Both Sides of the Table

JUNE 30, 2016

And if you raise the “5 on 20” and don’t grow into your next-round valuation you’re stuck because venture investors HATE doing down rounds. These types of firms may see your follow-on financing as a chance to “buy up ownership.” Most firms are somewhere in the middle.

Pre-Money Valuation 292

Pre-Money Valuation Valuation Early Stage Startup 292

VC Cafe

JANUARY 2, 2023

On a global level, venture financing of private companies dropped 33% year over year, from a record $733B in 2021 to $490B in 2022. Down rounds, especially for growth stage companies, and bridge rounds galore. We started to see down rounds taking place especially in growth stage. ” Fred Wilson.

Valuation 158

Valuation Down Round Venture Capital 158

Both Sides of the Table

JULY 29, 2010

The A round was done in February 2000 (end of the bull market) and my B round was done in April 2001 (bear market). As a result I had to do a down round. Down rounds are psychologically really difficult on companies and can make it harder to do later rounds. I eventually needed more money.

Venture Capital 282

Venture Capital Term Sheet Valuation Stock Options 282

Berkonomics

AUGUST 10, 2017

Many of the start-ups my various angel funds have financed died a slow death, not because of poor concept but because of poor execution, wasting fixed overhead and draining the financial resources from the company coffers. And professional investors often penalize the company with lower-priced down rounds or expensive loans as a result.

Silicon Valley 97

Silicon Valley Burn Rate Angel Investor Down Round 97

Both Sides of the Table

JUNE 22, 2011

New investors hate down rounds. Or worse yet they may never get financed. Raise at “ the top end of normal &# but not so high that future financings in a corrected market become impossible. They will enter the “triage phase&# of the market where they figure out which of their existing deals will survive.

Saudi Arabia 309

Saudi Arabia Valuation IPO Technical Review 309

Both Sides of the Table

JUNE 5, 2011

So in 2011 as a startup company if you can generate lots of demand you can definitely raise an A round of capital (say $3 million) at a $7 or 8 million pre-money valuation or slightly higher whereas just two years ago you would have struggled. That’s the deal you get when you’re raising in a good market for startup financing.

Pre-Money Valuation 336

Pre-Money Valuation Valuation Silicon Valley Stock 336

Both Sides of the Table

SEPTEMBER 18, 2014

At an accelerator … Me: Raising convertible notes as a seed round is one of the biggest disservices our industry has done to entrepreneurs since 2001-2003 when there were “full ratchets” and “multiple liquidation preferences” – the most hostile terms anybody found in term sheets 10 years ago. A down round?

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Berkonomics

AUGUST 3, 2023

Some businesses require very little capital and the founder can self-finance the enterprise and retain 100% of its ownership and control from ignition through liquidity event (startup through sale). And even with the significant cost of credit card debt, many entrepreneurs aggressively use existing cards to finance a startup.

Private Equity 118

Private Equity Valuation Cap Table Accredited Investor 118

OnlyOnce

JANUARY 18, 2022

I lived one of my favorite metaphors last week as we announced the closing of Bolster’s Series B financing and had our first post-round Board meeting, and I realized I’ve never blogged about it before: that raising rounds of financing is like having a good night at the blackjack table.

Down Round 62

Down Round .Net Finance Startup 62

ReadWriteStart

JUNE 1, 2020

If you are facing any problem you can always check out this: Business Loan vs. Equity Financing. But, in subsequent rounds of funding inflated valuation will be normalized resulting in a down round. You might have seen that valuations of several unicorns were suddenly slashed down. Inception stage.

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

Genuine VC

FEBRUARY 9, 2011

And there are many reasons why a not-as-blue-chip investor would be in a company with real promise: prior relationships he has with the entrepreneur, specific domain expertise/understanding of a sector, capital requirements for the business, or other dynamics around the round (price, hustle).

Startup 146

Startup Burn Rate Technical Review Down Round 146

Hunter Walker

AUGUST 8, 2023

Restructures, Down Rounds, and Pay to Plays. The reality is lots of companies – many of them quite promising – have already undergone, or will be facing, next financings which “clean up” old cap tables. Whatever gets reported is just the tip of the iceberg.

Portfolio 98

Portfolio Cap Table LP Valuation 98

Startup Professionals Musings

JANUARY 27, 2012

As the company grows and the second or third group of investors comes in, the terms of each subsequent financing grow in size, scope, and the number of lawyers’ fingerprints on them. These “IV drip” financings may reduce risk for investors, but put more pressure on founders. Anti-dilution protection.

Term Sheet 223

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

Ben's Blog

JULY 16, 2013

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. Down rounds are bad and hit founders disproportionately hard, but they are not as bad as bankruptcy. Yes, we did a down round.

Down Round 78

Down Round Marketing Preferred Stock Post-Money Valuation 78

Lightspeed Venture Partners

OCTOBER 7, 2012

As Cuban pointed out, this is a “down round” Zomm is seeking $2M for 10% of the company, implying an $18M pre money valuation today. The company likely will run out of money well before it hits its projected Q4 sales ramp, which is why it needs an emergency financing today. The entrepreneur was clearly desperate.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

ReadWriteStart

NOVEMBER 22, 2010

The survey looks at the valuations and the terms of financing for over 100 technology companies in Silicon Valley that reported raising capital in the third quarter of this year. According to Barry Kramer, a partner in the firm and a co-author of the survey, during the third quarter, "up rounds exceeded down rounds 52% to 30% with 18% flat.

Silicon Valley 115

Silicon Valley Venture Capital Valuation Down Round 115

Startup Professionals Musings

SEPTEMBER 14, 2010

As the company grows and the second or third group of investors comes in, the terms of each subsequent financing grow in size, scope, and the number of lawyers’ fingerprints on them. These “IV drip” financings may reduce risk for investors, but put more pressure on founders. Anti-dilution protection.

Term Sheet 227

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 227

Berkonomics

MARCH 30, 2010

Many of the start-ups my various angel funds have financed died a slow death, not because of poor concept but because of poor execution, wasting fixed overhead and draining the final resources from the company coffers. . Email readers continue here.]

Silicon Valley 85

Silicon Valley Burn Rate Angel Investor Down Round 85

Both Sides of the Table

FEBRUARY 4, 2016

.” There are a lot of data points that one can observer to get a sense of the venture capital markets – both LP fundings into venture and VC financings of startups. They point to some widely known facts: financings & valuations are up massively over the past 7 years and non-VC money has entered the system.

LP 150

LP Valuation Burn Rate Pre-Money Valuation 150

Gust

SEPTEMBER 17, 2014

Me: Raising convertible notes as a seed round is one of the biggest disservices our industry has done to entrepreneurs since 2001-2003 when there were “full ratchets” and “multiple liquidation preferences” – the most hostile terms anybody found in term sheets 10 years ago. It’s like we need a finance 101 course for entrepreneurs.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

For Entrepreneurs

APRIL 7, 2011

Introduction 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. Note: The concepts in this post will likely be obvious to experienced CEOs and entrepreneurs.

Finance 167

Finance Startup Cost Entrepreneur 167

The Equity Kicker

JANUARY 22, 2014

Investors who paid up for your financing are not happy. You fall into the spiral of death: head of sales gets replaced (at least once), CEO gets replaced (at least once), a down-round financing happens (if lucky).

Venture Capital 102

Venture Capital Down Round Valuation Lean 102

ithacaVC

FEBRUARY 1, 2018

The treatment of the friends, family and angels (FFA) as the startup matures and raises larger rounds of financing over time is interesting. Or the economy tanks or stock market tanks moving valuations down at inopportune times for the startup. And sometimes founders want to protect the financial interests of FFAs.

Preemptive Right 45

Preemptive Right Cap Table Valuation Dilution 45

Gust

OCTOBER 17, 2011

As the company grows and the second or third group of investors comes in, the terms of each subsequent financing grow in size, scope, and the number of lawyers’ fingerprints on them. These “IV drip” financings may reduce risk for investors, but put more pressure on founders. Anti-dilution protection.

Term Sheet 158

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 158

Feld Thoughts

APRIL 21, 2016

Bill Gurley wrote an incredible post yesterday titled On the Road to Recap: Why the unicorn financing market just became dangerous … for all involved. Also, they have a strong belief that any sign of weakness (such as a down round) will have a catastrophic impact on their culture, hiring process, and ability to retain employees.

Marketing 70

Marketing Down Round Startup IRR 70

Berkonomics

MARCH 28, 2019

If so, the VC will contemplate a “down round” – that is: offering an investment where previous investors find their investments instantly worth less than their original value, even if the investments were made at high risk and years earlier. The enlightened professional investor.

Limited Liability Company 48

Limited Liability Company Post-Money Valuation Valuation Down Round 48

The Equity Kicker

JULY 9, 2015

I’ve been here before too, when implementing anti-dilution clauses after down-rounds. And we still have to get all parties to understand and buy into our spreadsheet so it isn’t over yet. It shouldn’t be necessary.

Dilution 60

Dilution Down Round Finance Software 60

ithacaVC

NOVEMBER 14, 2014

Hopefully, it’s in high demand for good reasons, otherwise you risk a down round in the future. The latter won’t be enough money to grow and without the capital to grow, could risk failing or a down round. Don’t risk a down round. Map out multiple stages of financing. Accelerator.

Valuation 69

Valuation Startup Down Round Early Stage 69

Berkonomics

JUNE 8, 2017

Some businesses require very little capital and the founder can self-finance the enterprise and retain 100% of its ownership and control from ignition through liquidity event (startup through sale). And even with the significant cost of credit card debt, many entrepreneurs aggressively use existing cards to finance a startup.

Private Equity 106

Private Equity Valuation Cap Table Accredited Investor 106

Both Sides of the Table

FEBRUARY 8, 2016

Don’t assume that you can “just do a down round” if necessary. Down rounds are corrosive. The terrible consequence is that some great companies struggle to get financed. The best deals will continue to get financed. Optimize for a W more than % dilution in these circumstances. Start early.

Burn Rate 150

Burn Rate Cap Table Balance Sheet Dilution 150

Both Sides of the Table

SEPTEMBER 27, 2010

What micro VCs need to consider is what happens when several of your companies want to grow and require VC financing? Or when the economy turns downward and they all need financing extensions? You have to be careful about “getting ahead of yourself&# or you make the next financing more difficult.

Liquidity Event 308

Liquidity Event Silicon Valley Seed Stage Finance 308

Growthink Blog

MAY 23, 2011

The typical wisdom regarding the appropriate financing course for a new company goes as follows: 1. This venture capital financing - usually between $3 and $10 million - is the first of a number of rounds of outside investment over a period of three to five years.

Angel Investor 112

Angel Investor Venture Capital Sweat Equity Cram Down 112

Berkonomics

APRIL 6, 2012

If so, the VC will contemplate a “down round” – that is: offering an investment where previous investors find their investments instantly worth less than their original value, even if the investments were made at high risk and years earlier.

Limited Liability Company 79

Limited Liability Company Post-Money Valuation Valuation Down Round 79

ithacaVC

FEBRUARY 23, 2012

Luckily, I am not in charge of the internal finance function at our fund. My easy solution for VC firms would be to mark up or down the valuation of investments based only on new independently led outside rounds of financing. While not as bad as water boarding, this exercise always makes my stomach turn.

Valuation 49

Valuation Institutional Investors Marketing Down Round 49

www.mattbartus.com

DECEMBER 9, 2012

I just worked on a financing for a company that received a term sheet from a group of VCs at a $7 million pre-money valuation. Interesting strategy, although I don't know if it justifies the added risk of having a flat (or down) round next time you go to raise. Why else might this be useful? link] Brad Hargreaves.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

Bryce Dot VC

APRIL 21, 2016

“Why the Unicorn financing market just became dangerous…for all involved.” Perhaps the answer to the Unicorn dilemma isn’t to take the down round or the dirty term sheet. That was the title of the bombshell dropped on silicon valley last night.

Silicon Valley 40

Silicon Valley Dilution Term Sheet Down Round 40

Ben's Blog

JULY 16, 2013

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. Down rounds are bad and hit founders disproportionately hard, but they are not as bad as bankruptcy. Yes, we did a down round.

Marketing 46

Marketing Preferred Stock Post-Money Valuation Down Round 46