Trending Sources

Founders – Use Your Down Round To Clean Up Your Cap Table

Feld Thoughts

This is a little tricky in early rounds and with modest up-round financings, as you’ll often have a liquidation preference that is high relative to your overall valuation. Then, if you end up doing a down round, it suddenly matters a lot. Don’t worry about this too much, until you do a down round.

The Damaging Psychology of Down Rounds

Both Sides of the Table

I would love it if other people would weigh in on the comments section below if you’ve had experiences with down rounds. But why?

How Do I Protect My Option Grant From A Down Round In The Future?

Ask The VC

Question: I am considering joining a startup that is currently in the process of raising their next round of funding. What should I expect in terms of protection from both dilution and going under-water on my option prices given that I will be joining before term sheets and close of the round? Generally this is very hard to do.

Cash is King: 8 tips for Optimizing your Startup Financing Strategy

For Entrepreneurs

Getting Funded avoid down round Startup fundraising startup valuationIntroduction This post aims to help startup CEOs optimize their funding strategy by examining how investors value startups, and explaining how to avoid the common cash management pitfalls.

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Capital Market Climate Change

Ben's Blog

Had you not had the experience of raising your last round so easily, you might have seen this round coming. As if the price could never go down. When you go to fundraise, you will need to consider the possibility of a valuation lower than the valuation of your last round, i.e., the dreaded down round.

The Resetting of the Startup Industry

Both Sides of the Table

If you can get a round done at the price you expect – well done. Down rounds are corrosive. Why does this matter?

What Most People Don’t Understand About How Startup Companies are Valued

Both Sides of the Table

” “Mark has a vested interest in talking down valuations of startups.” Why Inside Rounds are Difficult? Mostly, no.

Burn Baby Burn

A VC : Venture Capital and Technology

You can do a down round, or three or four flat ones, until you get the price right. Andy sent me a WSJ piece with Bill Gurley yesterday. I don’t like to link to paid content so here’s a good Business Insider summary of the article that is open for anyone to read. He focuses on burn rates instead. Valuations can be fixed.

Fenwick & West - Venture Capital Survey Silicon Valley Third Quarter 2011

Recent Buzzes - VC Experts, Inc.

Up rounds exceeded down rounds in 3Q11 70% to 15%, with 15% of rounds flat. This was an increase from 2Q11 when up rounds exceeded down rounds 61% to 25%, with 14% of rounds flat. This was the ninth quarter in a row in which up rounds exceeded down rounds

Unicorpse

Feld Thoughts

The current usage of the word unicorn makes me tired. I could rant about it for a while, but that would make me tired of myself ranting about it.

Guest Post: Beware The Post Money Trap

A VC : Venture Capital and Technology

Combined with a lot of money being available from investors this is resulting in Series A rounds of $10 million and more. It needs to build enough value so that the next round of fundraising can be at or ideally above the current post money valuation. This ignores that down rounds are incredibly hard to do.

What Did And Did Not Happen In 2016

A VC : Venture Capital and Technology

I predicted “markdown mania” would hit the tech sector hard and employees would start getting cold feet on startups as they saw the value of their options going down. As has become my practice, I will end the year (today) looking back and start the year (tomorrow) looking forward. They did. We re-learned an old lesson: PC v.

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Fundraising advice: Don’t over optimise on terms

The Equity Kicker

They will most probably go on to raise multiple rounds of venture capital after all. And don’t forget the prime directive of fundraising strategy: set things up so that you never do a down round. If you raise at such a price, everything has to go perfectly in order for your next round to be an up one.

Spreadsheets in legal documents

The Equity Kicker

I’ve been here before too, when implementing anti-dilution clauses after down-rounds. It shouldn’t be necessary.

Quote Of The Day

Altgate

This from the head of Intel Capital while speaking at CES (according to Jeff Busang over at Flybridge Capital Partners ). Bookmark the permalink.

Pro-rata Rights For Angels

Ask The VC

When VCs invest in rounds, they set a threshold for “major investors” and, if you aren’t a major investor, you lose your pro-rata rights. I did also when I invested as an angel, although my angel strategy was to invest in only the first two rounds. In it she makes two important points about angel investing.

Venture Outlook 2016

Both Sides of the Table

On the chart below, 78% of the rounds of 80 $1bn+ companies were led by non VCs. 25% “down rounds? Boom and bust. Are VCs?

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Dilution concerns by founders and investors

Taffy Williams

Terms like “cram-down” or “down-round” originated from such events over the last 10 years or so. In for a penny?”

Professional Investors Qualms About Crowdfunding

Startup Professionals Musings

I would summarize the views and qualms from professional investors as the following: Crowdfunding platform costs could trickle down to angel groups.

What Do Industry Insiders Think Will Happen in VC in 2016?

Both Sides of the Table

So why the slow down all of a sudden? Most flat rounds. More down rounds. More structured rounds. How do I know?

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On the Road to Recap:

abovethecrowd.com

John was the first to uncover that just because a company can raise money from a handful of investors at a very high price, it does not guarantee (i) everything is going well at the company, or (ii) those shares are permanently worth the last round valuation. With the public markets down, these groups began writing down Unicorn valuations.

On the Square and Match IPOs and hopes for a correction

The Equity Kicker

So the share price has been trending down for some time before popping after the IPO. Exits Venture Capital

Why Raising Too Much Money Can Harm Your Startup

Both Sides of the Table

I understand this instinct for more capital and I have two very different personal experiences: In my first company we raised an A-round of $16.5

Bad Notes on Venture Capital

Both Sides of the Table

We raised a seed round. You’ll find out the minimum when the next round is raised. Him: But when I raised my first round we didn’t know how to price the company. How will you price the next round? Your A round? Him: We didn’t want to price our round. Just a discount to the next round.

Bad Notes on VC

Gust

We raised a seed round. You’ll find out the minimum when the next round is raised. Him: But when I raised my first round we didn’t know how to price the company. How will you price the next round? Your A round? Him: We didn’t want to price our round. Just a discount to the next round. A down round?

What is actually happening during a VC slowdown?

This is going to be BIG.

Fear, not surprisingly, weighs markets down. They might have to get another round in, and that round will most certainly be a down round. The public markets have been stumbling around lately, trying to figure out what China and oil prices mean for the rest of the world economy. Shouldn't they be long term minded?

Changes in the Venture Capital Funding Environment

Both Sides of the Table

In other words, it isn’t that VCs suddenly got smart, it’s that the costs of starting a company went down dramatically. I Leaderless Rounds.

Analyzing Boston's Reindeer (Not Unicorns)

Seeing Both Sides

Yelp is down 49% YTD, Box is down 41%, Hortonworks is down 24%). I'm Jewish, so I confess that I had to look that one up).

6 Areas a startup CEO must learn

Taffy Williams

Running out of money is not something to experience, unless you enjoy the pain of a severe down round or closure of a business.

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An Inside Scoop on the Funding Environment and What it Might Mean for You

Both Sides of the Table

With “uncertainty” taking hold, rounds were taking longer to complete. $30 million. But the story started more than 6 months ago.

A Recently Exited Founder on Surviving the Contradictory Role of Startup CEO

View from Seed

I called the recruiter running the search and told him I was going to step down and hire a CEO. and sold to Datto in late 2014. He was right.

The downside of accelerated investment decisions

Chris Dixon

Sadly, founders with bad investors will likely face punishing down rounds, key employees being indiscriminately fired, and elaborate financial shenanigans engineered to dilute founders and seed investors. There has been a lot of talk about how early-stage valuations have risen dramatically over the past few years. startups

How do VCs measure their success (and why you should care)?

Hippoland

Primarily these things: Companies dissolvingCompanies exitingCompanies raising equity rounds All of these events are concrete events that attach a numerical value to a company. If a company raises a good round, it gets marked up to the new value. And if a company takes a down-round, it gets marked down.

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Keep Term Sheets Simple for Quicker Cash to Spend

Gust

Venture capitalists and later round investors like the preferred convertible shares. Seat on the board. Define equity type.

The VC Death Trap

Rob Go

Let’s that fund invests 1/3 of the capital into the initial rounds. A fancy firm puts down a term sheet to invest $40M in the new company.

Capital Market Climate Change

Ben's Blog

Had you not had the experience of raising your last round so easily, you might have seen this round coming. As if the price could never go down. When you go to fundraise, you will need to consider the possibility of a valuation lower than the valuation of your last round, i.e., the dreaded down round.

3 Business Models Venture Capitalists Love

Fresh Inc.: The Staff Blog

Let''s face it: If the term "down round" doesn''t strike fear into your heart, it should. No revenue? Never mind. Doesn’t matter.

Don't Ignore These 4 Start-up Lessons

Fresh Inc.: The Staff Blog

A start-up can spring from an innovative idea, but founders often overlook key elements that can turn an idea into at nightmare.

Why Startups Should Raise Money at the Top End of Normal

Both Sides of the Table

If you invested in the first angel round of a startup company it is usually very hard to sell your stock – usually for many years if ever at all.

Sustainable startup growth and venture capital

The Equity Kicker

However severe our current situation is, I’m sure there will be plenty of short term negatives, including more job losses, company failures and down rounds. I think that’s why you see people like Bill Gurley, Fred Wilson and Mark Suster publicly talking markets down. I read it too, because it’s a big deal.