Equity for Early Employees in Early Stage Startups

SoCal CTO

I was asked by a reader how much equity he should give out to early employees and to service providers in a very early stage startup. Founders vs. Early Employees To help with this discussion, let me start with a definition of "early employee."

The Importance of Proprietary Deal Flow in Early-Stage VC

Both Sides of the Table

What stage? I sorted out pretty early that lawyers were a great source of deal flow. Because entrepreneurs often went to lawyers at their earliest stages to get their company registration done. We are judging how well you are coached on stage.

Trending Sources

Valuation Part I: Peeling the Onion, or How Top Investors Value the Startups They Invest In

Gust

Early-stage technology company valuations are generally a crap-shoot. This post builds on top of his work, and attempts to shed additional light on the valuation process. How To Fundraise Starting Your Company valuation valuations

Unusual Rounds of Early-Stage Funding & What to Know

Genuine VC

raised, the first non-friends-and-family capital, comprised of one to three institutional seed investors or larger VC funds, on a priced equity structure (though sometimes convertible note), with a valuation mechanism in place priced in the single digit millions. The standard seed round will buy the company 12 to 18 months of runway as it looks to prove out early-stage milestones to raise a Series A before running out of cash.

Why Early-Stage VCs Should Be Careful About Intros from Bankers

Both Sides of the Table

What stage? I sorted out pretty early that lawyers were a great source of deal flow. Because entrepreneurs often went to lawyers at their earliest stages to get their company registration done. We are judging how well you are coached on stage.

When Should Startup Founders Discuss Valuation with Seed VCs?

View from Seed

As the seed-stage startup fundraise process has received more transparency in recent years, ranging from published advice on how to raise seed capital to increased availability through AngelList, Funders Club, and various accelerator programs, I’ve noticed another trend emerging.

The Top 10 Sources of Early-Stage Money

Inc Startups

These investors are the most active financiers of early-stage startups. The median valuation for a company at its angel round was $2.5 Now for the question that''s probably on the mind of every young founder: Where can you get seed funding for your great startup idea?

10 Rules of Thumb for Startup Investment Valuation

Gust

Once you have a potential investor excited about your team, your product, and your company, the investor will inevitably ask “What is your company’s valuation?” How much is NewCo worth to investors at this point (pre-money valuation)? Early customers and contracts in progress add value.

8 Ways To Get Off The Ground With Angel Investors

Startup Professionals Musings

Angel investors are still the lifeblood of early-stage startups, despite the surge of activity in crowdfunding and an increasing early interest from venture capitalists. Simplicity is preferred at this stage. angel investor early-stage entrepreneur startup

Quick Post on Post-Money Valuations

Rob Go

When I first started out as a VC nearly 9 years ago, most early stage company valuations were expressed as pre-money valuations. That is, the valuation of the company prior to the investment of new capital.

10 Rules of Thumb for Startup Investment Valuation

Startup Professionals Musings

Once you have a potential investor excited about your team, your product, and your company, the investor will inevitably ask “What is your company’s valuation?” How much is NewCo worth to investors at this point (pre-money valuation)? Early customers and contracts in progress add value.

Startup Valuation: How Much Is Your Company Worth?

Seed Stage Capital

skip to main | skip to sidebar 19 January 2010 Startup Valuation: How Much Is Your Company Worth? One of the most common issues that concern entrepreneurs is how to address the "Valuation Question." How do we best approach the question of valuation?

The Truth About Early Stage Pre-Money Valuations

Ask the Angels

I think there are three fundamental truths regarding the valuation of early stage businesses by potential investors: The first is that a pre-money valuation is ultimately an outcome of negotiation , rather than a mathematical calculation of discounted cash flow or any other metric of potential company performance. Investors typically arrive at reasonable valuation conclusions after a process of due diligence. By Al Schneider.

What Startups Need To Know About Business Valuation

YoungUpstarts

With the daily demands of running a business along with the financial pressures and challenges inherent in early-stage companies, a business valuation may not be the first thing an entrepreneur thinks of when he awakes each morning. by Janet Chase, Kaufman Rossin.

How we determine valuations for marketplaces

Version One Ventures

I often get asked about how to determine the valuation for a marketplace startup that is starting to scale. Our assumptions for this valuation: Scale: > $1b GMV. So what about early-stage marketplaces? Early-stage companies are valued very differently.

How Investors Think About Valuation of Pre-Revenue Startups

SoCal CTO

A lot of my time is spent helping early-stage companies get to proof points so that they can raise capital. They might have some seed money and are thinking or raising a Series A based on success of an early release (MVP). Because of this, I've always tried to stay up-to-speed on how early-stage investors look at valuation of companies. Bill Payne is an expert on how early-stage investors should look at valuation.

The Berkus Method: Valuing an Early Stage Investment

Angel Investing News

Dave Berkus has just published the most recent version of his method for establishing a pre-money valuation for early stage companies. See his blog at The Berkus Method: Valuing an Early Stage Investment. Valuation David Berkus Method valuation

What Is a SAFE? A Closer Look at The Simple Agreement for Future Equity

Early Growth Financial Services

SAFEs usually appear around the seed stage of funding, as it gives founders the chance to raise funding without having to begin the process of setting a valuation or issuing convertible notes. Without the involvement of debt, there … Continue reading → Investment Capital: Equity / Debt / VC Funding Early Stages SAFE equity y combinator convertible debtConvertible debt is a staple in startup funding.

2011 Valuation Survey of North American Angel Groups

Angel Investing News

During the summer of 2010, I developed a workshop, A New ACEF Valuation Workshop for Angels and Entrepreneurs. To provide some reference points, I surveyed thirteen angels groups in North American to determine their recent experience in negotiating the pre-money valuation of pre-revenue companies. See the 2010 data reported here: Current Pre-money Valuations of Pre-revenue Companies. 2011 Angel Group Valuation Survey. Valuation.

Startup Valuations: 7 Things to Look for in a Valuation Company

Early Growth Financial Services

Valuation. What you may not know is that it really does matter who performs your valuation. There are a lot of valuation companies out there, so I know many entrepreneurs are tempted to just shop around until they find the lowest price, but this is a mistake. A valuation is more than just a commodity. All valuations are not created equally; there are better valuations, better processes, and better valuations business partners for your company.

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

Both Sides of the Table

Other founders, “as a privately held company we don’t disclose our valuation.&# Me, “dude, I’m not a journalist. I just want to figure out what a fair valuation is.&# I figured all the VC’s talked so we should.

8 things to consider when determining your startup valuation

The Next Web

Setting a valuation for an early-stage startup looking to raise money is tough. To help, I asked eight founders from YEC the following: What is one thing I should be thinking about as I come up with a valuation… This story continues at The Next Web.

Early stage money: The problem with PPMs

Berkonomics

Like most angel investors, I have preferences for the terms and conditions of investment and intend to negotiate with entrepreneurs on those terms, such as valuation, company structure, the makeup of the board of directors, liquidation preferences and others. By Bill Payne.

2011 Valuation Survey of North American Angel Groups

Gust

During the summer of 2010, I developed a workshop, A New ACEF Valuation Workshop for Angels and Entrepreneurs. To provide some reference points, I surveyed thirteen angels groups in North American to determine their recent experience in negotiating the pre-money valuation of pre-revenue companies. See the 2010 data reported here: Current Pre-money Valuations of Pre-revenue Companies. 2011 Angel Group Valuation Survey. Pre-money Valuation of Pre-revenue Companies.

Pattern recognition

Seth Levine's VC Adventure

But what’s going on right now with early stage company valuations suggests that VCs may be poor judges of at least some of these patterns. Company X raises money at a high valuation and the markets shift their perception of the clearing price for deals of that type. Perhaps the company raises another round at an even higher valuation, validating (at least temporarily) the first investment decision. Uncategorized bubble early stage comapny values valuatio

DC 21

A Five-Minute Tutorial On How To Value Your Startup

Startup Professionals Musings

As an entrepreneur looking for professional investors, one of the quickest ways to lose credibility and get rejected is to start with a ridiculously high pre-money valuation. Equally bad is professing no valuation estimate at all, asking investors to “make me an offer.”

The Berkus Method: Valuing an Early Stage Investment.

Berkonomics

For those of us who’ve invested in early stage companies, especially technology startups, we have confronted a universal problem. Because the Internet has such a long memory and documents from the distant past can be found with ease, a search the “The Berkus Method” today will yield a number of conflicting valuations culled from the many subsequent publications of the method over the ensuing years.

Raising Money Using Customer Development

Steve Blank

Unfortunately in early stage startups the drive for financing hijacks the corporate DNA and becomes the raison d’etre of the company. The goal of their startup in this stage becomes “getting funded.” What are Early Stage VC’s Really Asking?

AngelList Syndicates: Why Pooling Resources Is Good for Early Stage Investing

Inc Startups

It’s an innovative, new method for early investing that affects the way companies can get funded. It’s not yet clear what the ramifications to early stage investing are yet, but it’s clear that the landscape will change as a result and that it won’t be a passing trend.

Early Growth Financial Services (EGFS) Launches JumpStart Program for Early-Stage Startups

Early Growth Financial Services

Outsourced financial services firm adds low-priced, fixed cost offering to their suite of financial services to help support very early-stage startups nationwide. San Jose, CA (PRWEB) July 24, 2014 Early Growth Financial Services (EGFS), an outsourced financial services firm that provides accounting, CFO, strategic finance, tax, and valuation services and support to small to mid-sized companies nationwide, has just announced the launch of their new JumpStart program.

Startup Valuations – Again….

ithacaVC

I have written about startup valuations previously. This morning I was reading one of my favorite daily compilations of articles (called Innovation Daily, subscribe here ) and came across another great short article on startup valuations called “ Seed Rounds: How to Pick a Valuation “ Joseph Walla, who I don’t know, wrote it. There’s a reason it’s so difficult to figure out – valuations have little basis in reality for early stage companies.

Convertible Debt – Valuation Caps

Ask The VC

Today, in our series on convertible debt, we examine the conversion valuation cap. The valuation cap is typically only seen in seed rounds where the investors are concerned that the next round of financing will be at a price that is at a valuation that wouldn’t reward them appropriately for taking a risk by investing early in the seed round. The entrepreneurs thinks their valuation should be higher. They receive a term sheet at $20 million pre-money valuation.

Convertible Debt, Priced Equity Rounds and Deal Timing

Gust

An impromptu Twitter debate arose among Fred Wilson, Dave McClure, Mark Suster, Chris Dixon and others about convertible debt, priced equity rounds, and the nuances of early stage financing. Invested Interests angel investment convertible debt convertible note deal terms due diligence financials fundraising priced equity priced rounds tactics valuation valuations VCs venture capital

Color: $98M Post-Money Valuation?

Texas Startup Blog

The company raised $41 million from Sequoia and other investors at a post-money valuation of $98 million. Alternative Title: How to get a lot of users for your app on day one: Raise $41M in Venture Capital.

Startup Blog: Decisions, Decisions, Decisions ? Second Guessing

Taffy Williams

Sunday, May 8, 2011 Decisions, Decisions, Decisions – Second Guessing It does not matter whether you are in the early stages, later stages, or already a BigCo. It is always easy to decide to switch when you believe you will increase the valuation of your business.

Some thoughts on your ABBA round

Seth Levine's VC Adventure

As valuations have risen (become “frothy” in VC speak, which is our nice way of saying “too high”) companies have started raising much larger Series A rounds. This is anecdotal – I’ll try to validate it when the numbers are released – but where companies used to raise $3- $ 5M for their Series A, one response to higher valuations has been a much larger number of companies raising larger and larger Series A rounds (say $ 6M - $ 10M ).

How SaaS + Mobile has changed our world.

Scalable Startup

Spell-guesser, auto-fill, travel, accounting, calculating company valuations, facebook, pinterest, dropbox, codecademy, me writing this blog are all managed by a SaaS platform.

10 Leadership Elements That Maximize Business Value

Startup Professionals Musings

For early-stage startups, the goodwill component can easily exceed the size of all the financial elements together, or can just as easily mark a company with good financials as not investable. entrepreneur leadership capital startup valuation

How to Determine Your Startup’s Valuation for Investors

Business Plan Blog

Startup Valuation. What they should really be asking is, “What is my company’s valuation?” Don’t ask for an investment that is more than your business’ valuation. If your valuation is $1M, you can ask for $200-300K and offer 20-30% of equity in exchange. 3) What stage is your company in? If you are in the early stages, but have a prototype, angels might be interested. 6) Single or staged delivery.

Convertible Debt: Worst Form Of Seed Financing — Except For All The Others

Gust

How to finance a new seed-stage startup? Turn the question on its head: How could it make sense to lend money to a brand new, seed-stage company with no revenue, no products, and no collateral? (You Equity? Convertible debt? Convertible equity?