Both Sides of the Table

JUNE 5, 2011

2 preamble issues having read the comments on TC today: 1: I know that the prices of startup companies is much great in Silicon Valley than in smaller towns / less tech focused areas in the US and the US prices higher than many foreign markets. That’s the deal you get when you’re raising in a good market for startup financing.

Pre-Money Valuation 336

Pre-Money Valuation Valuation Silicon Valley Stock 336

View from Seed

OCTOBER 28, 2019

But this financing contour description is just a proxy for underlying business metrics. In reality, a pre-seed is “an early round of financing that is designed to help a company achieve certain intermediate milestones PRIOR to the magic combination of strong PMF + meaningful traction.”.

Seed Stage 247

Seed Stage Finance Dilution Early Stage 247

Both Sides of the Table

OCTOBER 12, 2014

All the confusion you hear from friends or read in the press is related to this nuance that early investors demand prorata rights and sometimes fight like hell to maintain them (Facebook problem) and sometimes prefer not to take them (overvalued company that they perceive isn’t doing as well as new investors coming in think).

Technical Review 336

Technical Review Later Stage Early Stage LP 336

Genuine VC

JULY 19, 2010

I think that the number of players in this devloping class of what I’d call “Micro VCs” will continue to increase over the coming years: the model fits into an opportunity on the capital supply side, as well as more importantly becomes the right product for many entrepreneurs on the demand side. Structural.

Seed Stage 175

Seed Stage Technical Review Dilution Offshore 175

View from Seed

JULY 15, 2020

These companies are probably burning a lot of cash, seeing headwinds in demand, and have funding needs that are substantial. Many of these companies are probably valued at their last financing round, which probably occurred in a very frothy funding environment. I think every investor has some of these.

Portfolio 215

Portfolio IRR Dilution Distribution 215

David Teten

JANUARY 19, 2021

More and more startups are pursuing Revenue-Based VCs , but “RBI” doesn’t fit everyone. From RBI, Flexible VCs borrow the ability to reap meaningful returns without demanding founders build for an exit. Santa Clara University shares their demand dividend structure. . Where else can fast-growing companies get funding?

Cofounder 78

Cofounder Technical Review Equity Dividend 78

Startup Professionals Musings

SEPTEMBER 5, 2016

In my experience as an advisor to aspiring entrepreneurs, I often encounter the myth that an initial startup requires investors. Outside funding is not a startup entitlement. Flaws in a business plan are often masked by money, but ultimately will kill any startup. Startups need to stay nimble and adapt to change.

Bootstrapping 120

Bootstrapping Entrepreneur Startup Exit Strategy 120

Feld Thoughts

MARCH 24, 2017

Foundry Group is best known for our investments in startups, but our vehicle currently investing in other venture funds, Foundry Group Next, is off to what we believe to be a great start and I wanted to share an update about it by talking about our new investment in a fund managed by Founder Collective.

Founder 75

Founder LP Technical Review Seed Stage 75

Both Sides of the Table

OCTOBER 7, 2014

5 million was always the classic definition of an A-round between the late nineties (crazy financings aside) and say 2007. If you want a great primer on how the VC and startup funding scene changed here’s a great primer. Startup Lessons' Why the latter? If you''re newer to VC math here''s a great primer].

Cap Table 399

Cap Table Silicon Valley Term Sheet Finance 399

The Next Web

FEBRUARY 27, 2014

George Deeb is the Managing Partner at Chicago-based Red Rocket Ventures , a startup consulting and financial advisory firm based in Chicago. This is typically in conjunction with an upcoming financing or pending takeover offer. Supply and demand. You can follow George on Twitter at @georgedeeb and @RedRocketVC.

Valuation 167

Valuation Forecast Seed Stage .Net 167

Berkonomics

FEBRUARY 21, 2019

First, few startups can use that much money today with all the virtual services available and increasingly inexpensive methods of development, prototyping and marketing. Third (if you’re keeping score), it is not wise to dilute the founder’s ownership greatly in the first round of financing. Four reasons you should reconsider.

Dilution 48

Dilution Retention Valuation Startup 48

Tim Keane

JANUARY 12, 2010

Startups and angels: Along the way to success. For angel groups, the distinction between groups and VCs on this issue is dwindling, especially as angel groups do bigger rounds of financing.   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

MAY 27, 2014

You may think that when someone offers you money to fund your startup, you should find a way to take their money. Is this the investor’s first time investing in a company that needs to raise multiple rounds of financing (if you are in fact doing so)? Every time an investment is made, everyone dilutes!). Major red flag!).

Angel Investor 119

Angel Investor Dilution Accredited Investor Due Diligence 119

Gust

OCTOBER 21, 2011

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. Suppose the notes converted as if the acquisition were an eligible financing round.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Gust

OCTOBER 12, 2011

Last week , we took the plunge and began dissecting an example term sheet for a convertible debt financing round piece by piece. In Part II, we looked at the mandatory conversion language that is at the heart of any convertible debt financing. Same, except at the option of the noteholders (per the term sheet example above).

Finance 107

Finance Term Sheet Pre-Money Valuation Early Stage 107

Both Sides of the Table

SEPTEMBER 25, 2011

All it says is that the VC has the right (but not obligation) to invest his/her proportional ownership in the next round of financing. So if you’re raising $10 million and only want to face 20% dilution and that’s the threshold for a new investor, you’re going to see tension. Why would this happen? You allowed it.

Entrepreneur 310

Entrepreneur Dilution Finance Silicon Valley 310

rapidrollout.wordpress.com

JANUARY 15, 2011

Web Startup Lessons Advice from a CTO and Entrepreneur Home About Startup Advice: When to Use a Consulting CTO There are not many to be found. He or she might call himself a “consulting CTO,&# “freelance CTO,&# “on-demand CTO,&# “CTO on call,&# “CTO for hire,&# or just a “technology strategy advisor.&#

Fractional CTO 40

Fractional CTO CTO CTO Hire Fractional VPE 40

Both Sides of the Table

APRIL 25, 2011

It’s nearly impossible to get a services company financed by VCs. They have created two internal technology “products&# and wanted to figure out how they could turn their services business into a product business that could be financed. You’re a small fish. This team is talented. They wanted advice.

Silicon Valley 332

Silicon Valley IP Dividend Finance 332

Up and Running

APRIL 24, 2018

As the healthcare industry continues to adopt digital technology, the number of healthcare startups is also growing. Here are seven factors that you must take into account to build a successful health startup and keep it afloat forever. In fact, startups have to stay one step ahead of the changing market conditions.

SBIR 73

SBIR Startup Artificial Inteligence Intellectual Property 73

The Startup Lawyer

JUNE 9, 2010

A startup’s Series A financing shouldn’t be a large liquidity event or salary payday for the startup’s founders. While a startup typically receives millions of dollars in a Series A, if too much of that $$$ flows guaranteed to the founders, various incentives get out of whack. Case Study.

Salary 99

Salary Term Sheet Liquidation Preference Liquidity Event 99

Both Sides of the Table

SEPTEMBER 5, 2012

Was Paul Graham right in his “high resolution” financing post? When convertible debt first started being introduced as a “faster, cheaper way to get startups funded” they didn’t have pricing built into them. It has nowhere near the same dilutive effects as a full ratchet except in extreme edge cases.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

Gust

OCTOBER 8, 2014

Cautionary note: No competent VC is actually fooled when you show up after raising $6M in seed financing and say you’re now raising an A! 5 million was always the classic definition of an A-round between the late nineties (crazy financings aside) and say 2007. It’s hard building a startup. Why the latter?

Cap Table 136

Cap Table Silicon Valley Term Sheet Non-Compete 136

Berkonomics

FEBRUARY 24, 2012

First, few startups can use that much money today with all of the virtual services available and increasingly inexpensive methods of development, prototyping and marketing. Third (if you’re keeping score), it is not wise to dilute the founder’s ownership greatly in the first round of financing. Email readers, continue here.]

Dilution 72

Dilution Retention Valuation Equity 72

K9 Ventures

OCTOBER 10, 2017

This post is intended to be a dynamic document, and I will attempt to update it from time to time with new questions that may arise or as financing trends evolve. Q: What amount of financing is considered Pre-Seed? It’s a legitimate stage of financing in the venture eco-system as of this writing (October 2017).

Seed Stage 82

Seed Stage Finance Later Stage Equity 82

David Teten

JANUARY 21, 2021

VI: Revenue-based financing: The next step for private equity and early-stage investment. This is a summary of: Revenue-Based financing: State of the Industry 2020. —– Greater Colorado Venture Fund (GCVF) is a $17M seed fund that invests in high growth startups in rural Colorado using equity and Flexible VC structuring.

Equity 78

Equity Revenue Cofounder Colorado 78

Pascal's View

OCTOBER 9, 2013

This video focuses on four of those fundamental risks: ( 1) A startup’s high probability of failure; (2) The mathematics of dilution; (3) The tendency to misunderstand a company’s stage of development and, therefore, its capital needs; (4) Understanding the risks associated with investing good money after bad and knowing when to call it quits.

Angel Investor 28

Angel Investor Video Dilution Venture Capital 28

Scott Edward Walker

JULY 27, 2011

There are, however, certain formal procedural requirements that the stockholder must comply with, including making a written demand upon the corporation, “under oath” and stating a “proper purpose.” The board can either accept or reject the demand. Moreover, there are certain tricky evidentiary issues.

Delaware 49

Delaware Liquidation Preference Redemption Los Angeles 49

Both Sides of the Table

MARCH 11, 2011

Too many entrepreneurs focus on dilution. But over-optimizing for dilution is a bad attribute relative to focusing on creating a big & winning company. When he tells his stories from the 1990′s your realize that he was probably the original “lean startup.&# domain from the tiny island of Tuvalu.

Product 350

Product Tuvalu Dilution Incubator 350

Startup Company Lawyer

JANUARY 11, 2010

I seem to be doing a lot of pre-Series A convertible bridge note financings these days. 50%) or warrant coverage are typically more company-favorable than a Series A financing where a valuation is set. Similarly, if the company was sold for $100M before another round of financing, the investor would receive 10%, or $10M.

Angel Investor 39

Angel Investor Valuation Bridge Financing Preferred Stock 39

maplebutter.com

JANUARY 8, 2013

189 Answers To The Top Startup Questions On Your Mind. 189 Answers To The Top Startup Questions On Your Mind. Written By Dan Martell on February 2nd, 2012 | Category: Hiring LeanStartup Marketing Metrics Startup Life | 6 Comments. I love startups. Here’s my high-level approach for startups. No, I have many ideas.

Technical Review 44

Technical Review Startup Cofounder Software Review 44

K9 Ventures

NOVEMBER 21, 2011

Let’s say you’re the founder (I use a solo-founder in my example to keep things simple, but this could just as well apply to a founding team) of a startup called Blood, Sweat and Tears, Inc. They want to keep the founders “all-in” in the startup, because they feel that otherwise the founders won’t be motivated enough.

Founder 87

Founder Common Stock Preferred Stock Stock 87

K9 Ventures

NOVEMBER 21, 2011

Let’s say you’re the founder (I use a solo-founder in my example to keep things simple, but this could just as well apply to a founding team) of a startup called Blood, Sweat and Tears, Inc. They want to keep the founders “all-in” in the startup, because they feel that otherwise the founders won’t be motivated enough.

Founder 84

Founder Common Stock Preferred Stock Stock 84

Professor VC

JULY 25, 2013

Startup outcomes tend to be very binary. The seed round had participation from two venture firms that were committed to doing their pro-rata and seed round was done with a very clean term sheet (1x preference, non participating, no anti-dilution). Angel Investors Silicon Valley term sheets venture financing venture capital'

Term Sheet 46

Term Sheet Silicon Valley Syndicate Syndication 46

Both Sides of the Table

FEBRUARY 14, 2016

” “Mark has a vested interest in talking down valuations of startups.” Most prefer not to say this publicly for two reasons: 1) they have an entire portfolio of startups, many of whom are raising capital and 2) they prefer not to be attacked publicly or seem “anti entrepreneur.” goes into a startup.

Valuation 150

Valuation Down Round Startup Later Stage 150

Hunter Walker

SEPTEMBER 5, 2021

Startup CEOs Should Test Strength of Cap Table Every ~6 Months To Know Where They Stand. As a venture fund I might have a strategy which says “for every dollar I invest into companies, I will hold one dollar in reserve for additional financings.” Instead my recommendation is to ask every ~6 months or so in-between financings.

Cap Table 94

Cap Table Seed Stage Syndicate Syndication 94

abovethecrowd.com

APRIL 20, 2016

Why the Unicorn Financing Market Just Became Dangerous…For All Involved. In February of last year, Fortune magazine writers Erin Griffith and Dan Primack declared 2015 “ The Age of the Unicorns ” noting — “Fortune counts more than 80 startups that have been valued at $1 billion or more by venture capitalists.”

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Both Sides of the Table

FEBRUARY 22, 2011

Here’s the problem: Let’s say you have 5 VCs (plus angels but let’s ignore that for now) and each one owns 5% so you took 25% dilution to get the round done. Either that or there is something other than a financial motivator involved – NO VC is looking to build a business off of 5% ownership in startups.

Dilution 314

Dilution Cap Table Due Diligence Option Pool 314