VC Cafe

OCTOBER 31, 2022

This is largely due to several major stock market crashes and global economic uncertainties. Many companies are now having to resort to tough measures in order to stay afloat, including layoffs, down rounds and tough terms from current investors. If the answer is yes, then a down round is likely the best path forward.

Founder 173

Founder Technical Review Down Round Liquidation Preference 173

VC Cafe

MAY 29, 2022

Snap’s stock plunged 40% last week after Evan Spigel announced the company will miss revenue targets, which raises questions about other ‘advertising powered’ social networks. Over 60 tech companies have been reported to conduct over 16,000 layoffs in May, and the list is growing as you can see in [link].

Venture Capital 183

Venture Capital Early Stage Valuation Startup 183

YoungUpstarts

JUNE 26, 2020

I used to think a valuation was kind of like a stock price of a public company. Setting aside the issues of valuation of common stock vs. preferred stock, what I really didn’t understand was that a valuation is a set of expectations. A down round, which can damage a company and make it difficult to raise money in the future.

Finance 180

Finance Silicon Valley Valuation Startup 180

Berkonomics

AUGUST 3, 2023

They have been burned too badly during the last decade by overvaluing businesses and finding themselves like friends and family, “stuffed” into a down round of lower valuation when a company takes its next round of financing from the next step, venture capitalists.

Private Equity 118

Private Equity Valuation Cap Table Accredited Investor 118

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. Whatever gets reported is just the tip of the iceberg.

Portfolio 98

Portfolio Cap Table LP Valuation 98

Both Sides of the Table

JUNE 22, 2011

New investors hate down rounds. But when it’s all over and they define the era of this mini run up in stock prices I suspect they’ll include 2011 in the “over valued&# category. They will enter the “triage phase&# of the market where they figure out which of their existing deals will survive. That may be.

Saudi Arabia 309

Saudi Arabia Valuation IPO Technical Review 309

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. This does not mean that if you have eight Angels in your company, you will have to seat all eight of them on your board.

Term Sheet 223

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 223

Ben's Blog

JULY 16, 2013

In fact, if you are like most companies, your managers probably implied to your employees that your stock price would only rise as long as you were private. They might have said something ridiculous like: “Based on the current price of the preferred stock, your offer is already worth $5M.” As if the price could never go down.

Down Round 78

Down Round Marketing Preferred Stock Post-Money Valuation 78

Lightspeed Venture Partners

OCTOBER 7, 2012

Week three’s breakdown covered topics like how hard momentum is to turn around, and how participating preferred stock works. This time I’ll break down week four of this season. 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.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

Gust

SEPTEMBER 17, 2014

If you’re wildly successful early on or if they help you achieve a great valuation they actually pay a significant price for their eventual stock even though they took much more risk than a future investor and backed you early. Less than you’ll probably grant your most junior employees in stock options? A down round?

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

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. This does not mean that if you have eight angels in your company, you will have to seat all eight of them on your board.

Term Sheet 227

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 227

Both Sides of the Table

FEBRUARY 4, 2016

As I’ve argued for ages there has to be a correlation between public tech stock valuations and private market valuations. 61% of VCs said valuations were “marginally down” in Q4 of 2015 but 91% expect price decreases in the next two quarters. Most flat rounds. More down rounds. So what happened?

LP 150

LP Valuation Burn Rate Pre-Money Valuation 150

Startup Company Lawyer

MARCH 14, 2010

I think that the Series Seed documents are probably most appropriate in a friends and family equity seed financing, as opposed to a round led by a professional investor. To differentiate it from typical “Series A&# preferred stock, which comes with certain expectations with regard to rights. Why is it called Series Seed?

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

ithacaVC

FEBRUARY 1, 2018

If FFAs only invest at the beginning and do not make any follow on investments as the company raises more $$ then the only real way FFAs make money when the company is ultimately sold is if the company keeps raising future rounds at higher and higher valuations (and IPO exit may provide upside if the stock price increases over time after the IPO).

Preemptive Right 45

Preemptive Right Cap Table Valuation Dilution 45

Gust

OCTOBER 17, 2011

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. This does not mean that if you have eight angels in your company, you will have to seat all eight of them on your board.

Term Sheet 158

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 158

Feld Thoughts

APRIL 21, 2016

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?

Marketing 70

Marketing Down Round Startup IRR 70

The Equity Kicker

NOVEMBER 20, 2015

That’s good news for both companies, because first day declines can sour a stock for months to come. I say that because investors in the $6bn round in Square have still made money on the deal. They had a ‘ratchet’ which repriced their investment in the event of a down round to give them a 20% return.

IPO 60

IPO Matching Ratchet Valuation 60

David Teten

AUGUST 7, 2019

The second strategy is Value Investing , a strategy which “seeks to maximize returns by finding stocks that are undervalued by the market…Investors assess a stock’s intrinsic value…and compare that value with the stock price. were clearly Momentum, but [in hindsight] they were also Value.”

Venture Capital 60

Venture Capital Valuation Stock NDA 60

Both Sides of the Table

FEBRUARY 8, 2016

We do this in our consumer lives with everything ranging from housing purchases to public stocks. Don’t assume that you can “just do a down round” if necessary. Down rounds are corrosive. Employees hate them because it’s hard to reset expectations that their stock is worth less.

Burn Rate 150

Burn Rate Cap Table Balance Sheet Dilution 150

Berkonomics

JUNE 8, 2017

They have been burned too badly during the last decade by overvaluing businesses and finding themselves like friends and family, “stuffed” into a down round of lower valuation when a company takes its next round of financing from the next step, venture capitalists.

Private Equity 106

Private Equity Valuation Cap Table Accredited Investor 106

Ben's Blog

JULY 16, 2013

In fact, if you are like most companies, your managers probably implied to your employees that your stock price would only rise as long as you were private. They might have said something ridiculous like: “Based on the current price of the preferred stock, your offer is already worth $5M.” As if the price could never go down.

Marketing 46

Marketing Preferred Stock Post-Money Valuation Down Round 46

ithacaVC

FEBRUARY 23, 2012

Most of my stomach turning results from the fact that this exercise is purely about unrealized return values of purely non-liquid assets (unless of course there is an active secondary market for the stock – this applies to a few handfuls of VC backed companies). It is easy to tell your LPs that the valuations are conservative…

Valuation 49

Valuation Institutional Investors Marketing Down Round 49

thebarefootvc

AUGUST 26, 2015

After a tumultuous week in global markets, today the US stock market ended higher on the session. As someone who invested through the 2001 and 2008 crashes I can assure you that down rounds and fire sales are not fun for anyone involved. and the Nasdaq (which includes Apple, Google, Intel and other tech stalwarts) gained 4.2%.

Marketing 40

Marketing Investment Bankers Valuation China 40

thebarefootvc

AUGUST 26, 2015

After a tumultuous week in global markets, today the US stock market ended higher on the session. As someone who invested through the 2001 and 2008 crashes I can assure you that down rounds and fire sales are not fun for anyone involved. and the Nasdaq (which includes Apple, Google, Intel and other tech stalwarts) gained 4.2%.

Marketing 40

Marketing Investment Bankers Valuation China 40

thebarefootvc

JULY 26, 2015

After a tumultuous week in global markets, today the US stock market ended higher on the session. As someone who invested through the 2001 and 2008 crashes I can assure you that down rounds and fire sales are not fun for anyone involved. and the Nasdaq (which includes Apple, Google, Intel and other tech stalwarts) gained 4.2%.

Marketing 40

Marketing Investment Bankers Valuation China 40

Feld Thoughts

SEPTEMBER 9, 2015

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.

Liquidation Preference 70

Liquidation Preference Burn Rate Balance Sheet .Net 70

Hippoland

NOVEMBER 13, 2016

If a company sells for stock or partial-stock, then it’s more complicated, depending on whether the acquirer is a public company or a private company, and we don’t need to dive into that in this post. If a company raises a good round, it gets marked up to the new value. Companies that exit are valued at whatever the sale is.

IRR 48

IRR Valuation Portfolio Due Diligence 48

www.mattbartus.com

DECEMBER 9, 2012

an option to purchase shares in the future at a pre-determined price) to the investor to purchase preferred stock at the Series A price. Interesting strategy, although I don't know if it justifies the added risk of having a flat (or down) round next time you go to raise. Post-Money. link] Brad Hargreaves. Matt Bartus.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

www.paulgraham.com

APRIL 28, 2010

A lawyer I asked about it said: When the company goes public, the SEC will carefully study all prior issuances of stock by the company and demand that it take immediate action to cure any past violations of securities laws. Unfortunately,its impractical (if not illegal) to adjust the valuation of thecompany up and down for each investor.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

Berkonomics

JANUARY 20, 2010

They have been burned too badly during the last decade by overvaluing businesses and finding themselves like friends and family, “stuffed” into a down round of lower valuation when a company takes its next round of financing from the next step, venture capitalists.

Private Equity 69

Private Equity Valuation Cap Table Accredited Investor 69

Seeing Both Sides

DECEMBER 17, 2015

Pretty good performance as a whole compared to other tech stocks that have gotten pretty beat up (e.g., Yelp is down 49% YTD, Box is down 41%, Hortonworks is down 24%). Seven of the nine companies saw price gains (as of 12/15) ranging from 6% (athenahealth) to 134% (Wayfair). Reindeer Pipleline: Ninety-Nine.

Boston 20

Boston B2C Down Round IPO 20

abovethecrowd.com

APRIL 20, 2016

The same thing happened to many Internet stocks. 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?

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Both Sides of the Table

FEBRUARY 14, 2016

I wonder whether LinkedIn’s stock market plunge in January 2016 might have a similar effect (to a lesser magnitude because the underlying company is still great). But it was a shock to the system to see such a beloved tech stock get so ravaged on valuation in a single day. Why Down Rounds are Harder Than You May Think.

Valuation 150

Valuation Down Round Startup Later Stage 150

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. At one point, he had just 5 individual companies representing 70% of his public stock portfolio. “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

Scalable Startup

FEBRUARY 1, 2013

All you need is for one of the new enterprise companies to completely whiff a quarter and their stock will collapse and then everybody will get all freaked out. We are already invested in these companies; we can’t sell our stock. We don’t have to sell our stock. People get confused about — it’s really funny watching the stock.

Software Review 22

Software Review Startup Venture Capital Stock 22

Reid Hoffman

JUNE 8, 2021

We took nearly 2% of the company’s stock, and we put it aside and we created, it was actually 9.2 And I made a decision not to do an equity round, because I thought it would be a down round. And I said, I think it’s going to be a down round, because people are scared. I think there’s a one-for-one-for-one.

Silicon Valley 69

Silicon Valley Hosting Rhode Island Design 69

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? Is there a difference between getting equity, stock, shares?

Equity 40

Equity Employee Founder Cofounder 40