portfolio companies to begin with. I think it’s sometimes a good exercise for companies to take a step back and think about the big external threats to their businesses. This forces some level of intellectual honestly about one’s position in the market, and can push you to try to see around corners and respond. MORE

Average deal premiums in the software sector this year are 27% over the target stock price one week before announcement, down from 43% during full-year 2009, which saw the highest average deal premiums since full year 2001 and the tail-end of the tech boom. MORE

The single most important ingredient of success is not the idea, but having a team in place that has impeccable integrity, can iterate the product quickly, pivot the business model as necessary, and keep costs down in the process. People with money to invest have choices. MORE

That means writing down and signing the terms of the agreement, after making sure everyone understands them. New money from professional investors sees lesser value in old money, so the equity of early investors is “crammed down” and often lost in the scale-up surge. MORE

The mainstream didn't believe it, and the press was skeptical, but it was easy to see that costs would come down, experiences would improve, and there would be more software to serve needs. And now tablets--attempted before but failing because of the insistence of OS vendors to put a PC OS in the form factor, when Jobs said no, let's augment the phone instead of cramming down a Mac OS into a tablet form factor. MORE

a) doing what is effectively a down round preemptively when I don’t have to, by underpricing my current round in this market vs. b) accepting the market price along with some risk of taking a down round in the future, if I don’t hit my milestones, why would I ever choose b)?” MORE

That means writing down and signing the terms of the agreement, after making sure everyone understands them. New money from professional investors sees lesser value in old money, so the equity of early investors is “crammed down” and often lost in the scale-up surge. MORE

Sometimes you’ll see that the lifetime value of your customers has gone way down because now you’re doing volume you’ve harvested all your ‘ideal’ early adopters. With the lower evaluation, all the initial investors and the founders will be crammed down and lose a good portion of their equity. MORE

That means writing down and signing the terms of the agreement, after making sure everyone understands them. New money from professional investors sees lesser value in old money, so the equity of early investors is “crammed down” and often lost in the scale-up surge. MORE