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Why Startups Should Raise Money at the Top End of Normal

Both Sides of the Table

Early-stage investors in technology startups are only looking for growth-oriented companies that can achieve an “exit&# someday – either via selling your company to a larger company or via an IPO. So rounds tend to be “range bound&# where the top end of the valuation spectrum often being done in boom markets (i.e.

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Bad Notes on Venture Capital

Both Sides of the Table

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? A down round? Lawyers don’t make money on your seed round in any instance. They are investing in your relationship in hopes that you do an A, B and C round.

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Small Investors

ithacaVC

If FFAs only invest at the beginning and do not make any follow on investments as the company raises more $$ then the only real way FFAs make money when the company is ultimately sold is if the company keeps raising future rounds at higher and higher valuations (and IPO exit may provide upside if the stock price increases over time after the IPO).

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Bad Notes on VC

Gust

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? A down round? Lawyers don’t make money on your seed round in any instance. They are investing in your relationship in hopes that you do an A, B and C round.

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Using warrants to pump up your VC valuation

www.mattbartus.com

If you are a company that is fundraising, keep in mind that there are a few different levers you can pull to change the amount of dilution that the founders will experience. Let’s say you receive a term sheet for a $1 million investment at a $3 million fully diluted pre-money valuation, and you’re kind of disappointed.

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On the Road to Recap:

abovethecrowd.com

The pressures of lofty paper valuations, massive burn rates (and the subsequent need for more cash), and unprecedented low levels of IPOs and M&A, have created a complex and unique circumstance which many Unicorn CEOs and investors are ill-prepared to navigate. In Q1 of 2016 there were zero VC-backed technology IPOs.

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How to Fund a Startup

www.paulgraham.com

In an IPO, it might not merely addexpense, but change the outcome. Those remedial actions can delay, stall or even kill the IPO. Of course the odds of any given startup doing an IPO are small.But not as small as they might seem. Whatkind of anti-dilution protection do they want? They just want to invest in this startup.