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Founders – Use Your Down Round To Clean Up Your Cap Table

Feld Thoughts

There are three things that will mess you up in the long run: Too much liquidation preference : My simple rule of thumb is that if you’ve raised more than $25m and your liquidation preference is greater than 50% of your post money valuation, you have too much liquidation preference. Venture Capital cap table down round Financing VC

The Damaging Psychology of Down Rounds

Both Sides of the Table

I would love it if other people would weigh in on the comments section below if you’ve had experiences with down rounds. But why?

Cash is King: 8 tips for Optimizing your Startup Financing Strategy

For Entrepreneurs

Getting Funded avoid down round Startup fundraising startup valuationIntroduction This post aims to help startup CEOs optimize their funding strategy by examining how investors value startups, and explaining how to avoid the common cash management pitfalls.

Startup Valuations – Again….


I have written about startup valuations previously. If you are advising startup founders, I strongly suggest having them read all 4 of the posts to get the lay of the startup valuation land. A founder is about to raise their first round and asking me how to value their company. [1]. Valuations of other companies like you.

Bad Notes on VC


We raised a seed round. You’ll find out the minimum when the next round is raised. Him: But when I raised my first round we didn’t know how to price the company. How will you price the next round? Your A round? Him: We didn’t want to price our round. Just a discount to the next round. A down round?

The Resetting of the Startup Industry

Both Sides of the Table

If you can get a round done at the price you expect – well done. Down rounds are corrosive. Be realistic on valuation.

What Most People Don’t Understand About How Startup Companies are Valued

Both Sides of the Table

” “Mark has a vested interest in talking down valuations of startups.” Do Investors WANT Valuations to Drop?

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. It’s long but worth reading every word slowly.

Burn Baby Burn

A VC : Venture Capital and Technology

As I was reading the WSJ piece, I found myself nodding my head and saying “yes”, “yes”, “yes” The thing I like so much about Bill’s point of view is that he does not focus on valuations as a measure of risk. Valuations can be fixed. Andy sent me a WSJ piece with Bill Gurley yesterday.


Feld Thoughts

But a lot of these are paper unicorns, so their valuations may not be real for a while.” The current usage of the word unicorn makes me tired.

Why Raising Too Much Money Can Harm Your Startup

Both Sides of the Table

I understand this instinct for more capital and I have two very different personal experiences: In my first company we raised an A-round of $16.5

Address the five risks to increase your valuation.


So it is important for the entrepreneur to identify, address and mitigate each of these in order to increase valuation and decrease the risk of ultimate loss of the business. Reduction or elimination of one or more of these risks increases the valuation of the company and certainly improves its chances of survival and growth.

Fundraising advice: Don’t over optimise on terms

The Equity Kicker

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. The biggest problem comes from chasing high valuations. But I’ll say it again: trying to get really high valuations is a mistake.

What Do Industry Insiders Think Will Happen in VC in 2016?

Both Sides of the Table

They point to some widely known facts: financings & valuations are up massively over the past 7 years and non-VC money has entered the system.

LP 94

Guest Post: Beware The Post Money Trap

A VC : Venture Capital and Technology

As valuations are extended and it feels very late in this cycle, I feel that the risk of this happening to entrepreneurs is quite high now. Combined with a lot of money being available from investors this is resulting in Series A rounds of $10 million and more. This ignores that down rounds are incredibly hard to do.

On the Square and Match IPOs and hopes for a correction

The Equity Kicker

Match closed up 23% at a valuation of $3.5bn and Square was up 45% at a valuation of $4.2bn. Exits Venture Capital

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Silicon Valley Venture Capital Survey Finds That, Yes, Valuations Are Up


And not surprisingly, perhaps, the survey found that valuations are up. Sponsor. The full survey can be downloaded here. Discuss.

A Cap is not a Valuation

Bryce Dot VC

Most had structured their seed rounds as bridge notes (a fancy term for a loan) that would convert to equity when the anticipated future round of funding closed. The problem we began to run into was that founders believed that these caps were actual valuations. So explore we did!

Venture Outlook 2016

Both Sides of the Table

On the chart below, 78% of the rounds of 80 $1bn+ companies were led by non VCs. 25% “down rounds? Boom and bust. Are VCs?

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Professional Investors Qualms About Crowdfunding

Startup Professionals Musings

I would summarize the views and qualms from professional investors as the following: Crowdfunding platform costs could trickle down to angel groups.

On the Road to Recap:

One key to this population growth has been the remarkable ease of the Unicorn fundraising process: Pick a new valuation well above your last one, put together a presentation deck, solicit offers, and watch the hundreds of million of dollars flow into your bank account. Take a clean round at a lower valuation. Emotional Biases.

IPO 47

How do VCs measure their success (and why you should care)?


Primarily these things: Companies dissolvingCompanies exitingCompanies raising equity rounds All of these events are concrete events that attach a numerical value to a company. If a company raises a good round, it gets marked up to the new value. And if a company takes a down-round, it gets marked down.

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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. Him: But when I raised my first round we didn’t know how to price the company. How will you price the next round? Your A round? Him: We didn’t want to price our round. Just a discount to the next round.

Why Startups Should Raise Money at the Top End of Normal

Both Sides of the Table

2: As expected at least one person accused me of writing this post because I want to see lower valuations. I raised my A round at a $31.5

Using warrants to pump up your VC valuation

How to pump up your VC valuation. One possibility is to negotiate a higher valuation and offer warrants (i.e., A View from the Valley.

The downside of high valuations


Valuations are high. In times of rising valuations, it is important for entrepreneurs to think about their long term funding strategy and choose a valuation that is sustainable not just today but over the whole life cycle of your company. Seed and angel capital has never been more plentiful. This is known as a double dip.

3 Business Models Venture Capitalists Love

Fresh Inc.: The Staff Blog

Then there’s the promising young company that actually has $20 million in sales but only manages to eek out a valuation of $200 million.

An Inside Scoop on the Funding Environment and What it Might Mean for You

Both Sides of the Table

With “uncertainty” taking hold, rounds were taking longer to complete. $30 million. But the story started more than 6 months ago.

Changes in the Venture Capital Funding Environment

Both Sides of the Table

In other words, it isn’t that VCs suddenly got smart, it’s that the costs of starting a company went down dramatically. I Leaderless Rounds.

What is the Right Burn Rate at a Startup Company?

Both Sides of the Table

” Stay lean and only raise a big round if you DO find product / market fit and which point you want to loosen the belt quickly and raise the capital to do so. Of course a lot of this also comes down to investor trust. Valuation. I wanted to call out special attention to valuation in this debate. Startup Lessons

Keep Term Sheets Simple for Quicker Cash to Spend


The price is the percent of ownership given to the investor, calculated as “investment/post-money valuation.” Seat on the board.

Don't Ignore These 4 Start-up Lessons

Fresh Inc.: The Staff Blog

High valuation for an early stage start-up is not always good. However, there are four lessons that they often dismiss.

What is actually happening during a VC slowdown?

This is going to be BIG.

Fear, not surprisingly, weighs markets down. Now that they have to go back into the market next year to pitch their own fund, they're going to have to answer some tough questions about valuations. They might have to get another round in, and that round will most certainly be a down round. They're just.

Analyzing Boston's Reindeer (Not Unicorns)

Seeing Both Sides

Yelp is down 49% YTD, Box is down 41%, Hortonworks is down 24%). I'm Jewish, so I confess that I had to look that one up).

A Recently Exited Founder on Surviving the Contradictory Role of Startup CEO

View from Seed

I called the recruiter running the search and told him I was going to step down and hire a CEO. and sold to Datto in late 2014. He was right.

Keep Term Sheets Simple for Quicker Cash to Spend

Startup Professionals Musings

The price is the percent of ownership given to the investor, calculated as “investment/post-money valuation.” Seat on the board. Marty Zwilling.

The VC Death Trap

Rob Go

Let’s that fund invests 1/3 of the capital into the initial rounds. A fancy firm puts down a term sheet to invest $40M in the new company.

The downside of accelerated investment decisions

Chris Dixon

There has been a lot of talk about how early-stage valuations have risen dramatically over the past few years. Sadly, founders with bad investors will likely face punishing down rounds, key employees being indiscriminately fired, and elaborate financial shenanigans engineered to dilute founders and seed investors. startups

Sustainable startup growth and venture capital

The Equity Kicker

On Friday it seemed like everyone in the venture capital industry was again reading about market turmoil, this time the news is that angel investors are pulling back and valuations taking a hit. The best startups capture all the returns so focusing too much on entry valuation is a mistake. I read it too, because it’s a big deal.

Capital Market Climate Change

Ben's Blog

You probably thought that valuations would be roughly the same as they were the last time you raised money. And those are big companies with real earnings, so you can imagine how a private company’s valuation might fluctuate. In June of 2000, I raised money at an $820M post-money valuation. As if the price could never go down.