Both Sides of the Table

MARCH 1, 2016

Some LPs have privately speculated that later-stage VCs may have a field day in the next 18 months, buying up large positions in firms with strong revenue at attractive prices given the recent squeeze on funding. But of course, for every angle of the market where one person sees caution, another spots opportunities.

Venture Capital 150

Venture Capital LP Silicon Valley Marketing 150

Both Sides of the Table

APRIL 14, 2010

That means that the likely have a minimum of $15 million in liquidation preferences. It will usually be higher because the liquidation preference has a dividend so if the deal is long in the tooth assume that the liquidation preference might be $20-22 million. Take liquidation preferences head on.

Venture Capital 289

Venture Capital Liquidation Preference Common Stock Dividend 289

The Equity Kicker

JUNE 28, 2013

Otherwise the investors won’t make the multiple on their investment that they want and after liquidation preferences are paid the amount left for the entrepreneur may well also be disappointing. Company exits for £20m having raised £15m for 50% of the company in a 1x liquidation preference – the investor gets £17.5m

Liquidation Preference 116

Liquidation Preference Valuation Portfolio Operations 116

Gust

SEPTEMBER 17, 2014

Me: Raising convertible notes as a seed round is one of the biggest disservices our industry has done to entrepreneurs since 2001-2003 when there were “full ratchets” and “multiple liquidation preferences” – the most hostile terms anybody found in term sheets 10 years ago. Revenue multiple? How will you price the next round?

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Both Sides of the Table

FEBRUARY 15, 2016

If you raised $10 million at a $40 million pre-money on a company with limited revenue and if your investors are telling you that they’re concerned about your future because they doubt that outsiders will fund you at your current performance level then I would be more cautious with my burn rate – even if it means slashing costs.

Burn Rate 150

Burn Rate Cap Table Valuation Software Review 150

Tim Keane

JANUARY 12, 2010

3]   However, if they are built bottom up, they demonstrate and make explicit a range of business model assumptions the entrepreneur is using to think about his business and its revenue model. Second a liquidation preference and a participation. This is why a bottom up approach is more credible.   First , dividends.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Gust

NOVEMBER 15, 2012

In my own portfolio I have companies that are generally perceived to be extremely successful with high profile customers and lots of sales…but they just happen to have a liquidation preference ladder of $25 million!

Seed Stage 131

Seed Stage Hockey Stick Cap Table Liquidation Preference 131

Gust

APRIL 16, 2014

But something like that would be way, way outside the norm.

Liquidation Preference 152

Liquidation Preference Revenue Entrepreneur Startup 152

Feld Thoughts

SEPTEMBER 9, 2015

Some will demonstrate strategically justifiable metrics and have fantastic ‘up round’ exits; others may see liquidation preferences kick in which will negatively impact founders and employees; others may fulfill the adage “IPO is the new down round” , which has been the case for more than half of the public companies on our list.

Liquidation Preference 70

Liquidation Preference Burn Rate Balance Sheet .Net 70

Up and Running

MAY 21, 2015

What this means, is that he gets paid not as a portion of the profit, but as a portion of the overall revenue, regardless of the profit. That’s because preferred shares operate under a completely separate set of rules (which will be defined in the investment documents) than your shares. Liquidation preference.

Covenant 60

Covenant Liquidation Preference Ratchet Dilution 60

K9 Ventures

JUNE 5, 2015

As the check size increases, investors tend to look for more traction, established revenue models, proven unit-economics, and other metrics that were previously associated with later stage companies. In the 80s and 90s a company would go public when it hit $20M in revenue.

Seed Stage 48

Seed Stage Venture Capital Early Stage Valuation 48

ithacaVC

SEPTEMBER 20, 2011

Let’s say a given company has raised $15mm in VC funding and is generating about $3mm in revenue and starting to ramp up quickly. Furthermore, it is in an industry where M&A transactions typically happen in the 3-4X revenue range. Tough to argue that it is not reasonable. Worth some thought and discussion.

Liquidation Preference 49

Liquidation Preference Common Stock Stock Options Valuation 49

Both Sides of the Table

NOVEMBER 4, 2009

BTW, this ignores liquidation preferences which actually mean you’ll earn less. So when the Stanford MBA, the ex senior technology developer or the former Chief Revenue Officer of a company is calling me and asking my advice on their next gig you can see why I start with “are you ready to earn or to learn?&#.

Stock Options 418

Stock Options Stock Liquidation Preference Option Pool 418

Both Sides of the Table

SEPTEMBER 28, 2013

The don’t understand VC liquidation preferences or multiple return expectations. Sure, our revenue is growing, but is that enough to raise an internal round? There are merger discussions, board debates, product miscues, revenue misses and a litany of delicate topics. They see the dollar signs and the victory.

Startup 417

Startup Dilution San Diego Stock Options 417

Up and Running

DECEMBER 30, 2015

Overestimating future revenue. Founders should pay attention to the liquidation preference in the term sheet to ensure it does not become detrimental to them in a less than favorable exit. . “Setting too high a valuation during a funding round can set you up for failure.” See Also: Rejected by Investors?

Due Diligence 84

Due Diligence Valuation Liquidation Preference Redemption 84

Both Sides of the Table

SEPTEMBER 2, 2009

We should end the year with a few million in fully recurring revenue and we’re projected to double next year. But more spend = more viral opps = more revenue down the road. >50% of our revenue in now viral. I took money with a 3x participating preferred liquidation preference with 8% compounded interest annually.

Founder 329

Founder Liquidation Preference Term Sheet Participating Preferred 329

Growthink Blog

MAY 23, 2011

With this capital, the company propels itself to $50 million+ in revenues, and to either a sale to a strategic acquirer or to an initial public offering. This venture capital financing - usually between $3 and $10 million - is the first of a number of rounds of outside investment over a period of three to five years.

Angel Investor 112

Angel Investor Venture Capital Sweat Equity Cram Down 112

Spencer Fry

APRIL 17, 2017

If this is the case, you may find yourself starting all over with little revenue (if any), a 1-2 person team that might be consulting on the side to pay bills, and no marketing spend. As a bootstrapper, you have nobody above you on the cap table (note: investors sit above you in their liquidation preference), so it’s your way or the highway.

Bootstrapping 63

Bootstrapping Cap Table Liquidation Preference Cofounder 63

abovethecrowd.com

FEBRUARY 24, 2015

As a result, a “late-stage” financing is no longer reserved for high-revenue, pre-profitability companies getting ready for an IPO; it is simply any large round of financing done at a high price. You must subtract it from your top-line revenue. You should not pay a net revenue multiple for a gross revenue disclosure.

IPO 40

IPO Liquidation Preference Valuation Technical Review 40

Gust

MAY 24, 2012

By contrast, venture capital and angel investments normally take the form of Preferred Stock with rights and preferences set forth in the company’s Certificate of Incorporation and other governance documents.

IPO 159

IPO Equity Common Stock Stock 159

Both Sides of the Table

MARCH 3, 2013

We talked about Liquidation Preference, Voting Rights, and all of the other valuable terms crowd-funding investors don’t understand. ” No royalty paid until there is revenue. Neither does Clayton. I think I’ll save a deep dive on this topic for another post. Then there is a royalty rate.

Bankruptcy 403

Bankruptcy Offshore Liquidation Preference Balance Sheet 403

dondodge.typepad.com

JANUARY 15, 2011

from David Dalka - Creating Revenue and Retention - Chicago GSB MBA As discussed in my recent post about a TiE event on Chicago start ups, there are many factors to consider when taking in funding and employees. Posted by: Jason | August 12, 2007 at 01:23 AM really great post don. Venture Capital investing is extremely risky.

Equity 40

Equity Employee Dilution Valuation 40

abovethecrowd.com

APRIL 20, 2016

A high performing, high-growth SAAS company that may have been worth 10 or more times revenue was suddenly worth 4-7 times revenue. This is because these companies have raised so much capital that the early investor is no longer a substantial portion of the voting rights or the liquidation preference stack.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Both Sides of the Table

FEBRUARY 14, 2016

forward revenue for SaaS businesses when in the years before it had been less than 5x. Or down rounds might favor earlier-stage investors because the liquidation preferences of later stage investors get reduced. As I’ve pointed out previously, this is perfectly captured by Joe Floyd here tracking SaaS multiples over time.

Valuation 150

Valuation Down Round Startup Later Stage 150

Life Beyond Code

SEPTEMBER 27, 2011

One Million by One Million is a global initiative that aims to nurture a million entrepreneurs reach a million dollars each in annual revenue and beyond by 2020, thereby creating a trillion dollars in global GDP and ten million jobs. 1M/1M Program has a bold mission. This is where numerous ventures fail.

Programming 116

Programming Silicon Valley Bootstrapping Technical Review 116