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Cram Down – A Test of Character for VCs and Founders

Steve Blank

Most existing investors (those still in business) hoarded their money and stopped doing follow-on rounds until the rubble had cleared. Except, that is, for the bottom feeders of the Venture Capital business – investors who “ cram down ” their companies. A cram down is different than a down round. You Have a Choice.

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A heartbreaking story about time and money.

Berkonomics

How about young or pre-revenue companies? 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. Lots of good jobs were lost and many investors including me were left with the question.

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What is the Right Burn Rate at a Startup Company?

Both Sides of the Table

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. So if your costs are $500,000 per month and you have $350,000 per month in revenue then your net burn (500-350) is equal to $150,000.

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Startup Funding – A Comprehensive Guide for Entrepreneurs

ReadWriteStart

The primary source of your funds should be your paying customers, i.e., your business should generate enough revenues and profits to fund the growth and expansion. These usually play a role in the very early stage of your business, primarily pre-revenue. Reasons for funding. ? Incubators and Accelerators. Government programs.

Startup 150
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Why Startups Should Raise Money at the Top End of Normal

Both Sides of the Table

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. I raised my A round at a $31.5 million post-money valuation with no revenue. It was early 2000. That was market.

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Wasted time is money lost.

Berkonomics

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.

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Venture Capital Q&A Session

Both Sides of the Table

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.