What every entrepreneur should know about financing right now

Version One Ventures

The ability to raise money no longer determines one’s fate. More money is flowing in from a new crop of angels, newly wealthy from a number of tech IPOs. And, we should expect angel activity to drop as new angels discover that returns from their seed investments aren’t so easy to come by. Any entrepreneur trying to navigate the financing landscape should be aware of the over-abundance of angel money compared with subsequent rounds.

How to deal with the Series A crunch

Version One Ventures

With headlines declaring that more than 1,000 seeded startups will soon be orphaned, it’s only natural that startups are concerned about the future funding landscape. Seed financing grew from 89 fundings in Q1 2009 to more than 500 in Q3 2012. That means there are a lot more seeded startups out there: an excess demand for a limited supply of Series A financings. Traditionally, I’ve advised startups to raise enough money to sustain them for 18 months.

Trending Sources

The Silliness Of Recapping Seed Rounds

Feld Thoughts

A company raises $1m of seed money from angels in a convertible note with a $6m cap. Assuming equity is raised at or above that cap, the total dilution, before the new money, is 16.6% (equivalent to an equity financing of $1m at a $6m post money valuation. ” They are running out of money. The term sheet converts all the convertible debt into a post-money valuation of $100, essentially making the convertible debt worthless.

Financing risk

Chris Dixon

Startups that raise seed funding face the risk of not being able to raise additional money. This is what is sometimes known as “financing risk.&#. If you are a company that just raising seed funding, financing risk should be top of mind. Here are some tips for mitigating it: - Start by thinking about the next round of financing and work backwards. Experienced seed investors can also advise you on this. Raise enough seed money.

Doing The Right Thing In A Recap

Feld Thoughts

Six weeks ago I wrote a post titled The Silliness Of Recapping Seed Rounds. My answer was simple – I would have given the early seed investors some percentage of the company as part of the financing. Given the amount raised, the new financing, and the cap, I would have asked the seed investors to waive the terms and instead accept a smaller percentage of the company than they would have otherwise gotten. Investments fg angels recap seed

Making Sense of Seed Investment Data

Rob Go

There were a number of interesting articles published over the last week in response to Mattermark and CB Insight’s data around early stage financing activity. In particular, a number of people commented on what looks like a dramatic rise and fall in seed deal volume over the past four years coupled with an increase in seed investment dollars. As a team, we’ve been thinking about what has been going on in the seed market in recent years.

Booming Companies That Should Inspire Entrepreneurs

Blogtrepreneur | Entrepreneur Blog

Uber Uber started out as a small San Francisco business that managed to generate $200,000 in seed money in 2009. Every huge company started out as an entrepreneur with an idea and the willingness to work hard to reach his or her dream.

Build Entrepreneur Credentials Early and Wisely

Startup Professionals Musings

More important are standard business, finance, and economics courses. Too many startups fail simply by missing the practical elements of money management, time management, and setting priorities. Most schools have business plan competitions, and even give out seed money to winners.

A Year in Review: 2016

Version One Ventures

At the same time, seed money is still abundant due to the proliferation of micro VC over the past few years. They started with a simple question: if 100 startups raise a Seed round, how many of those will go on to raise a Series A, and then a Series B ? The challenge here is that founders – having an easy time raising their seed rounds and maybe Series A – can be lulled into thinking that each subsequent round will be just as easy.

Startups getting caught in No Man’s Land

BeyondVC

Increasingly I am seeing many startups who were ably seed funded get caught in "No Man's Land" between the seed round and a true Series A round led by a venture capitalist. This is happening because there are way too many companies raising seed capital but not enough executing their way to a Series A. This can happen for many reasons including not raising enough capital in the seed round to begin with and of course not getting your product out the door.

Startups getting caught in No Man’s Land

BeyondVC

Increasingly I am seeing many startups who were ably seed funded get caught in "No Man's Land" between the seed round and a true Series A round led by a venture capitalist. This is happening because there are way too many companies raising seed capital but not enough executing their way to a Series A. This can happen for many reasons including not raising enough capital in the seed round to begin with and of course not getting your product out the door.

Build Entrepreneur Credentials Early and Wisely

Gust

More important are standard business, finance, and economics courses. Too many startups fail simply by missing the practical elements of money management, time management, and setting priorities. Most schools have business plan competitions, and even give out seed money to winners.

6 Ways To Make Your Startup More Attractive To Investors — Even With A Criminal History

YoungUpstarts

But he chose to move forward with a positive attitude, raise seed money for his company, and network his way to a profitable future. Advice For The Young At Heart Catherine Hoke criminal history startup startup finance startup funding

Most Great Entrepreneurs Don’t Drop Out of Harvard

Startup Professionals Musings

More important are standard business, finance, and economics courses. Too many startups fail simply by missing the practical elements of money management, time management, and setting priorities. Most schools have business plan competitions, and even give out seed money to winners.

7 Things You Should Know About Angel Investors

Inc Startups

You have more opportunities than ever before to raise seed financing. Many assume that the archetypal venture capital firms around Silicon Valley and Boston--the likes of Kleiner Perkins and Sequoia Capital--supply almost all the initial financing for high-growth startups.

10 Reasons Why Capital Shouldn't Make Or Break Your Startup

Startup Professionals Musings

By John Williams Fast Company magazine recently reported that PayPal founder Paul Thiel is giving away $100,000 to twenty-four young men and women to finance startup businesses. Having no money can help you plan.

Top Startup Advisor Paul Graham Just Warned Against Taking Google's Money

www.businessinsider.com

Finance. Your Money. Top Startup Advisor Paul Graham Just Warned Against Taking Googles Money. Grahams startups go through a months-long process of coaching to help them build products and raise money. The pattern is: youve already raised some money at a cap of $x.

Instead of sticking a fork in the venture market, realize. there is no fork

This is going to be BIG.

David's firm most recently participated in the $77 million second round financing of SoFi, a one year old startup focusing on student loans. I suppose, more specifically, the bubble ended in the last two weeks of September--right after this financing.

Norwegian Government launch two new Seed Funds

ArcticStartup

Last week came the announcement that Innovation Norway had appointed Alliance Venture Spring in Oslo and ProVenture Management in Trondheim to manage two new national seed funds. It has been hard to find investors, tough for entrepreneurs to raise seed money in Oslo before.

Figuring Out FourSquare

Seeing Both Sides

million in its series A financing and kept the burn rate at less than $100k per month to make he money last. Dennis wrote a great post at the time of the financing that showed just how product obsessed he was, even after taking the seed money.

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Ungerminated: Trouble with Seeds

Passionate Intensity

Quantity, quality, and size of early-stage seed financing has recently given rise to speculation about a seed funding bubble. Money is available, some will say, easy to get. I call these “ungerminated seeds.” This is what seed rounds are all about.

3 Reasons to Look to the Angels for Start-up Funding

Inc Startups

But at the initial seed financing stage of your start-up, VCs are not always the better option In fact, angel investors often have more to offer. Let's be clear: VCs play a vital role in helping with growth equity (your second or third round of financing).

5 Reasons To Use Your Personal Credit Card For Business Expenses

YoungUpstarts

Unless you have a healthy bank account or investors to fall back on you’re likely going to use your personal money to finance portions of your business expenses at some point. This could come in very handy when you need seed money or need to make several large purchases at once.

The best advice startups will never follow

Berkonomics

Let me tell you a few short hair-raising stories of entrepreneurs who have raised money and regretted it later. There’s a common expectation among entrepreneurs that seed money from family is great – letting close relatives in at the ground floor. Starting up Raising money

5 Reasons to Avoid Silicon Valley

Inc Startups

Too much seed money. You must be scratching your head now and asking yourself: How can too much money be bad? That sounds great but it also means that those “lucky” seed money recipients will be on their own from the moment they cash the check.

Why you shouldn’t keep your startup idea secret

cdixon.org

Another benefit of talking freely, is that you may also find potential partners or future employees–other key components beyond investment money. link] Finance Geek » Mistakes that startups make. [.] link] What’s the right amount of seed money to raise? link] Finance Geek » How To Develop New Startup Ideas. [.] cdixon.org - chris dixons blog. Follow @cdixon. About me. cdixon.org contents. Twitter: @cdixon. My posterous blog. Hunch! hunch.com. Hunch API.

The Series A crunch is hitting now. Have we even noticed?

pandodaily.com

We know this: As many as a thousand companies who’ve received seed rounds won’t be around in a year — maybe six months. The number of seed and angel investors has exploded in recent years, buoyed up by a number of factors. Pando Daily. PandoMonthly. Video. PandoDigest.

The Legal Side of Entrepreneurship

YoungUpstarts

This article highlights their advice on issues ranging from financing to patent trolls: While startups may believe lawyers are too costly, working with one early on avoids potentially serious problems later. Financing. ” The Cost of Financing.

Don’t get hung up on the valuation of your startup

VC Ready Blog

Even if there are good comparables available (ideally other companies at a similar stage of development with similar products that recently received financing at a known valuation), it is hard to extrapolate from those comparables to determine the valuation of your company because you have different technology, a different product and different people. We’ll write more about convertible debt financings in a future post). Tags: Financing investors Startup Valuation VC

Don’t get hung up on the valuation of your startup

VC Ready Blog

Even if there are good comparables available (ideally other companies at a similar stage of development with similar products that recently received financing at a known valuation), it is hard to extrapolate from those comparables to determine the valuation of your company because you have different technology, a different product and different people. We’ll write more about convertible debt financings in a future post). Tags: Financing investors Startup Valuation VC

It Doesn’t Matter How Much Money You’re Raising, It’s Still Hard

Instigator Blog

More and more companies are raising money , and valuations seem to be skyrocketing. and bubblier eagerness to put venture and angel capital to work it’s still extremely hard to raise financing. And in many cases the amount of money you’re looking to raise isn’t particularly relevant. When VCs are ready to get a new fund off the ground they have to jump to our side of the table and raise the money. Big money.

To Follow On or Not to Follow On

This is going to be BIG.

That wasn't a bubble bursting issue--that was a poor financing strategy issue of people getting caught with their pants down, hands in the cookie jar, and all the metaphors you can think of at once. That's why I constantly remind companies that when you do an outsized financing price or size-wise, you expose yourself to getting hit bad in a downtown unless you're conservative about how you use the money. Some VCs just toss in seeds as options.

How to find funding for your hardware startup while we’re waiting for the hardware revolution

Version One Ventures

Despite the recent media buzz surrounding the hardware revolution and emerging maker space, the overwhelming majority of hardware startups have a hard time attracting financing today. Hardware requires time, money, and inventory. hardware (Photo credit: alorenzi).

A Compilation of the Web's Best Advice for Entrepreneurs

Platforms and Networks

Rose is CEO of AngelSoft, a platform that provides web-based planning tools for angel investors and entrepreneurs (NEW 11/29) Marc Andreessen on how much money to raise -- and how much is too much (NEW 11/29) Atlas VC Fred Destin on what not to disclose to a VC when raising money (NEW 11/30) Equity simulator from OwnYourVenture that calculates impact on % ownership by round of $ raised, size of option pool, etc.

Funding, dealflow and startup traction from Latvia: October

ArcticStartup

Prize money & Awards. In addition to the status, BuyerDeck also received £25,000 prize money. The startup received €2,000 prize money. Dealflow from Latvia for Q3: 18 startups raising over €5 millionseed money 18 Latvian startups looking for over €5 million seed money.

B2B 2

Understanding a VC’s Seed Funding Policy is Critical

Both Sides of the Table

There has been much discussion about VCs doing seed funding in the past year. I’ve written about it myself (Is VC Seed Funding Dead?) and (Is There Really a Signaling Problem with VC Seed Funding?). Knowing What the Seed Funding Policy of your VC is.

What Makes an Entrepreneur? Cojones (7/11)

Both Sides of the Table

He wanted to raise angel money. If your idea is so amazing that it warrants my hard-earned angel money or the money of my LP investors from our fund then why should I take a risk on you if you won’t take a risk on yourself?

TradeShift Looking To Further Digitalize Payments

ArcticStartup

At the moment, according to TechCrunch , the company is self sufficient financially being nodded forward with a little seed money from investors. TechCrunch believes TradeShift is financing itself with deals it has signed already in Northern Europe and an unnamed city in Brazil. Tags: digital christian lanng e-invoicing financing gert sylvest mikkel hippe brun morten lund porta tradeshift

Q&A: How To Deal With The Trough of Sorrow? And tips for bootstrapping companies

Rob Go

Even Mailbox (which just got acquired by DropBox for likely a big number) I’m sure faced a trough of sorry when they shifted resources away from their original product (behind which their raised their seed round) and pursued what could have been yet another email client. Find good financing partners. You want to find financing partners who help you in the situations described above, don’t become yet another impediment.

The Seed Signaling Problem That’s NOT Being Talked About

Seth Levine's VC Adventure

There’s been plenty of chatter over the past few years about the potential pitfalls for entrepreneurs taking seed money from VCs. This includes a recent and very thorough overview of the issues by Elad Gil which I’d highly recommend reading, even if you’re already familiar with the issues around seed financing (and in particular the so called “party round” where everyone takes a piece but no one takes the lead).