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Why Raising Too Much Money Can Harm Your Startup

Both Sides of the Table

There is a general guideline of how much investors want to own in order to invest in your company and the norm is 15–30% with the most common range 20–25% per early stage round. A $15–20 million valuation sounds better than an $8 million valuation, doesn’t it? But it’s actually not that silly.

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Want to Know How VC’s Calculate Valuation Differently from Founders?

Both Sides of the Table

I don’t feel that as a VC sneaking in nefarious terms into a term sheet that the entrepreneur doesn’t understand is a good way to build a long-term relationship nor to build a long-term reputation but this does happen and more frequently than we all would like. I turned them down. They were nonplussed. This is a shame.

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Valuations 101: The Risk Factor Summation Method

Gust

The Risk Factor Summation Method the fifth methodology for estimating the pre-money valuation of pre-revenue companies we have described in recent posts. Reputation risk. As an example, Assume the average pre-money valuation of pre-revenue companies in your area is $2.0 1 positive.

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The Changing Structure of the VC Industry

Both Sides of the Table

pre-money valuation you certainly would want to exercise your right to continue investing if you had prorata rights. Because this is all VCs do and if we intend to work with all of our fellow VCs and entrepreneurs when the rain ends and the sun shines again our reputations matter greatly.

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How Investors Can Bring More Than Just Money To The Table

YoungUpstarts

For startup founders and CEO’s it’s also just as common to see them place too much focus on the amount of money raised, and the pre-money valuation, rather than the value that each investor can bring to the table. Do you have relationships with other investors at the next stage of the investment lifecycle?

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The Truth About Convertible Debt at Startups and The Hidden Terms You Didn’t Understand

Both Sides of the Table

As in, “your money into my company will convert at a 15-20% discount to the next round of capital I raise with a maximum price of $8 million pre-money valuation (or whatever the cap was).” You rarely find full ratchets in early-stage deals any more. That’s not possible.

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How to Fund a Startup

www.paulgraham.com

Some angel groups charge you money to pitch your idea to them.Needless to say, you should never do this. One of the dangers of taking investment from individual angels,rather than through an angel group or investment firm, is that theyhave less reputation to protect. The problems are different in the early stages.