Both Sides of the Table

JUNE 5, 2011

2 preamble issues having read the comments on TC today: 1: I know that the prices of startup companies is much great in Silicon Valley than in smaller towns / less tech focused areas in the US and the US prices higher than many foreign markets. I can’t control the market. Private markets for stocks are the opposite.

Pre-Money Valuation 336

Pre-Money Valuation Valuation Silicon Valley Stock 336

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. Check ‘em out!

Venture Capital 282

Venture Capital Term Sheet Valuation Stock Options 282

ReadWriteStart

JUNE 1, 2020

The next reason is to establish a competitive advantage over your competition and quickly acquire a substantial market share. Let’s take an example – In the case of an internet or app business, the user traction and market penetration is a must. Establish a competitive advantage. Both of which are expensive and time-consuming.

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

Ben's Blog

JULY 16, 2013

What about the efficient market hypothesis? Aren’t markets rational? If markets behave rationally, one might expect the ratio of price to earnings to be reasonably stable over the period (click here for complete data set). Because markets are not logical; markets are emotional. Yes, we did a down round.

Down Round 78

Down Round Marketing Preferred Stock Post-Money Valuation 78

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

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

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. Restructures, Down Rounds, and Pay to Plays. Soft Acquisition Market.

Portfolio 98

Portfolio Cap Table LP Valuation 98

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

Berkonomics

MARCH 30, 2010

Since this number is budgeted and pre-authorized, managers tend to focus upon other things such as sales, marketing and product development issues. There is an art to efficient management of a process, whether that is the process of bringing a product to market from R&D to production or developing a new product’s launch program.

Silicon Valley 85

Silicon Valley Burn Rate Angel Investor Down Round 85

Lightspeed Venture Partners

OCTOBER 7, 2012

This isn’t a company yet, it’s an idea, and the founder could do a lot more on his own to validate product-market fit before raising capital. 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. They were right to do so.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

VC Cafe

FEBRUARY 27, 2024

What’s the difference between an angel round and pre-seed round and why do I believe we’ll see more pre-seed rounds taking place in 2024? While the answers are somewhat semantic, the pre-seed funding round is making a comeback in 2024 startup financing. Seed is about showing initial product market fit.

Valuation 186

Valuation Software Review Generative AI Technical Review 186

The Equity Kicker

JANUARY 22, 2014

You rush a few key hires, overbuild the team, ramp marketing spend. A few quarters in, you realize that product/market fit is not quite there, or you’re not as far up the sales learning curve as you thought, or your LTV/CAC is suddenly in the toilet. Investors who paid up for your financing are not happy.

Venture Capital 102

Venture Capital Down Round Valuation Lean 102

Ben's Blog

JULY 16, 2013

What about the efficient market hypothesis? Aren’t markets rational? If markets behave rationally, one might expect the ratio of price to earnings to be reasonably stable over the period (click here for complete data set). Because markets are not logical; markets are emotional. Yes, we did a down round.

Marketing 46

Marketing Preferred Stock Post-Money Valuation Down Round 46

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

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

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

Both Sides of the Table

SEPTEMBER 27, 2010

We need venture debt, factoring companies and public markets. 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? In public investing you can get in and out even in a bull market.

Liquidity Event 308

Liquidity Event Silicon Valley Seed Stage Finance 308

ithacaVC

NOVEMBER 14, 2014

A founder is about to raise their first round and asking me how to value their company. [1]. You evaluate the team, product, market and other variables – then, make a general guess. Market size. A big market determines the upside potential. Don’t risk a down round. Map out multiple stages of financing.

Valuation 69

Valuation Startup Down Round Early Stage 69

Both Sides of the Table

FEBRUARY 8, 2016

And when prices are dropping on a VCs existing companies in market, there is a substantial reduction in FOMO (fear of missing out) for new deals, which means that investors take their time in making investment decisions. Don’t assume that you can “just do a down round” if necessary. Down rounds are corrosive.

Burn Rate 150

Burn Rate Cap Table Balance Sheet Dilution 150

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. There are a lot of dark, hard days.

Angel Investor 112

Angel Investor Venture Capital Sweat Equity Cram Down 112

David Teten

AUGUST 7, 2019

To simplify, there are two classic approaches to public markets investing. The first is Momentum Investing , “a strategy to capitalize on the continuance of an existing market trend”, which usually meaning that the price has been rising in the recent past. As a venture capitalist, should you be a Momentum or a Value investor?

Venture Capital 60

Venture Capital Valuation Stock NDA 60

abovethecrowd.com

APRIL 20, 2016

Why the Unicorn Financing Market Just Became Dangerous…For All Involved. These mutual funds “mark-to-market” every day, and fund managers are compensated periodically on this performance. With the public markets down, these groups began writing down Unicorn valuations. Emotional Biases.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

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. As growth investments (and valuations) go down, unicorns might struggle to survive, according to Globes. Israeli public tech companies saw market cap decline of 65% in 2022. ” Fred Wilson.

Valuation 158

Valuation Down Round Venture Capital 158

Genuine VC

FEBRUARY 9, 2011

Plus, VCs often will have met the Founder/CEOs of many of a particular startup’s competitors, so they’ll have an even richer understand of the market landscape. So most of your calculus in selecting the right startup role should involve understanding the company’s market and business plan in executing toward a grand vision.

Startup 146

Startup Burn Rate Technical Review Down Round 146

Rob Go

JUNE 1, 2016

Things are starting to go sideways, or the market has turned. No worries – insiders do a $20M round to get the company another year. The fund does a $5M chunk of this round. Where I think funds do start having hard conversations around follow-ons is when they need to lead inside rounds or protect themselves in down rounds.

Term Sheet 28

Term Sheet Portfolio Valuation Warrant 28

Scalable Startup

OCTOBER 26, 2011

The first venture round is often based on an idea, past successes, a business plan, or a market hunch. The current phenomenon of Internet multi-millionaires recycling their money back into the startup markets is creating “super” angels like Ron Conway. Where is the market going? Is it positioned correctly?

Mezzanine 22

Mezzanine Due Diligence IPO Angel Investor 22

Both Sides of the Table

FEBRUARY 14, 2016

I recently survey more than 150 VC friends from all stages and geographies what they thought about the market by asking “Which of the following statements best describes your mood heading into 2016?” I’ll spare you the math and point out that this means we funded 0.104% of the market. In short – no.

Valuation 150

Valuation Down Round Startup Later Stage 150

Both Sides of the Table

MARCH 30, 2016

It is an heroic accomplishment in a brutal fund-raising market in which only market leaders can bring in that sort of money. Every VC who’s been the business for a long time realized first hand that the VC markets were changing rapidly as early as Q3 of 2015. But of course public markets had begun gyrating. $30 million.

Balance Sheet 150

Balance Sheet Burn Rate Valuation Forecast 150

This is going to be BIG.

SEPTEMBER 7, 2012

The one thing that does effect them all is the cyclicality of funding and exit markets, but if you go back over the last 20 years, there's really only been a very short timeframe where you literally could not get a company funded. If you're doing seed deals, how often does a down round in a seed deal even happen? Down from what?

Later Stage 99

Later Stage Down Round Pre-Money Valuation Early Stage 99

Both Sides of the Table

JUNE 5, 2016

The funding environment for tech startups is an ever shifting ground as we go through predictable shifts that go hand-in-hand with the slowing of the overall market. This works in a booming market or in a company that never hits any headwinds. Non VC Growth Rounds. The market eventually slowed down. VC Infighting.

Venture Capital 150

Venture Capital Silicon Valley Burn Rate LP 150

This is going to be BIG.

MARCH 3, 2019

How then, do you expect to make money when you’re buying on the public market? First, price discipline doesn’t work in overly competitive markets. When there are too many funds in a market, keeping your entry price reasonable is going to get you shut out of a lot of deals. Seed round investors get a tidy 18.2x

Portfolio 110

Portfolio Burn Rate LP Distribution 110

www.quora.com

SEPTEMBER 22, 2011

There's more visibility for the company, sure, but how clear is that vision after they've raised a seed round? This is a far cry from a sustainable business, product-market fit, and a long ways from profitability in most cases. They've got a handful of customers, maybe a few thousand users, and some initial traction.

Equity 40

Equity Employee Founder Cofounder 40

Bryce Dot VC

APRIL 21, 2016

“Why the Unicorn financing market just became dangerous…for all involved.” This wasn’t the first time that Bill has sounded this alarm, nor is he the only one to have been calling out bad behavior in the VC funding market. Perhaps the answer to the Unicorn dilemma isn’t to take the down round or the dirty term sheet.

Silicon Valley 40

Silicon Valley Dilution Term Sheet Down Round 40

Both Sides of the Table

OCTOBER 18, 2015

There is a lot of uncertainty about the state of the private, high-growth technology markets and the venture capital markets that underpin them. There is nobody to blame for this abandonment of common sense – it is simply the market being the market and we’re doomed to repeat history. It’s just a market.

IPO 150

IPO Venture Capital LP SEC 150