Feld Thoughts

FEBRUARY 9, 2016

I have two simple rules for founders in my head from this experience. 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. Then use the down round to clean up your preference overhang.

Cap Table 70

Cap Table Down Round Liquidation Preference Founder 70

Berkonomics

OCTOBER 5, 2023

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. And professional investors often penalize the company with lower-priced down rounds or expensive loans as a result.

Silicon Valley 118

Silicon Valley Burn Rate Angel Investor Down Round 118

Both Sides of the Table

JUNE 30, 2016

Amongst the most often asked questions I get from founders is, “How much money should I raise?” Reflexively founders want to raise as much money as they can because they figure it will give them more resources, better chances of competing and a longer runways before they have to do the often painful job of asking, yet again, for money.

Pre-Money Valuation 292

Pre-Money Valuation Valuation Early Stage Startup 292

VC Cafe

JUNE 10, 2022

But recently those round sizes and valuations have tumbled to about $10 million and $50 million, respectively, he said. As a result, founders are accepting increased dilution of the stakes they hold in their own companies. With over 1,000 global unicorns (and about 1.5 As an example, here are 34 new unicorns minted in May 2022.

Valuation 151

Valuation Marketing Venture Capital 151

VC Cafe

JANUARY 2, 2023

As Fred Wilson put in in his post ‘What will happen in 2023’ “I believe that ‘new normal’ is more or less where we were in 2015 where seed rounds were done around $10mm, A rounds were done around $15mm to $25mm, B rounds were done around $25mm to $50mm, and growth rounds had a cap at 10x revenues.”

Valuation 158

Valuation Down Round Venture Capital 158

Both Sides of the Table

JUNE 5, 2011

I’ve decided to take all of my private conversations and subjective points-of-view on the topic and make them public in a keynote speech at the Founder Showcase in San Francisco on June 15th. Finally, even if they could bring themselves to offer you a major down round, the more sophisticated investors know it’s fool’s gold.

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. I eventually needed more money.

Venture Capital 282

Venture Capital Term Sheet Valuation Stock Options 282

ReadWriteStart

JUNE 1, 2020

I have interacted with a lot of founders who funded their initial business expenses through credit cards. Point number 1: You must understand that funding is a business transaction between the investors and the startup founders. But, in subsequent rounds of funding inflated valuation will be normalized resulting in a down round.

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

Both Sides of the Table

SEPTEMBER 28, 2014

by Michael Woolf that is worth any startup founder reading to get a sense of perspective on the reality warp that is startup world during a frothy market such as 1997-1999, 2005-2007 or 2012-2014. Burn rate in case you don’t know is the amount of money a company is either spending (gross) or losing (net) per month. (it

Burn Rate 383

Burn Rate Balance Sheet .Net Valuation 383

Berkonomics

AUGUST 10, 2017

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. 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

VC Cafe

NOVEMBER 30, 2022

The 2022 Founders Factories report by DealRoom and Accel shines a spotlight on the startup clusters that produced most unicorns across Europe and Israel, and then tracks the alumni of those unicorns to test where the talent goes to found their next companies. London and Tel Aviv are home to the most founder nurturing unicorn startups.

Europe 97

Europe Balance Sheet Valuation 97

www.quora.com

SEPTEMBER 22, 2011

Type to Add and Search Questions; Search Topics and People Startups Startup Compensation Entrepreneurship Compensation Stock Options Major Internet Companies Silicon Valley Why is there such a large founder to early employee equity drop-off? The real question here is: why is it fair for founders to get so much more?

Equity 40

Equity Employee Founder Cofounder 40

VC Cafe

MAY 29, 2022

Sequoia’s “Adapting to Endure” Sequoia presented this deck to a group of portfolio founders and it quickly spread online to founders worldwide. Investing at this stage is primarily focused on founders, market tailwinds, and underlying product/strategy (in that order). Source: VentureUnlocked newsletter.

Venture Capital 183

Venture Capital Early Stage Valuation Startup 183

View from Seed

FEBRUARY 19, 2015

This is a guest post from Rob May , a co-founder and CEO of Backupify , which raised $19.5M Hang out with other founders and CEOs. Other CEOs are the only people you can sit down and talk with about the hardest parts of your job. and sold to Datto in late 2014. Disclosure: NextView was not an investor in Backupify.).

Founder 120

Founder Startup Cofounder Business Model 120

Both Sides of the Table

JUNE 22, 2011

I recently spoke at the Founder Showcase at the request of Adeo Ressi. I said that at the Founder Showcase, too. And for many of these they were (over) funded 7-10 years ago and don’t necessarily all represent great returns for investors or founders. New investors hate down rounds. That’s a fact.

Saudi Arabia 309

Saudi Arabia Valuation IPO Technical Review 309

Both Sides of the Table

MAY 30, 2018

What was the post money on your last round (and how much capital have you raised)? It’s not uncommon for a VC to ask you how much capital you’ve raised and what the post-money valuation was on your last round. VCs hate “down rounds” and many don’t even like “flat rounds.” There are some simple reasons. After all?—?we

Valuation 324

Valuation Post-Money Valuation Pre-Money Valuation Cofounder 324

VC Cafe

JANUARY 29, 2024

Many startups extended runway, cut costs and took on painful down rounds or expensive debt to avoid raising in 2023. Rates coming down – The Fed is expected to cut interest rates this year, potentially thawing capital into startups, and opening up the IPO window (which will give funds/LPs liquidity).

Generative AI 171

Generative AI Global Venture Capital Valuation 171

VC Cafe

MAY 18, 2022

Down rounds are coming. Advice for startup founders (consolidated). CEOs and founders need to look this harsh reality square in the eyes and start planning to ensure survival today. Startup founders should adjust expectations accordingly. "Tourist" founders & investors go away.

Term Sheet 190

Term Sheet Startup Valuation Ukraine 190

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

Hunter Walker

AUGUST 8, 2023

Restructures, Down Rounds, and Pay to Plays. Funds will get rightsized , which helps better align investors and founders in what defines a successful outcome. Whatever gets reported is just the tip of the iceberg. And fascinating new advances (and needs) in AI, climate, biology, etc are driving tech-IP driven startups.

Portfolio 98

Portfolio Cap Table LP Valuation 98

Both Sides of the Table

SEPTEMBER 18, 2014

And now I have to explain to team that they’re taking more dilution than they expected if we do a down round. A down round? I know how to structure around that to protect the founders from getting screwed on a multiple liquidation preference. Raising lower seems kind of like something is wrong.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

This is going to be BIG.

AUGUST 21, 2023

Before we get into a debate about how much a founder should own, there’s a context implicit in the question that is easily overlooked. And then, even when they have, they still remain “interested” should Sequoia decide to throw down a term sheet.) Now that we’ve established that, let’s talk about founder blind spots.

Cap Table 78

Cap Table Term Sheet Database Option Pool 78

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). For those of you who fit that description, nice work. Do not expect grand valuations of your enterprise from these professional angels.

Private Equity 118

Private Equity Valuation Cap Table Accredited Investor 118

Feld Thoughts

APRIL 21, 2016

. “Many Unicorn founders and CEOs have never experienced a difficult fundraising environment — they have only known success. 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

OCTOBER 18, 2018

For investors, a subsequent down round at a lower valuation than the last, or an exit opportunity at a loss are all opportunities for the affected stakeholder to show a side that can sometimes shock an entrepreneur or CEO. That one hurts early investors and founders more than perhaps any other action by investors.

Valuation 96

Valuation Dilution Down Round Employee 96

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. Has there ever been a down round, inside round, a flat round, or a CEO change?

Startup 146

Startup Burn Rate Technical Review Down Round 146

Steve Blank

NOVEMBER 2, 2009

In times when venture capital is hard to get, investors extract high costs for failure (down-rounds, cram downs , new management teams, shut down the company.)

Lean 244

Lean Silicon Valley Startup RSS 244

A Crowded Space

DECEMBER 9, 2013

In VC: I see a fair number of deals that have reached some point of stagnation that are seeking a flat or down round. Every good founder I know writes a list of names when they are starting to prepare for fundraising. “The most important thing to do if you find yourself in a hole is to stop digging.” . This is bad.

Technical Review 68

Technical Review Deal Flow Balance Sheet Down Round 68

NZ Entrepreneur

SEPTEMBER 16, 2020

The statistics show that even though most founders bet their time and resources that their startups will be the best in the world, 90% of those new startups won’t be in operation in 10-15 years. Founders are typically ambitious when projecting sales volumes. No one can predict the future and it’s especially true in the startup world.

Startup 69

Startup Sales Cycle Down Round Revenue 69

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

crowdSPRING Blog

MAY 10, 2013

Startup Founders: Don’t Forget to Sell the Dream | by Jason Shen – [link]. The Damaging Psychology of Down Rounds | by Mark Suster – [link]. The Start-up Hall of Shame (America’s 10 Worst States for Entrepreneurs) – [link]. Startups: You Should Value Software More | by Wade Foster – [link].

Social Media 93

Social Media Small Business Design Media 93

Startup Professionals Musings

JANUARY 27, 2012

The first capital a young company receives usually takes the form of common stock, the same class of shares the founders hold. Venture capitalists and later round investors like the preferred convertible shares. 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

YoungUpstarts

JUNE 26, 2020

I always caution entrepreneurs not to take too high a valuation in any round because it sets very high expectations for the next round. A down round, which can damage a company and make it difficult to raise money in the future. Unfortunately, most startups don’t meet their initial rosy projections. What happens then?

Finance 205

Finance Silicon Valley Valuation Startup 205

Berkonomics

MARCH 30, 2010

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

The Equity Kicker

MARCH 24, 2015

Everyone loves a high valuation and it’s natural for founders to want to minimise dilution. 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.

Valuation 60

Valuation Down Round Dilution Venture Capital 60

ithacaVC

FEBRUARY 1, 2018

Founders often raise money from friends and family and other angels. The treatment of the friends, family and angels (FFA) as the startup matures and raises larger rounds of financing over time is interesting. And sometimes founders want to protect the financial interests of FFAs. Here is a quick guide.

Preemptive Right 45

Preemptive Right Cap Table Valuation Dilution 45

Startup Professionals Musings

SEPTEMBER 14, 2010

The first capital a young company receives usually takes the form of common stock, the same class of shares the founders hold. Venture capitalists and later round investors like the preferred convertible shares. 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