Both Sides of the Table

JUNE 5, 2015

I am reminded of this problem every time my firm does a financing where a note went before us but more specifically I was reminded by this great post by Brad Feld to talk about the pre-money vs. post-money conversion issue. In the old days VCs funded off of a “pre-money” valuation. How much is in the option pool?

Pre-Money Valuation 150

Pre-Money Valuation Option Pool Post-Money Valuation Dilution 150

Up and Running

SEPTEMBER 20, 2021

For instance, the cap table will help you with various possibilities while running business activities like available options and pre-money valuations faster. In case this option is not available, you may quickly discover how much you will give and calculate the percentage you are ready to offer. Total share ownership.

Cap Table 112

Cap Table Pre-Money Valuation Stock Options Option Pool 112

The Next Web

JUNE 15, 2012

From Silicon Valley to Peoria, Illinois, cash-strapped startups look for inventive way to finance their business – often handing out equity to employees, consultants, vendors, and other service providers. Many young tech startups reserve 15%-20% for employee stock options. It’s a logical solution. Plan upfront.

Equity 116

Equity Stock Options Vesting Stock 116

ReadWriteStart

SEPTEMBER 2, 2011

While certainly not every business needs to raise venture financing, it is the path for many high-growth technology startups. Including things like liquidation preferences impact both future rounds and ultimate liquidity to why VCs ask to expand an option pool before investing as part of their term sheet.

Cap Table 125

Cap Table Term Sheet Liquidation Preference Technical Review 125

David Teten

DECEMBER 3, 2019

Some notable metrics are revenue growth rates, free cashflow, leverage ratios, historical financing amounts, returns on marketing spend, customer acquisition costs, lifetime value of customers, customer churn rates, and team social scores. I have not found a thorough platform for due diligencing all aspects of a potential investment.

Technical Review 78

Technical Review Software Review Analytics Private Equity 78

Hunter Walker

AUGUST 7, 2017

But employee option pool is important enough that I wanted to briefly expand upon my comment above. No one wants to run out of equity pool midway between financings (and larger seed rounds these days usually means more hiring pre-A)! As you can see, Weekend VC Twitter gets pretty wild and crazy!!!!

Equity 94

Equity Pre-Money Valuation Option Pool Founder 94

ithacaVC

JANUARY 24, 2013

Having a relatively small about of convertible debt on your balance sheet prior to your Series A financing is not a bad thing. One interesting point that comes up a lot is how to factor the convertible debt into the premoney valuation of the Series A round. I am going to ignore any valuation cap feature.

Valuation 53

Valuation Balance Sheet Option Pool Dilution 53

www.mattbartus.com

DECEMBER 9, 2012

How to pump up your VC valuation. Let’s say you receive a term sheet for a $1 million investment at a $3 million fully diluted pre-money valuation, and you’re kind of disappointed. You have a 20% option pool, so you know this will take your ownership down from 80% to 60%, and the VC will get 25%. Option Pool.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

www.inc.com

SEPTEMBER 24, 2011

Finance | Tuesdays. Financing a Small Business. Financing A Small Business. Personal Finance. Before Roving Software could receive its first round of financing from professional investors, in early 1999, he had to put all the stock arrangements in writing. Start-up | Mondays. Technology | Thursdays. Franchises.

Fractional CTO 40

Fractional CTO Equity Iowa Technical Cofounder 40

ithacaVC

DECEMBER 13, 2013

The share price is calculated by taking the pre-money valuation and dividing it by the number of shares outstanding pre-money. So Share Price (SP) = Pre-Money Valuation (PMV) / Shares Outstanding (SO). On a fully diluted pre-money basis, that would mean the option pool represents 14.5% (356,758/2,456,758) of the cap table.

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67

The Startup Lawyer

FEBRUARY 4, 2011

The following are some issues to consider and actions to take before accepting an incubator’s offer: (1) Calculate Valuation and Determine Value. Pre-money valuations startups receive from incubators are typically low…really low. The “revised for the cash investment only&# pre-money valuation is $600,000. (2)

Incubator 105

Incubator Pre-Money Valuation Option Pool Advisory Board 105

www.readwriteweb.com

DECEMBER 29, 2011

While certainly not every business needs to raise venture financing, it is the path for many high-growth technology startups. This includes things like how liquidation preferences impact future rounds and ultimate liquidity, to why VCs ask to expand an option pool before investing as part of their term sheet.

Cap Table 47

Cap Table Term Sheet Liquidation Preference Technical Review 47

Professor VC

JANUARY 17, 2008

Another comment which probably deserves more discussion is around valuation. One of the panelists mentioned that they have gotten very valuation sensitive (nothing wrong with that) and like to purchase preferred stock rather than invest in convertible notes. Labels: angel groups , valuation. See you next time. Steve Bennet.

Pre-Money Valuation 28

Pre-Money Valuation Angel Investor Angel Groups Valuation 28

Seeing Both Sides

JULY 15, 2009

VCs have an unfair advantage when it comes to financings. A typical start-up company will do 2-4 venture capital financings before a successful exit (or, conversely, an ignomious ending). In contrast, the typical venture capitalist, either individually or across their partnership, will do 5-10 financings in any given year.

Pre-Money Valuation 49

Pre-Money Valuation Option Pool Stock Options Post-Money Valuation 49

Scott Edward Walker

NOVEMBER 26, 2017

Indeed, this is critical in order to effectively negotiate any transaction (including a financing) – as every investment banker on Wall Street understands. As you begin to set-up investor meetings, the challenge now is to create a competitive environment and a sense of urgency.

Term Sheet 63

Term Sheet San Francisco Founder Investment Bankers 63

Scott Edward Walker

AUGUST 31, 2011

Which financing sources should they consider? At what valuation and on what terms? Because this is only a $725K investment, a good lawyer will recommend structuring the investment as a convertible note or a “Series Seed” financing , rather than a full-blown Series A. How should the founders divide the initial stock ownership?

Term Sheet 45

Term Sheet Silicon Valley Liquidation Preference Option Pool 45

The Next Web

AUGUST 14, 2013

You’ll hear terminology getting bandied about left and right about things like convertible notes, capped vs. uncapped, stock option pools, board observer rights, maturity dates, priced equity. A convertible note is actually a debt instrument that converts to equity upon certain events occurring (usually a series A financing event).

Founder 142

Founder Incubator Cofounder Accredited Investor 142

venturehacks.com

MARCH 21, 2008

Many advisors want options they can exercise immediately —that’s fine. If your company hasn’t raised a Series A, increase the advisor’s equity by roughly 30%-50% to account for dilution from seed investors, Series A investors, option pools, swimming pools, and the like.

Advisory Board 44

Advisory Board Cap Table Vesting Equity 44

thestartuplawyer.com

FEBRUARY 24, 2010

About the Author Ryan Roberts is a startup lawyer and represents technology companies through all phases of the startup process, including incorporation, seed & venture financings, and exit transactions. He obviously never launched a startup and got shafted by a co-founder. Click here to learn more about his practice.

Cofounder 40

Cofounder Founder Preferred Stock Startup 40

Gust

SEPTEMBER 13, 2012

In general, and in a more-or-less-ideal world, companies should be prepared to give up roughly 20%-40% of equity for each round of early financing, where the size of each round is enough for the company to increase its valuation significantly. …and like this based on giving up 40% for each financing round: After Founding: 100%.

Option Pool 160

Option Pool Equity Valuation Startup 160

www.payne.org

SEPTEMBER 22, 2011

The strike price typically goes up as the company raises additional funding (at higher valuations). My advice: understand the terms of your option grant, especially the strike price. Lets say youre being offered 2% of a company with a valuation of $10m after funding. Buying your stock would cost $200,000!

Equity 56

Equity Employee Vesting Preferred Stock 56