The Startup Magazine

JULY 25, 2021

But existing shareholders are not happy with the company’s proposed plan to issue $500 million in new shares as it would only dilute its current float. In fact, the announcement of the share issue led to a decline in Galactic share prices and overall market valuation. Understand market share . Boost customer satisfaction.

Valuation 162

Valuation Artificial Inteligence Dilution Marketing 162

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. On a public stock market that is the value that investors place on future free cash flows of the business discounted to today’s date to account for the time value of money. Private markets for stocks are the opposite.

Pre-Money Valuation 336

Pre-Money Valuation Valuation Silicon Valley Stock 336

Startup Professionals Musings

AUGUST 24, 2016

Investors may not be called co-founders, but they always get equity, commensurate with their share of the total costs anticipated, or share of the current valuation. Even with an agreed initial equity split, it’s smart to have Founder’s stock actually issue or vest over a period of at least two years, on a month-by-month basis.

Equity 120

Equity Cofounder Technical Cofounder Intellectual Property 120

Startup Professionals Musings

MARCH 23, 2014

In reality, so-called “Founder’s” shares are simply common stock, issued at the time of startup incorporation, for a very low price, and normally allocated to the multiple initial players commensurate with their investment or role. Here are some typical special terms and considerations for Founder’s stock: Negligible real value.

Stock 256

Stock Vesting Common Stock Founder Vesting 256

ReadWriteStart

JUNE 1, 2020

The shares given out can either be common stocks or preferred stocks. ? Debt investment. The bridge or exit stage is generally of very large transactions and for companies with substantial valuation. Raising higher capital at an early stage means more equity to be diluted to the investors. Bridge or exit stage.

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

Startup Professionals Musings

DECEMBER 11, 2022

Non-credible funding request or unreasonable valuation. Future unproven projections don’t set today’s valuation. Experienced entrepreneurs understand investor expectations of Board representation, preferred stock, and payments based on interim milestones. Investors are looking to buy a chunk of the business, not the product.

Due Diligence 271

Due Diligence Intellectual Property Entrepreneur Preferred Stock 271

Both Sides of the Table

AUGUST 14, 2017

Executives run the day-to-day so often the board is more involved as a sparring partner at key intervals. The administrative work we actually do at board meetings? Boards are not appointed to be founder-friendly lapdogs for the 1–3 founders who start companies and usually own the largest equity positions in the company.

Cofounder 217

Cofounder Stock Options Equity Technical Review 217

Startup Professionals Musings

OCTOBER 7, 2022

The average valuation for angel investments is $2 million, which will get you $500,000 for 20 percent of your startup. Most professional investors will expect preferred stock, a board seat, rights to later rounds and perhaps anti-dilution protection. Are you flexible on the terms of the investment?

Preferred Stock 304

Preferred Stock Exit Strategy Equity Angel Investor 304

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

Berkonomics

AUGUST 10, 2023

To protect against such an event, almost every professional investor includes a clause in the investment documents which allow the investor to “put” the stock back to the company after five years, requiring the company to pay back the investment plus dividends accrued during the term of the investment. Draconian terms?

Liquidity Event 116

Liquidity Event Initial Public Offering Dividend Valuation 116

Both Sides of the Table

SEPTEMBER 10, 2021

I’m over-paying for every check I write into the VC ecosystem and valuations are being pushed up to absurd levels and many of these valuations and companies won’t hold in the long term. On the one hand, you’re over paying for every investment and valuations aren’t rational. That never would have happened 10 years ago.

Pre-Money Valuation 471

Pre-Money Valuation Valuation Venture Capital Early Stage 471

Both Sides of the Table

OCTOBER 1, 2009

Unemployment coupled with a stock market drop will stop this spending cold IMHO. If these factors impact earnings the stock market may be headed South – If unemployment rises housing prices won’t. This will likely cause the stock market to contract. If the stock market holds then the pace of VC may hold steady.

Technical Review 269

Technical Review Stock Hawaii Early Stage 269

Gust

MARCH 16, 2014

In reality, so-called “Founder’s” shares are simply common stock, issued at the time of startup incorporation, for a very low price, and normally allocated to the multiple initial players commensurate with their investment or role. Here are some typical special terms and considerations for Founder’s stock: Negligible real value.

Stock 175

Stock Vesting Common Stock Founder Vesting 175

ithacaVC

OCTOBER 10, 2017

Here is the big problem with investors – they dilute the founders’ ownership in the company. Let’s cover some basics: It is impossible to issue stock to investors without existing shareholders (founders, employees and prior investors) being diluted. Is this actually a big problem?

Dilution 53

Dilution Stock Options Stock Valuation 53

Gust

APRIL 11, 2014

Let’s get right down to business: Dilution of founders’ and other early shareholders’ equity in startups is frequently a subject of intense interest and debate. That’s the concept of what some call mathematical dilution. Suppose it raises $2 million at a $6 million pre-money valuation.

Dilution 162

Dilution Equity Pre-Money Valuation Prospectus 162

View from Seed

SEPTEMBER 14, 2021

Or is there a major disconnect between a portfolio’s valuations and the actual dollars returned to LPs? Both early- and late-stage startup valuations are currently elevated. For context, seed-stage pre-money valuations are up 24% from H1 2020 to H1 2021. US VC versus stocks. How have more recent vintages performed?

Valuation 319

Valuation Pre-Money Valuation Distribution Early Stage 319

Startup Professionals Musings

MARCH 14, 2020

Non-credible funding request or unreasonable valuation. Future unproven projections don’t set today’s valuation. Experienced entrepreneurs understand investor expectations of Board representation, preferred stock, and payments based on interim milestones. Investors are looking to buy a chunk of the business, not the product.

Due Diligence 308

Due Diligence Intellectual Property Preferred Stock Seed Stage 308

Startup Professionals Musings

JANUARY 4, 2020

The average valuation for angel investments is $2 million, which will get you $500,000 for 20 percent of your startup. Most professional investors will expect preferred stock, a board seat, rights to later rounds and perhaps anti-dilution protection. Are you flexible on the terms of the investment?

Startup 337

Startup Preferred Stock Exit Strategy Equity 337

View from Seed

SEPTEMBER 14, 2021

Or is there a major disconnect between a portfolio’s valuations and the actual dollars returned to LPs? Both early- and late-stage startup valuations are currently elevated. For context, seed-stage pre-money valuations are up 24% from H1 2020 to H1 2021. US VC versus stocks. How have more recent vintages performed?

Valuation 295

Valuation Pre-Money Valuation Distribution Early Stage 295

David Teten

JANUARY 19, 2021

Yes, via conversion rights at a valuation cap. Yes, via conversion rights at a valuation cap. Eligible for favorable treatment under Qualified Small Business Stock exemption, if structured as equity. This applies if the investment converts into common stock; details are beyond this essay’s scope. Founder retains control.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

Both Sides of the Table

OCTOBER 12, 2014

” If you invested at $8m pre-money and put $2m in (thus you own 20% of a company at a $10m post-money valuation) and if you put another $2m into a round at a $40m valuation raising $10m ($50m post) you end up with half your money at $8m pre and half at $40m pre thus your average price goes up dramatically. That seems fair.

Technical Review 336

Technical Review Later Stage Early Stage LP 336

Startup Professionals Musings

OCTOBER 7, 2010

In reality, so-called “founder’s” shares are simply common stock, issued at the time of startup incorporation, for a very low price, and normally allocated to the multiple initial players commensurate with their investment or role. Here are some typical special terms for founder’s stock: Negligible par value. Stock survives investment.

Stock 214

Stock Vesting Common Stock Founder Vesting 214

Both Sides of the Table

SEPTEMBER 25, 2010

Either would be fine with startups, so long as they can easily change their valuation. The key is making sure the second close isn’t too high (I think 50% of X sounds about right) because you’ll be adding on that dilution to yourself & “X&# investors will own less of the company. I agree on all points.

Finance 286

Finance Term Sheet Technical Review Warrant 286

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

Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. If you’re wildly successful early on or if they help you achieve a great valuation they actually pay a significant price for their eventual stock even though they took much more risk than a future investor and backed you early.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

ithacaVC

SEPTEMBER 10, 2012

But here is one that I want to focus on in this post: “Can I ask for undiluted stock (non dilution clause)?” I am not even sure what “undiluted stock” is, but safe to say the person (I will call him Exec X) meant stock that his equity would not be dilutable in terms of ownership.

Dilution 53

Dilution Employee Cap Table Stock 53

View from Seed

SEPTEMBER 14, 2021

Or is there a major disconnect between a portfolio’s valuations and the actual dollars returned to LPs? Both early- and late-stage startup valuations are currently elevated. For context, seed-stage pre-money valuations are up 24% from H1 2020 to H1 2021. US VC versus stocks. How have more recent vintages performed?

Valuation 156

Valuation Pre-Money Valuation Distribution Early Stage 156

Startup Professionals Musings

JANUARY 22, 2013

In reality, so-called “founder’s” shares are simply common stock, issued at the time of startup incorporation, for a very low price, and normally allocated to the multiple initial players commensurate with their investment or role. Here are some typical special terms and considerations for founder’s stock: Negligible real value.

Vesting 245

Vesting Common Stock Stock Founder Vesting 245

Hunter Walker

AUGUST 8, 2023

At the time, this is last quarter and the stock market has trended upwards nicely since then (a potential leading indicator of private tech valuations), we all agreed venture portfolios were probably still 25-40% overvalued. Valuations. And that’s what’s happening here. Soft Acquisition Market.

Portfolio 99

Portfolio Cap Table LP Valuation 99

Startup Professionals Musings

SEPTEMBER 26, 2015

Perhaps they're way off in their valuation (usually far too high), or paralyzed by fear at seeing the other terms, because they have no idea what's normal, and what's worth a fight to the death (their startup's). In very early startups, which have no valuation, the term sheet may specify a convertible note.

Term Sheet 120

Term Sheet Demand Preferred Stock Liquidation Preference 120

Startup Professionals Musings

JANUARY 27, 2012

The price is the percent of ownership given to the investor, calculated as “investment/post-money valuation.” The pre-money valuation is company value today, while the post-money valuation is the pre-money valuation plus the investment amount. Anti-dilution protection. But some dilution is almost inevitable.

Term Sheet 223

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 223

Startup Company Lawyer

MARCH 14, 2010

To differentiate it from typical “Series A&# preferred stock, which comes with certain expectations with regard to rights. There is no real rule to what a particular series of preferred stock is called. Anti-dilution protection. Deleting anti-dilution rights saves several pages of text in the Certificate of Incorporation.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

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

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. Dilution / valuation. I hate when companies publish too much information about the total stock option allocations, the company valuations, the dilution faced in every round, etc. ” Yes.

Startup 417

Startup Dilution San Diego Stock Options 417

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

ithacaVC

JANUARY 24, 2013

One interesting point that comes up a lot is how to factor the convertible debt into the premoney valuation of the Series A round. Let’s assume the following: Common Stock outstanding: 3,400,000 shares owned by the founders. I am going to ignore any valuation cap feature. Series A premoney valuation negotiated to be $3mm.

Valuation 53

Valuation Balance Sheet Option Pool Dilution 53