ReadWriteStart

JUNE 1, 2020

Instead of funding, you pay the investors a structured royalty, which is a portion of the sales. 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.

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

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

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. There is a lot to say about retaining control.

Private Equity 118

Private Equity Valuation Cap Table Accredited Investor 118

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 In 2010, we were recruiting for a Senior Vice President of Sales and Marketing for Backupify, and it was clear that many of the people I was interviewing wanted the CEO role. Hang out with other founders and CEOs. Keep at it.

Founder 120

Founder Startup Cofounder Business Model 120

VC Cafe

SEPTEMBER 26, 2022

The past year was a wild ride for startups and founders, giving a whole new meaning to the ”rollercoaster” aspect of being an entrepreneur. Sustainable growth: Prioritise sales efficiency over growth at all costs. Patrick Collison , self-made billionaire founder of Stripe. Bill Gates , founder of Microsoft.

Founder 187

Founder Startup Valuation Pre-Money Valuation 187

Hunter Walker

AUGUST 8, 2023

Restructures, Down Rounds, and Pay to Plays. As The Information proclaims, “ Unicorn Fire Sales Ahead.” 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.

Portfolio 98

Portfolio Cap Table LP Valuation 98

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. Key Variables to Consider: Sales units. Founders are typically ambitious when projecting sales volumes. Timing of sales.

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Startup Sales Cycle Down Round Revenue 69

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

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. Not long after, the company was sold in a “fire sale” amounting to slightly less than the debt on the books. All investors, including the VC firm, lost everything.

Silicon Valley 85

Silicon Valley Burn Rate Angel Investor Down Round 85

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). For you who fit that description, nice work. There is a lot to say about retaining control.

Private Equity 106

Private Equity Valuation Cap Table Accredited Investor 106

Startup Company Lawyer

MARCH 14, 2010

Founders Institute Plain Preferred Term Sheet (by WSGR – disclaimer, I represent the Founders Institute and was involved in drafting this document). Co-sale rights. These rights are missing, which is probably okay since I have never heard of a co-sale right being used before. Comprehensive protective provisions.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

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. The reverse also holds: a Value investment can become Momentum, and then follow with a down round.

Venture Capital 60

Venture Capital Valuation Stock NDA 60

Scalable Startup

JANUARY 27, 2011

If you’re venture funded, things get kind of ugly -unhappy board members, cut off from communications, down- rounds to keep you going, or no more funding. Many early stage founders aren’t sure how to handle this requirement for success. And all those other depressing clichés. What about users? Press Mentions?

Revenue 22

Revenue Early Stage Down Round Software Review 22

Both Sides of the Table

FEBRUARY 8, 2016

But I would point out that raising money is an existential event and I think in the coming 12-18 months you may see loss ratios (companies going out of business or selling in fire sales) go up. 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

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. With this capital, the company propels itself to $50 million+ in revenues, and to either a sale to a strategic acquirer or to an initial public offering.

Angel Investor 112

Angel Investor Venture Capital Sweat Equity Cram Down 112

Berkonomics

OCTOBER 7, 2011

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.

Valuation 54

Valuation Dilution Down Round Employee 54

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.) Sales people cost money, and when they’re not bringing in revenue, their wandering in the woods is time consuming, cash-draining and demoralizing.

Lean 244

Lean Silicon Valley Startup RSS 244

Hippoland

NOVEMBER 13, 2016

Primarily these things: Companies dissolvingCompanies exitingCompanies raising equity rounds All of these events are concrete events that attach a numerical value to a company. Companies that exit are valued at whatever the sale is. If a company raises a good round, it gets marked up to the new value.

IRR 48

IRR Valuation Portfolio Due Diligence 48

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). For you who fit that description, nice work. There is a lot to say about retaining control.

Private Equity 69

Private Equity Valuation Cap Table Accredited Investor 69

abovethecrowd.com

APRIL 20, 2016

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. Their own ego is also a factor – will a down round signal weakness?

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Scalable Startup

OCTOBER 26, 2011

The second round is often for some or all of the following – corporate growth, go to market, turn the prototype into a robust offering, marketing costs, or to hire a sales force. It’s no longer based on a hunch, unless the company is in trouble and needs money to finish what the first round started. Founders Fund.

Mezzanine 22

Mezzanine Due Diligence IPO Angel Investor 22

www.paulgraham.com

APRIL 28, 2010

A typical startup goes throughseveral rounds of funding, and at each round you want to take justenough money to reach the speed where you can shift into the nextgear. I think it would help founders to understand funding better—notjust the mechanics of it, but what investors are thinking. Few startups get it quite right.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

Rob Go

JUNE 1, 2016

This company may end up salvaging some value in a sale, but it could also be a near total loss, which is tough to swallow. 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. It has the fewest internal checks and balances.

Term Sheet 28

Term Sheet Portfolio Valuation Warrant 28

Altgate

MARCH 8, 2009

Growth stage investors are usually the Series B or C investors who come in when the product is in the market but there is little or no revenue and the team is probably in the 20-something range with the goal to ramp it up to 40-50 employees with the new money, build out a sales team, etc. But some will be saved.

Later Stage 34

Later Stage Early Stage Venture Capital Portfolio 34

Both Sides of the Table

MARCH 30, 2016

forward sales with some as high as 12x sales. Investors sat with the founder & CEO, Jason Spievak, and asked him what he wanted to do about the future. forward sales, we hinted at a range north of 5x but “we’d be flexible” and we meant it. Did he want to see if Invoca could be public some day?

Balance Sheet 150

Balance Sheet Burn Rate Valuation Forecast 150

Reid Hoffman

JUNE 8, 2021

While many travel industry leaders chose to “go dark,” as Airbnb CEO and co-founder Brian Chesky put it , while they decided how to navigate next steps, Chesky took a different approach: He got candid. Today, we are thrilled to have Airbnb CEO and co-founder Brian Chesky with us. Well, that same thing can be said for any product.

Silicon Valley 69

Silicon Valley Hosting Rhode Island Design 69

Reid Hoffman

JUNE 8, 2021

While many travel industry leaders chose to “go dark,” as Airbnb CEO and co-founder Brian Chesky put it , while they decided how to navigate next steps, Chesky took a different approach: He got candid. Today, we are thrilled to have Airbnb CEO and co-founder Brian Chesky with us. Well, that same thing can be said for any product.

Silicon Valley 36

Silicon Valley Hosting Rhode Island Design 36

Scalable Startup

FEBRUARY 1, 2013

So the best technology for inventory management and for financial planning and for sales-force management and for online marketing can now be used just as easily or more easily by a small business. And they don’t buy sales-force automation software, they rent on Salesforce.com. Marc Andreessen: No, we have not seen down rounds yet.

Software Review 22

Software Review Startup Venture Capital Stock 22

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