Both Sides of the Table

OCTOBER 1, 2009

Consumer spending is 70% of the economy and will continue to be stretched – We can look all we want at tech innovation, VC funding cycles and hot M&A deals, but ultimately growth and therefore investment must be underpinned by revenue. Unemployment coupled with a stock market drop will stop this spending cold IMHO.

Technical Review 269

Technical Review Stock Hawaii Early Stage 269

Tim Keane

JANUARY 12, 2010

Term-sheets and Valuations: Thinking about Negotiations.   I’ve sat down with entrepreneurs and a copy of a term sheet guide I like [ “Term Sheets & Valuations - A Line by Line Look at the Intricacies of Venture Capital Term Sheets & Valuations ” by Alex Wilmerding, Aspatore Press.] The Valuation Question.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Startup Professionals Musings

JANUARY 4, 2020

Angel investors will perk up if you have a prototype or a few real customers, while venture capitalists will likely choose to wait until you have achieved several million in revenue or customer count. The average valuation for angel investments is $2 million, which will get you $500,000 for 20 percent of your startup.

Startup 337

Startup Preferred Stock Exit Strategy Equity 337

Both Sides of the Table

SEPTEMBER 29, 2009

They should heed the age old advice that raising slightly more money while you can is always better than trying to optimize future valuations. Should VC’s really be impacted by public market valuations when the money that they’re investing today should be for returns in 7-10 years? Short answer – yes.

Burn Rate 263

Burn Rate Valuation Pre-Money Valuation Private Equity 263

Both Sides of the Table

SEPTEMBER 18, 2014

Revenue multiple? Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. How do you think they’ll feel if your next round is at a $50 million post money valuation and their hard-earned $25,000 is worth 0.05% of your company? People seem concerned about valuation.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Both Sides of the Table

APRIL 14, 2012

Did raising money at a $500 million valuation help secure the $1 billion deal? “it’s smart to use an impending investment valuation to drive a higher acquisition valuation” I would like to amend her statement slightly to read, “it’s smart to use an impending investment valuation to drive an higher acquisition.”

Valuation 316

Valuation Balance Sheet Dilution Term Sheet 316

Both Sides of the Table

SEPTEMBER 28, 2013

So the tech team departed en masse to find the next great stock option scheme to make their big bucks. Sure, our revenue is growing, but is that enough to raise an internal round? Dilution / valuation. I wasn’t expecting this much dilution this quickly.” But we departed on good terms. ” Yes.

Startup 417

Startup Dilution San Diego Stock Options 417

www.avc.com

SEPTEMBER 22, 2011

This is NOT your 409a valuation (we call that "fair value"). This "best value" can be the valuation on the last round of financing. The other important data point is the number of fully diluted shares. The first thing you do is you figure out how valuable your company is (we call this "best value").

Equity 64

Equity Employee CTO Hire Fractional CTO 64

Berkonomics

DECEMBER 6, 2010

Use stock options and warrants to pay for service only rarely. Earlier, I stated that stock options are the currency of early stage business. There are times when services of others are available for stock instead of – or in addition to cash. This truth is obvious when a start-up has no cash.

Stock Options 61

Stock Options Stock Warrant Common Stock 61

Startup Professionals Musings

AUGUST 1, 2016

Getting investors to trust you with their money is always a challenge, and it’s even more difficult in the early stages, where you don’t have a significant revenue stream, a few customers, or maybe even a product yet. Non-credible funding request or unreasonable valuation. Future unproven projections don’t set today’s valuation.

Due Diligence 120

Due Diligence Intellectual Property Preferred Stock Seed Stage 120

Gust

SEPTEMBER 17, 2014

Revenue multiple? Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. How do you think they’ll feel if your next round is at a $50 million post money valuation and their hard-earned $25,000 is worth 0.05% of your company? People seem concerned about valuation.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Berkonomics

DECEMBER 20, 2018

Arthur: The usual royalty revenue sharing funding agreement is for an agreed period – and commences on the generation of revenues by the royalty issuer (company licensing the IP.) That party is only concerned with its royalty revenues and growth – and not profit from or valuation of its business.

IP 54

IP Intellectual Property Investment Bankers Product 54

Berkonomics

DECEMBER 20, 2018

Arthur: The usual royalty revenue sharing funding agreement is for an agreed period – and commences on the generation of revenues by the royalty issuer (company licensing the IP.) That party is only concerned with its royalty revenues and growth – and not profit from or valuation of its business.

IP 48

IP Intellectual Property Investment Bankers Product 48

Startup Professionals Musings

MARCH 7, 2015

Angel investors will perk up if you have a prototype or a few real customers, while venture capitalists will likely choose to wait until you have achieved several million in revenue or customer count. The average valuation for angel investments is $2 million, which will get you $500,000 for 20 percent of your startup.

Preferred Stock 120

Preferred Stock Exit Strategy Equity Angel Investor 120

Venture Chronicles

MAY 26, 2010

At this point it’s all paper valuation because the stock isn’t liquid so achieving an outcome is a function of executing on the business to achieve a next round of funding or selling it. Those activities cover the full spectrum and are people powered, and people cost money.

Lean 40

Lean Early Stage Valuation Startup 40

Both Sides of the Table

APRIL 14, 2010

Liquidation preference is the amount of money that an investor gets paid before the common stock (e.g. It also gets the new investor concerned that management (common stock holders) will not be incentivized because they realize that the investors will take most of the money unless there is a big upside scenario. But pass they will.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Pre-Money Valuation 289

Both Sides of the Table

FEBRUARY 8, 2016

The startup industry may be “resetting,” which doesn’t mean a “crash” but rather just a resetting of valuations, timescales, winners/losers, capital sources and the relative emphasis of growth rates vs. burn rates. We do this in our consumer lives with everything ranging from housing purchases to public stocks.

Burn Rate 150

Burn Rate Cap Table Balance Sheet Valuation 150

Gust

OCTOBER 12, 2011

The agreement contains language providing that, at the Company’s option , the notes may be converted to shares of Common Stock at a predetermined valuation. Entrepreneurs generally prefer #2, provided it’s at a valuation that wouldn’t be absurdly dilutive given the amount of notes outstanding.

Finance 107

Finance Term Sheet Pre-Money Valuation Early Stage 107

Berkonomics

AUGUST 27, 2015

They financed their companies, to the extent possible, in a manner minimizing the cost of capital, planning for organic growth in the number of customers served and in associated revenues. The Flipper’s executives usually have significant equity holdings, either actually owned or reflected in stock options.

Intellectual Property 48

Intellectual Property Balance Sheet Stock Options Valuation 48

Ben's Blog

JULY 16, 2013

You probably thought that valuations would be roughly the same as they were the last time you raised money. Perhaps you are caught in the “Series A crunch” or perhaps you are a consumer company and expected that you would be valued on users rather than revenue like the last time. But they most certainly are not. Things change.

Down Round 78

Down Round Marketing Preferred Stock Post-Money Valuation 78

Up and Running

SEPTEMBER 20, 2021

And as the company grows, it brings on new people and may decide to issue stock options to attract new staff and funding from investors. Furthermore, there are various forms of equity, such as preferred stock, common stock, and convertible notes, which influence the present and potential future investors. Common shares.

Cap Table 112

Cap Table Pre-Money Valuation Stock Options Option Pool 112

Ben's Blog

JULY 16, 2013

You probably thought that valuations would be roughly the same as they were the last time you raised money. Perhaps you are caught in the “Series A crunch” or perhaps you are a consumer company and expected that you would be valued on users rather than revenue like the last time. But they most certainly are not. Things change.

Marketing 46

Marketing Preferred Stock Post-Money Valuation Down Round 46

dondodge.typepad.com

JANUARY 15, 2011

The entrepreneur expects the company to be worth many times this valuation and so does the investor. The key is to have several VCs or investors competing for the deal to arrive at a "fair" valuation. So they will give you a pre-money valuation somewhere around the amount you raise. How much money should I take?

Equity 40

Equity Employee Dilution Valuation 40

www.paulgraham.com

APRIL 28, 2010

A lawyer I asked about it said: When the company goes public, the SEC will carefully study all prior issuances of stock by the company and demand that it take immediate action to cure any past violations of securities laws. There never has to be atime when you have no revenues. Another concept we need to introduce now is valuation.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

Both Sides of the Table

FEBRUARY 25, 2010

million at a $15 million pre-money valuation. But we weren’t optimizing for dilution – we were building a $1 billion+ company and we wanted the runway to succeed. Morgan Stanley had proposed a higher valuation to let them in. million at a $15 million pre-money valuation. We ended up agreeing a term sheet for $16.5

Technical Review 301

Technical Review Term Sheet Due Diligence Venture Capital 301

www.startupnorth.ca

OCTOBER 23, 2010

I would assume that they are very similar but given the lower valuations and this may change the salary/options mix. and then further dilute for advisors (0.5% – 1% – 2%) and early employees (5 – 15% *if* they are foregoing major chunks of salary). Lead Engineer 0.5 – 1 5+ years experience Engineer 0.33 – 0.66

Employee 41

Employee Founder Salary Equity 41

www.paulgraham.com

OCTOBER 23, 2010

The way to getrich from a startup is to maximize the companys chances of succeeding,not to maximize the amount of stock you retain. The problem is, for the company to exist, you have todecide who the founders are, and how much stock they each have. They get the same kind of stock and get diluted the same amount in futurerounds.

Startup 105

Startup Cofounder Software Stock 105

abovethecrowd.com

APRIL 20, 2016

One key to this population growth has been the remarkable ease of the Unicorn fundraising process: Pick a new valuation well above your last one, put together a presentation deck, solicit offers, and watch the hundreds of million of dollars flow into your bank account. The same thing happened to many Internet stocks.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Startup Professionals Musings

OCTOBER 29, 2013

If your company is early stage and has a valuation under $1M, don’t ask for a $5M investment. If your valuation is around $1M, you can validly ask for $200K-$300K, and offer 20%-30% of your company in exchange. The investor would be buying your company five times over, and he doesn’t want it. Type of investor.

Valuation 258

Valuation Early Stage Warrant Common Stock 258

Startup Professionals Musings

SEPTEMBER 19, 2012

If your company is early stage and has a valuation under $1M, don’t ask for a $5M investment. If your valuation is around $1M, you can validly ask for $200K-$300K, and offer 20%-30% of your company in exchange. The investor would be buying your company five times over, and he doesn’t want it. Type of investor.

Valuation 236

Valuation Early Stage Warrant Common Stock 236

Both Sides of the Table

FEBRUARY 14, 2016

I have been talking about my concerns about valuations for the past couple of years because, well, they’ve been rising very rapidly the past two years! ” “Mark has a vested interest in talking down valuations of startups.” Do Investors WANT Valuations to Drop? The Motive for Speaking Up. Mostly, no.

Valuation 150

Valuation Down Round Startup Later Stage 150

Both Sides of the Table

MARCH 30, 2016

Investors had grown too used to the idea that any deal you funded would get marked up to a higher valuation in the next round and that’s clearly not always true. Investors had grown too used to the idea that any deal you funded would get marked up to a higher valuation in the next round and that’s clearly not always true.

Balance Sheet 150

Balance Sheet Burn Rate Valuation Forecast 150

Startup Professionals Musings

JULY 8, 2011

If your company is early stage and has a valuation under $1M, don’t ask for a $5M investment. If your valuation is around $1M, you can validly ask for $200K-$300K, and offer 20%-30% of your company in exchange. The investor would be buying your company five times over, and he doesn’t want it. Type of investor.

Entrepreneur 234

Entrepreneur Valuation Early Stage Warrant 234

NZ Entrepreneur

JULY 8, 2019

I made my first investment in the stock market when I was 12 years old. Soon after that first investment, I started my first business, and am now on my fifth (all $1m+ in revenue, but not all ‘successful’). Valuations. This often carries the double whammy of dilution. I killed it, everyone did.

New Zealand 42

New Zealand Entrepreneur Valuation Dilution 42

Startup Professionals Musings

JUNE 9, 2010

If your company is early stage and has a valuation under $1M, don’t ask for a $5M investment. If your valuation is around $1M, you can validly ask for $200K-$300K, and offer 20%-30% of your company in exchange. The investor would be buying your company five times over, and he doesn’t want it. Type of investor. Calculate what you need.

Valuation 227

Valuation Early Stage Warrant Common Stock 227

discuss.joelonsoftware.com

NOVEMBER 1, 2010

I dont control the companys valuation: if for example the company is privately-held, then the value of equity might be complicated and outside my control (you can dilute equity, reinvest any revenue instead of paying it in dividends, etc., An employee is normally paid a salary or wages.

Sweat Equity 40

Sweat Equity Equity Angel Investor Affiliate 40

www.paulgraham.com

OCTOBER 23, 2010

And those who do raiseVC rounds will be able to get higher valuations when they do. Ifthe best startups get 10x higher valuations when they raise seriesA rounds, that would cut VCs returns from winners at least tenfold. [ A typical big angel round might be $600k on a convertible note witha valuation cap of $4 million premoney.

Valuation 92

Valuation Stock Partner Founder 92