When Should Startup Founders Discuss Valuation with Seed VCs?

View from Seed

On the positive side for a founder, directly stating a high valuation expectation up front can anchor the negotiations to a higher level, assuming that an investor takes the leap of faith to invest. And as my partner Rob Go likes to say, “Time kills all deals.”).

Startup Blog: Take a Stand!

Taffy Williams

It may be around deal structure, testing or design of product, new hires, downsizing or firing, how much to spend on a program or some other issue. The deal terms are ones you as the CEO, entrepreneur, or employee know will cause great stress and even the possible demise of the company.

Trending Sources

How VCs Think About Adding New Partners

Both Sides of the Table

Wonderful human being who is civically engaged, mother of 3, mentorer of younger founders, hard worker and arguer extraordinaire (so says her current Twitter bio). In Kara’s case I got to see her work on deal structuring first hand having worked closely with her on her board at P.S. XO.

Your (Potential) Investor's Business Model

David Lee

I believe that this is important for founders to remember as they raise money. Different business models lead to different approaches to valuation, deal structure and diligence process. Talk to other founders who have worked with them. In each case, the valuation discussion, deal structure and process will all vary accordingly “[O]ne thing I should tell you is that our approach is our approach, and we don’t even claim it’s the right approach.”

My First Investment

A VC : Venture Capital and Technology

They had negotiated a deal to purchase an editor called BRIEF and a version control package whose name escapes me (might have been VCS?) So I negotiated a deal to invest the funds into the company for a revenue share on the sale of both products plus a warrant to buy stock in SDC. So we were faced with a quandry, take back the products, which we could do by contract, or restructure the deal. That deal taught me a few big lessons.

Keep Term Sheets Simple for Quicker Cash to Spend

Startup Professionals Musings

Remember a term sheet agreement is not a deal until the check clears. It’s true that Angel investors typically do not present entrepreneurs with overly complicated deal structures, especially when compared to venture capitalists.

Who Invests In Investors: Homebrew LP Shares VC Performance Goals, Importance of Diversity & What They Look For In New Funds

Hunter Walker

Similarly, a GP might be in the middle of great flow, but we need to have conviction that they can identify the right deals, structure creatively, and negotiate effectively.

LP 38

Startup Business Development Strategies: 7 Tips For Putting.

Seed Stage Capital

skip to main | skip to sidebar 24 January 2010 Startup Business Development Strategies: 7 Tips For Putting Together Stellar Deals Business development is fun. A few tips for startups doing deals: 1. Introduce competition into every deal. Be operationally ready to do a deal.

Acquisitions Aren't About the Money

Inc Startups

When PopCap was being sold, we spoke to multiple potential acquirers, and in the end were extremely fortunate to get a great deal from a great partner. ” We'd spend countless hours talking with the other company about growth, numbers, and deal structure.

That convert you raised last year is a part of your cap table

Seth Levine's VC Adventure

When it comes to convertible debt, I’ve had a few instances recently where “out of sight, out of mind” has created some misunderstandings around deal structures. Of course many entrepreneurs naturally focus on the main tab of their cap table spreadsheet that shows ownership by founder, investor, etc and for them this is the starting point of negotiating a round.

Knowledge Is Power: Convertible Note Financing Terms, Part II

Gust

In this installment, I’ll dig into the “how” by dissecting an example term sheet based on a real deal. A term sheet keeps things relatively straightforward by summarizing the most significant deal terms in outline form, whereas the deal documents themselves (often referred to as definitive agreements ) — even for a relatively simple convertible debt financing — inevitably contain some densely written legalese. These deal terms are simple but significant.

10 Tips for Startups Raising Money from Angels

VC Cafe

Management team that sounds and looks like they can execute the plan – if you didn’t finish building the team yet, make sure you have at least one co-founder with complementary skills. Deal structure – I could write a full post just on this, but some aspects that were brought up are the need to agree on a reasonable valuation, what investment vehicles are used (convertible debt vs stock, options and warrants and other non-dilutive mechanisms).

That convert you raised last year is a part of your cap table

Seth Levine's VC Adventure

When it comes to convertible debt, I’ve had a few instances recently where “out of sight, out of mind” has created some misunderstandings around deal structures. Of course many entrepreneurs naturally focus on the main tab of their cap table spreadsheet that shows ownership by founder, investor, etc and for them this is the starting point of negotiating a round.

SeedRuption

charliecrystle.com

If I'm a hot deal in NY or SOMA, maybe I can raise and close an angel round in a few weeks. So, context matters to deal structure. So maybe the guidance for deal docs should be this: Convertible Debt: for founders who need a rolling close so the cash can come in as it's raised. Equity (priced round): for founders and investors who have the luxury of pulling things off relatively quickly I hate that title, but it's Saturday night and I'm feeling saucy.

How to value your company for sale (Part 2)

A Smart Bear: Startups and Marketing for Geeks

Remember how the buyer has his own way of valuing the deal ? You’re skipping a step — trying to decide if the deal is even plausible — but how can you decide that if all you’re doing is thinking about the other side? Do you prefer Deal B?

Walker Twitter Highlights: August 11th – 21st

Scott Edward Walker

p2Pkk0 cc: @jack “One by one, all the things founders dislike about raising money are going to get eliminated.” prAYlf Quora-Related Quora: What deal structure should be in place for a friend/family investment of < 20k in your startup? Twitter Highlights bubble data founders Paul Graham raising money redemption rights silicon valley startup VCs Warren Buffett

Should You Sell Your Business? 7 Things to Consider

Inc Startups

Prior to the process, my business partner and I wrote down the criteria for the deal that we would accept. In the last few weeks of the deal, we were ready to back out because of a change in the deal structure. I went through with the deal, but the timing wasn''t right.

Piercing the Corporate Veil of Sweat Equity

grasshopperherder.com

« Thanks but No Thanks – Things to Avoid When Recruiting Co-founders Why is Cyber Squatter a Bad Word? Some have been as co-founder, most have been as a consultant with the possibility of becoming an paid employee, “as soon as we close our funding round.”

Knowing When It’s Time To Sell Your Startup

YoungUpstarts

The founders sold the two year old company to eBay in 2005 for $2.6 This deal-of-the-day service was founded in November 2008 and quickly became a sensation. The deal closed only four months later in August of 2012.

Startup Blog: 7 Questions You May Get from Potential Investors

Taffy Williams

Many founders have eventually been replaced by investors or the board at some point in the development of the company. This can happen based on a great deal with a partner, positive data from proof-of-concept, a major advancement in development, or other such value creating events.

in search of.the ideal term sheet

Seed Stage Capital

A 3x liquidation preference, for example, means the VC gets to take out 3 times his/her initial investment before founders and employees get anything. So if you raise $10 million at a 3x liquidation preference and then sell for $25 million, founders and emplyees get nothing.

Clean Deal Terms

David Lee

Sam Altman has a nice post here on a founder-friendly term sheet. He said one thing there that I agree with 100%, among others: I have an allergic reaction to complex deal structures, as they invariably end up with all sorts of unintended consequences. Lately I’ve seen more complex “deal terms” in early stage financings. Namely, the super pro-rata can act as an effective blocking right to some subsequent deals.

Knowledge Is Power: Convertible Note Financing Terms, Part V

Gust

As we conclude our convertible note financing series, there are assorted terms commonly seen in term sheets and deal documents that are worth touching on briefly. This is the norm for West Coast deals, but it’s often the case in dealing with East Coast investors (more commonly for VC financing rounds rather than angel seed rounds) that the lead investor wants its lawyers to draft the documents.

A Primer on Angel Investment ‘Simple Term Sheets’

Startup Professionals Musings

Remember a term sheet agreement is not a deal until the check clears. It’s true that angel investors typically do not present entrepreneurs with overly complicated deal structures, especially when compared to venture capitalists.

Knowledge Is Power: Convertible Note Financing Terms, Part IV

Gust

To account for scenarios in which the startup is acquired before it has a chance to complete a priced equity financing round, most term sheets and deal documents contain a “ change in control ” provision. In descending order of preference from the founders’ point of view: 1. Having covered just about every path a convertible note can take, we’ll finish up the series by looking at a few miscellaneous term sheet items and revisiting the pros and cons of different deal structures.

Should You Co-Found Your Company With a Software Development Shop (2 of 2)?

David Teten

I’ve been looking for suggestions for an initial deal structure that is appropriate for the theoretical case of a trusted dev shop putting in $100k in market-value of services over a 6 month period in time. What are the terms of their relationship with the founder?

The Corrosive Downside of Acquihires

Inc Startups

I''m supposed to believe that my best innovation can only come from scores of startup founders who just made millions and have now become CVOs at my company? Mark, doesn''t the acquiring company mostly care about the super innovative founders?

The downside of high valuations

StartupCFO

When it comes to deal structuring, the higher you push the valuation, the more “protections&# investors will build in. As I was looking through Fenwick & West’s Q3 Silicon Valley VC survey , there are clear signs that these protections are making their way into the deals that are getting done: - 20% of deals had multiple liquidation preferences. 53% of deals had participating prefs.

You Think It's About the Money. It's Not About the Money.

Inc Startups

When PopCap was being sold, we spoke to multiple potential acquirers, and in the end were extremely fortunate to get a great deal from a great partner. ” We'd spend countless hours talking with the other company about growth, numbers, and deal structure.