Bad Notes on Venture Capital

Both Sides of the Table

We raised a seed round. You’ll find out the minimum when the next round is raised. 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. There were no metrics. Your A round? This week.

Current Startup Market Emotional Biases

Feld Thoughts

Fred Wilson’s daily post referred to the article in Don’t Kick The Can Down The Road. 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. Their own ego is also a factor – will a down round signal weakness? Anything that hints of a down round brings questions about the success metrics that have already been “booked.”

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Why Startups Should Raise Money at the Top End of Normal

Both Sides of the Table

If you invested in the first angel round of a startup company it is usually very hard to sell your stock – usually for many years if ever at all. Ah, but you say that for a normal-sized angel check or A round check one shouldn’t worry about the ultimate exit because he or she is getting in really early and at a cheap enough price so who cares whether one pays $5 million pre-money or $15 million pre-money – you just have to make sure you back really big companies.

How NZ entrepreneurs can up their capital raising game

NZ Entrepreneur

I personally funded my first ventures, then led the two rounds that have seen Ambit take in $2.2m And importantly, each round needs to be an increase on the last, so investors feel like their investment is winning and share the news or hopefully re-invest. The situation I see time and again is an over-valuation on a markedly smaller-than-anticipated business, revenue numbers not achieved, and then needing to do another raise on a lower valuation (a ‘down-round’).

Unicorpse

Feld Thoughts

Some will demonstrate strategically justifiable metrics and have fantastic ‘up round’ exits; others may see liquidation preferences kick in which will negatively impact founders and employees; others may fulfill the adage “IPO is the new down round” , which has been the case for more than half of the public companies on our list. The current usage of the word unicorn makes me tired.

What I *Would Have* Said at TechCrunch Disrupt

Both Sides of the Table

I used an analogy I heard from Michael Dougherty (founder of Jelli) recounting what First Round Capital told him, “sometimes you’re on the local train and sometimes you’re on the express train. The express train represents raising a large VC round before you’ve figured out whether you can be big.&# I agree. But it also hurts entrepreneurs – Mike asked people about what they were doing to keep prices down.

Bad Notes on VC

Gust

We raised a seed round. You’ll find out the minimum when the next round is raised. 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. Him: But when I raised my first round we didn’t know how to price the company. There were no metrics.

Startup Fairy Tales and Other Tall Tales That Venture Capitalists Tell

Growthink Blog

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. Usually unbeknownst to all, the decision around pursuing or accepting a venture capital round will be the most important factor in determining the investment return for the founder and the original angel investors in the company. It is driven by the following: • The Best Metric for the Health of a Company is Cash Flow.

In Venture Capital, Should You Be a Momentum or a Value Investor?

David Teten

Likely signs of a Momentum investment: the round is oversubscribed and the entrepreneur has more negotiating leverage than VCs during the closing process. . 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. That’s where the logic falls down.

To Follow On or Not to Follow On

This is going to be BIG.

There are a lot of people that artificially group together performance metrics for venture, and try to extrapolate successful stratagies from it. That wasn't a bubble bursting issue--that was a poor financing strategy issue of people getting caught with their pants down, hands in the cookie jar, and all the metaphors you can think of at once. I haven't negotiated to get my way into $18mm funding rounds with huge checks--so I'm simply not going to do that. Down from what?

The VC Death Trap

Rob Go

Let’s that fund invests 1/3 of the capital into the initial rounds. What IS problematic is putting a lot more capital into follow-on rounds for a company that ends up not working. There is a lot of competition, so the fund ends up investing $5M into the A round at a pretty high price. A fancy firm puts down a term sheet to invest $40M in the new company. No worries – insiders do a $20M round to get the company another year.

Twitter Link Roundup #178 – Small Business, Startups, Innovation, Social Media, Design, Marketing and More

crowdSPRING Blog

The critical metrics for each stage of your SaaS business | by Lars Lofrgren – [link]. The Damaging Psychology of Down Rounds | by Mark Suster – [link]. Every day on the crowdSPRING Twitter account and on my own Twitter account , I post links to posts or videos I enjoyed reading or viewing. These posts and videos are about logo design , web design , startups, entrepreneurship, small business, leadership, social media, marketing, and more!

The Future of Startups 2013-2017

Scalable Startup

So let me maybe start with sort of – top-down and bottoms-up is how we think about it, because both are important — so let me start with historical context and then maybe go to the stuff happening right now. And so it has always been this kind of trickle-down model for 50 years. Alexia Tsotsis: It’s grassroots versus trickle-down. Marc Andreessen: Versus trickle-down. I mean, we have been trying to take down mostly good companies.