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 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

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. Your A round?

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Lightspeed Venture Partners

OCTOBER 7, 2012

The founders were very sympathetic; a man, laid off from his job, and his very pregnant wife, who sold their house and investing $150k into the business and are working hard to make a go of it. The two founders invested $40k in the business, and plan to license it rather than manufacture it because manufacturing seems too hard.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

VC Cafe

FEBRUARY 27, 2024

A founder asked me what makes a $2M round “pre-seed”? especially if the startup already has a product and revenue? And why do we still sometimes hear about pre-seed rounds that look more like a series A in pricing and size?

Valuation 186

Valuation Software Review Generative AI Technical Review 186

Berkonomics

MARCH 30, 2010

Although young companies rarely measure profitability this repeatedly, more mature companies usually can bring from five to ten percent of revenues to the bottom line in the form of net profit. It is not a strong bargaining position for the CEO to ask for money to complete a product promised for completion with the previous round of funding.

Silicon Valley 85

Silicon Valley Burn Rate Angel Investor Down Round 85

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

ithacaVC

NOVEMBER 14, 2014

If you are advising startup founders, I strongly suggest having them read all 4 of the posts to get the lay of the startup valuation land. A founder is about to raise their first round and asking me how to value their company. [1]. Funding lets you invest in growing your company faster than revenue growth would normally allow.

Valuation 69

Valuation Startup Down Round Early Stage 69

Ben's Blog

JULY 16, 2013

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. 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 Round 78

Down Round Marketing Preferred Stock Post-Money Valuation 78

Both Sides of the Table

SEPTEMBER 27, 2010

And people like Jeff Clavier, Aydin Senkut, Dave McClure, Chris Sacca & Eric Paley (at Founder Collective) are leading the charge. Chris Sacca talked about how a $20 million exit can change a founder’s life and that shouldn’t be scoffed at. Or when the economy turns downward and they all need financing extensions?

Liquidity Event 308

Liquidity Event Silicon Valley Seed Stage Finance 308

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

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

Both Sides of the Table

FEBRUARY 8, 2016

If you raised money in the past 2 years and have grown it is possible that your next round valuation might be flat (or lower) even though you have a higher revenue because investors may value your multiple differently. Don’t assume that you can “just do a down round” if necessary. Start early.

Burn Rate 150

Burn Rate Cap Table Balance Sheet Dilution 150

David Teten

AUGUST 7, 2019

Likely signs of a Value investment: the company has challenges in filling out the round; the investors have more negotiating leverage than the founders during the closing process; the company has significantly better metrics (e.g. LTV / CAC, revenue growth, etc.) were clearly Momentum, but [in hindsight] they were also Value.”

Venture Capital 60

Venture Capital Valuation Stock NDA 60

Ben's Blog

JULY 16, 2013

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. 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.

Marketing 46

Marketing Preferred Stock Post-Money Valuation Down Round 46

Berkonomics

JANUARY 20, 2010

Some businesses require very little capital and the founder is able to 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 69

Private Equity Valuation Cap Table Accredited Investor 69

abovethecrowd.com

APRIL 20, 2016

Why the Unicorn Financing Market Just Became Dangerous…For All Involved. All Unicorn participants — founders, company employees, venture investors and their limited partners (LPs) — are seeing their fortunes put at risk from the very nature of the Unicorn phenomenon itself. By January of 2016, that number had ballooned to 229.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Scalable Startup

OCTOBER 26, 2011

It’s no longer based on a hunch, unless the company is in trouble and needs money to finish what the first round started. This problem often leads to a lowered valuation or “down round” Not a great scenario.) If the company is doing well, the second round is easier to acquire. Founders Fund.

Mezzanine 22

Mezzanine Due Diligence IPO Angel Investor 22

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

MARCH 30, 2016

Investors sat with the founder & CEO, Jason Spievak, and asked him what he wanted to do about the future. 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. CMRR (contracted monthly recurring revenue) grow 100% y/y.

Balance Sheet 150

Balance Sheet Burn Rate Valuation Forecast 150

Both Sides of the Table

FEBRUARY 14, 2016

forward revenue for SaaS businesses when in the years before it had been less than 5x. But if you’re a seed investor and you’re worried that the A-round won’t get done if your post-money is too high you suddenly start paying less. Why Financing in Falling Markets is So Damn Difficult. Down rounds are hard.

Valuation 150

Valuation Down Round Startup Later Stage 150

Both Sides of the Table

OCTOBER 18, 2015

“Trade in an asset at a price that strongly deviates from an asset’s intrinsic value” The arguments against that, “This time the startups have real revenues!” In 2014 3 out of 12 exits were occurred at a lower valuation than the previous round. 25% “down rounds? ” ring hollow.

IPO 150

IPO Venture Capital LP SEC 150