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Why Raising Too Much Money Can Harm Your Startup

Both Sides of the Table

So the temptation would be to ask for $5 million because that implies a $20 million pre-money valuation if you’re able to only give away 20% or a $15 million pre-money valuation of investors require 25%. A $15–20 million valuation sounds better than an $8 million valuation, doesn’t it?

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The Changing Venture Landscape

Both Sides of the Table

And the loosening of federal monetary policies, particularly in the US, has pushed more dollars into the venture ecosystems at every stage of financing. What Has Changed in Financing? These days $10 million is quaint for the best A-Rounds and many are raising $20 million at $60–80 million pre-money valuations (or greater).

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On Bubbles … And Why We’ll Be Just Fine

Both Sides of the Table

In addition to FOMO it is partly driven by massive increase in valuations for earlier-stage companies who raised money at bit seed prices but who still have product risk. million pre-money valuation is now raising $1 million at a $12 million valuation the next investor has nowhere to go but up (or sit out the investment).

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The Great VC Ice Age is Thawing (for now) – Part 1 of 3

Both Sides of the Table

I’m not saying all their companies were bad but I guarantee you they spent an inordinate amount of their time on “triage” meaning trying to determine which companies to shut down, which to do “internal rounds” of financing and which were strong enough to try to raise external capital. I put my money on the latter.

Burn Rate 263
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Shark Tank Season 4 episode 2 breakdown

Lightspeed Venture Partners

The right number to focus on is pre money valuation as that is how an investor is valuing the company before the investment. Post money valuation = Pre money valuation + Investment. post money valuation and a $1.35M pre money valuation.

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Lean Startup Conference Speaker Andy Rachleff on his 35 years in Silicon Valley, Wealthfront and telling stories

Startup Lessons Learned

Previously, on the venture side you wanted to invest as early as possible, because the first round of financing got you to a product, and then you'd get beta-type customers, and then you'd raise a second round at a much higher price, and the business could immediately take off from there. I was the second partner to opt out.

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Keep It Under Your Hat: Valuation Caps and the $650 Million Sale of MySpace for $125 Million

Gust

Entrepreneurs and investors who have spent any time dealing with convertible debt seed financing transactions are likely to have encountered the subject of valuation caps. The cap is irrelevant if the next equity financing is at a valuation below the cap amount.) These options were granted shortly after MySpace, Inc.