Both Sides of the Table

SEPTEMBER 28, 2014

So if your costs are $500,000 per month and you have $350,000 per month in revenue then your net burn (500-350) is equal to $150,000. But those of us with longer memories remember that the revenue line can move south very quickly when the market overall turns south. Gross burn is the total amount of money you are spending per month.

Burn Rate 383

Burn Rate Balance Sheet .Net Valuation 383

SoCal CTO

SEPTEMBER 27, 2011

If the company's valuation is $2 million, $90k is 4.5%. Of course, to be able to use this kind of formula, you will need to be able to determine how much impact the person will have and figure out a valuation. I've talked about this topic before in How Investors Think About Valuation of Pre-Revenue Startups.

Early Stage 391

Early Stage Equity CTO Hire Sweat Equity 391

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. Optimize for a W more than % dilution in these circumstances. Be realistic on valuation.

Burn Rate 150

Burn Rate Cap Table Balance Sheet Dilution 150

Startup Professionals Musings

DECEMBER 11, 2022

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 271

Due Diligence Intellectual Property Entrepreneur Preferred Stock 271

Startup Professionals Musings

MARCH 12, 2023

VCs tend to demand more control of your spending and strategic decisions, with required board seats and lower valuations. Angels will likely agree to simpler term sheets, better valuations, and less restrictive terms on potential dilution, voting rights, exit options, and executive roles. How big is your startup opportunity?

Angel Investor 246

Angel Investor IRR Venture Capital Valuation 246

ReadWriteStart

JUNE 1, 2020

The primary source of your funds should be your paying customers, i.e., your business should generate enough revenues and profits to fund the growth and expansion. These usually play a role in the very early stage of your business, primarily pre-revenue. Point number 3: Never raise money with an increased valuation.

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

Both Sides of the Table

MARCH 21, 2013

I think it’s important for enterprise startups to layer in professional services into your revenue stream. deliver profitable revenue that while on gross margins of 50% vs. software at 85-95% it is still profits to help you cover fixed costs. Control Size of PS Revenue Relative to Software Business. rollout support.

Software Review 321

Software Review Software IP Technical Review 321

Both Sides of the Table

JUNE 5, 2011

2: As expected at least one person accused me of writing this post because I want to see lower valuations. As the risks below get eliminated the higher the valuation investors are prepared to pay. So rounds tend to be “range bound&# where the top end of the valuation spectrum often being done in boom markets (i.e.

Pre-Money Valuation 336

Pre-Money Valuation Valuation Silicon Valley Stock 336

YoungUpstarts

SEPTEMBER 16, 2015

What’s critical for entrepreneurs to understand is that valuations for startups do not increase at a linear rate; they increase geometrically based on achieving the right milestones. The best entrepreneurs raise enough money to achieve a set of interim milestones and then raise capital again at a significantly increased valuation.

Valuation 100

Valuation Dilution Chicago Technical Review 100

Startup Professionals Musings

OCTOBER 7, 2022

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 304

Preferred Stock Exit Strategy Equity Angel Investor 304

Startup Professionals Musings

JUNE 13, 2020

VCs tend to demand more control of your spending and strategic decisions, with required board seats and lower valuations. Angels will likely agree to simpler term sheets, better valuations, and less restrictive terms on potential dilution, voting rights, exit options, and executive roles. How big is your startup opportunity?

Angel Investor 314

Angel Investor Entrepreneur IRR Valuation 314

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

MARCH 14, 2020

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 308

Due Diligence Intellectual Property Preferred Stock Seed Stage 308

David Teten

JANUARY 19, 2021

More and more startups are pursuing Revenue-Based VCs , but “RBI” doesn’t fit everyone. Flexible VC 101: Equity Meets Revenue Share. By tying payments to actual revenues, founders and investors remain aligned around the company’s real-time performance, good or bad. Flexible VC: Revenue -based. Of the Inc.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

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

NOVEMBER 14, 2017

Throughout the first year we made many fixes and saw our revenue base in these markets accelerate so we felt we were ready to attack Los Angeles, amongst the most important storage markets in the country. An example of the systems companies build are pricing & revenue management tools to best help to optimize yield.

Operations 286

Operations New York City Technical Review Startup 286

ReadWriteStart

JANUARY 27, 2011

And, oh by the way, we also really like the idea of the 1M/1M entrepreneurs building valuation and negotiating leverage through these business development efforts, instead of signing off large chunks of their company in form of equity early on. million in revenue. The business is already profitable with $2.9

Dilution 114

Dilution Revenue Finance Entrepreneur 114

Berkonomics

JUNE 5, 2014

Dave’s note: Popular Bill Payne returns this week with a thoughtful take on valuations. Yet, at the pre-revenue stage of development, angel investors price both companies at a pre-money valuation of $1.5 Yet, at the pre-revenue stage of development, angel investors price both companies at a pre-money valuation of $1.5

Pre-Money Valuation 92

Pre-Money Valuation Valuation Angel Investor Dilution 92

View from Seed

SEPTEMBER 23, 2019

To provide relevant perspective, listing past convertible note(s) and/or equity financing(s) including total round size and valuation (caps) is helpful. Plus, any other non-standard items here should be called out, too, like non-dilutive grants, as applicable. What not to include is directly stating valuation expectations.

Cap Table 211

Cap Table Seed Stage Valuation Dilution 211

Up and Running

SEPTEMBER 20, 2021

For instance, the cap table will help you with various possibilities while running business activities like available options and pre-money valuations faster. The data presents a historical insight on a cap table that can affect the valuation of your startup when it comes time for a new round of fundraising. Total share ownership.

Cap Table 112

Cap Table Pre-Money Valuation Stock Options Option Pool 112

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

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. This has a tangible impact on the valuation of start-ups and the pace of investment.

Technical Review 269

Technical Review Stock Hawaii Early Stage 269

This is going to be BIG.

OCTOBER 10, 2014

Well, if you group them all up, here''s what you get: Pre-Money Valuations (M). You wind up with about a four-ish valuation, mostly right around four, but with some outliers that bring up the average. So, if you''re looking at pre-money valuations saying "But hey, my deal wasn''t valued at X, WTF??" Pre-Money Valuations (M).

Pre-Money Valuation 146

Pre-Money Valuation Dilution Valuation Term Sheet 146

View from Seed

APRIL 30, 2015

” Venture debt gives you those options, and particularly for companies that wind up doing well, then on your same cash-out date, you’d likely have achieved a better milestone thanks to fueling your spend, which would translate into a better valuation. Traction and revenue? NVV: Is there any dilution? Business model?

Term Sheet 120

Term Sheet Equity Startup Seed Stage 120

Both Sides of the Table

JULY 16, 2013

Because at least while the VC spigot is open and flowing for high-potential individuals that fit a pattern that some VCs seem to favor they can access cheap capital that isn’t terribly dilutive and can use the to fund development and swing for the fences with limited focus on monetization. And the dilution that goes with it.

Burn Rate 412

Burn Rate Dilution Revenue Valuation 412

The Next Web

SEPTEMBER 13, 2013

Many Asian entrepreneurs tell me that they want to raise funds from Silicon Valley firms because they perceive the valuations to be higher. Valuations are based more on typical later-stage type of metrics. Finally, don’t over-optimize on valuation. This is even true for the Asian arms of Silicon Valley VCs.

Asia 132

Asia Silicon Valley India Term Sheet 132

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

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

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

Startup Professionals Musings

AUGUST 2, 2014

VCs tend to demand more control of your spending and strategic decisions, with required board seats and lower valuations. Angels will likely agree to simpler term sheets, better valuations, and less restrictive terms on potential dilution, voting rights, exit options, and executive roles. How big is your startup opportunity?

Angel Investor 266

Angel Investor Entrepreneur Venture Capital IRR 266

Austin Startup

FEBRUARY 13, 2019

Either way, if you know you’re going to fail, it’s much better to do so with your own money on the line than money that also costs you in dilution, perpetuity or more. Not necessarily the entire business, but at some point, something will fail and you’ll either learn from it and grow or it will be the beginning of the end.

Strategic Investors 49

Strategic Investors Austin Angel Investor Bootstrapping 49

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

ReadWriteStart

SEPTEMBER 10, 2010

They already have several customers including some telcos, and are at about $350,000 in revenues. You can get cash without diluting your ownership in the company. Because customer financing equals revenue, not equity. Why not go further, develop more valuation, customer experience, and really, deeply validate the business?

Cloud 115

Cloud Silicon Valley Incubator Finance 115

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

JANUARY 20, 2011

People are raising in record times and with wacky valuations. They have some revenue but not much. I asked him what his valuation expectations were and he said he wasn’t fixated on that. He wanted a good partner, a fair valuation, and quite honestly, just some effing money! He’s struggling to raise money.

Dilution 284

Dilution Valuation Seed Money Differentiation 284

Berkonomics

MARCH 21, 2019

If you are a going business with a track record of revenues, then the importance of accurate current financial statements cannot be overstated. If there is no record of revenues, see the “The Berkus Method” available with any search query for valuing the business before revenues. Let’s start with the basics.

Hockey Stick 63

Hockey Stick Liquidity Event Valuation Balance Sheet 63