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.

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. And it’s probably worth mentioning that the Valley is littered with the skeletons of high-profile startups that launched with big ambitions and lots of money.&#

Entrepreneurs: It's OK to Divulge Your Last-round Post-money Valuation

Allen's Blog

[Entrepreneurs: read all the way to the bottom of this post; there are different situations that can look confusingly similar, and it''s important to distinguish among them.]. Most, smart investors will ask you for the post-money valuation of your last round of financing at the conclusion of your first meeting (i ndeed, if a VC doesn''t ask for it during your initial meeting, it''s usually a sign they''ve already decided to pass). .

Entrepreneurs: It's OK to Say What Your Last Post-Money Valuation Was

Allen's Blog

Entrepreneurs: the post-money valuation of your last round is a standard bit of info to give to new investors, even prior to the first meeting (if they ask for it prior to the meeting). If they like your idea, they may decide whether to pursue it, based in part on how high your last valuation was.

Food for Thought: Target Post Money Valuations and Capital Structure

Will Price

Jeremy and Josh 's thoughts on valuation are well worth reading. Not only should founders be mindful of valuation issues, but also need to be thoughtful about capital structure and shareholder mix. Too much money too early and too many people too early interferes with the productive process of iteration. Too High "A" Round Post-Money Valuations While a self-serving argument, an equally challenging problem is a too high "A" round post-money.

Shark Tank Season 4 episode 2 breakdown

Lightspeed Venture Partners

post money valuation. Mark Cuban offered $300k for 33% of the company, implying a $900k post money valuation. implying a $600k post money valuation. Post money valuation = Pre money valuation + Investment.

Guest Post: Beware The Post Money Trap

A VC : Venture Capital and Technology

As valuations are extended and it feels very late in this cycle, I feel that the risk of this happening to entrepreneurs is quite high now. —————————————– In the current valuation environment many entrepreneurs seem to believe that only two numbers matter in a financing: the amount of the raise and the dilution. The number everyone seems to be forgetting about is the post-money valuation.

Definitions: Pre-money & Post-Money

Entrepreneurship Blog

One set of the terms that I wasn't sure of when I first started thinking about venture capital were the " pre-money " and " post-money " valuations. Pre-money refers to the value of the company prior to raising capital and the post-money refers to the value of the company after raising capital. For example, if a company has a $3M pre-money valuation and it raises a $2M round, the post-money valuation is $5M.

Unintended Consequences: When SAFE and Convertible Notes Go Awry

Pascal's View

This is a fundamental issue that does, indeed, boil down to understanding the post-money valuation of a company. At its core, this issue points to the lack of understanding about the importance of post-money valuation by both entrepreneurs and investors. The most serious unintended consequence occurs from “note waterfalls”— converting multiple notes that have multiple valuation caps.

How to Talk About Valuation When a VC Asks

Both Sides of the Table

One of the hardest things about the fund-raising process for entrepreneurs is that you’re trying to raise money from people who have “asymmetric information.” What was the post money on your last round (and how much capital have you raised)?

Keep Term Sheets Simple for Quicker Cash to Spend

Gust

Entrepreneurs sometimes assume an initial agreement with an angel is a commitment, so they start spending before any money is received. The price is the percent of ownership given to the investor, calculated as “investment/post-money valuation.”

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.

Is There More Than One Type Of Convertible Debt?

Ask The VC

I’d recently made an offer to invest in a company Troy was an investor in and the entrepreneur and I got tangled up in the definition of pre and post money in the context of existing convertible debt. In this case there were multiple traunches of convertible debt at different valuation caps. Given the magnitude of the convertible debt, the way the debt was handled had a significant impact on the post money valuation dynamics.

What is it Like to Negotiate a VC Round?

Both Sides of the Table

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. It’s worth reading his post to understand the problem. In the old days VCs funded off of a “pre-moneyvaluation. Inexperienced VCs get caught in the pre-money vs. post-money trap.

Valuation Methods 101

Gust

This is the first of a six part series on different methods used by angel investors to arrive at pre-money startup valuations. Detailed descriptions will be published over the next few weeks: The Scorecard Method: This method compares the target company to typical angel-funded startup ventures and adjusts the average valuation of recently funded companies in the region to establish a pre-money valuation of the target. The Cayenne Valuation Calculator.

VC Experts Q3 2011 Life Science Valuation Report

Recent Buzzes - VC Experts, Inc.

VC Experts , the premier provider of valuation & deal term data of private company financing transactions, recently released their Q3 2011 Life Sciences Valuation & Deal Term report. The report, utilizing data found in the Valuation & Deal Term Database, includes details about the investments, terms, and estimated post-money valuation data for companies in the Life Sciences sector who raised capital in Q3 2011.

Keep Term Sheets Simple for Quicker Cash to Spend

Startup Professionals Musings

Entrepreneurs sometimes assume an initial agreement with an Angel is a commitment, so they start spending before any money is received. The price is the percent of ownership given to the investor, calculated as “investment/post-money valuation.”

Series A Warrants Based On Milestones Versus A Deal With Two Closes

Ask The VC

Let’s assume a post-money valuation of $4m. The post money valuation after the warrant is exercised is $6.25m (2.5m / 0.40). Bottom line – the investor is proposing a $3.75m pre-money / $6.25m post-money for a total investment of $2.5m. Question: In a Series A, the investor is proposing a preferred stock with warrants.

Doubling Down On The Overpay

A VC : Venture Capital and Technology

One thing I've seen many VCs do wiith their initial investment in a company is invest more when the valuation gets expensive. They are ownership driven, not valuation driven. So if they originally wanted to invest $4mm at a $20mm post money valuation and buy 20% of the company, they talk themselves into investing $8mm at a $40mm post money valuation so they can still buy 20% of the company.

The $10 million Photo and other VC Stories

Steve Blank

When we were trying to raise money for E.piphany, my last startup, I was negotiating with a venture capital firm called Infinity Capital. They really wanted to invest, but it was the beginning of the bubble, and I wanted (what was then) an absurd valuation.

Startups: The Elevator To Success Is Out Of Order

OnStartups

We know the difference between pre-money and post-money valuations. "The elevator to success is out of order. You'll have to use the stairs.one step at a time." ~Joe Joe Girard. As a community, I think entrepreneurs have gotten more knowledeable over the years.

Unicorns: High Valuation Deals and Structure

Allen's Blog

There are now well over a hundred private tech companies that have announced financings with post-money valuations of over $1B. Having worked on several of these high-valuation deals over the years, it surprises me that no mention (in anything I read) is ever made of how heavily structured the deals are to protect the investors from downside risk.

A Primer on Angel Investment ‘Simple Term Sheets’

Startup Professionals Musings

Entrepreneurs sometimes assume an initial agreement with an angel is a commitment, so they start spending before any money is received. The price is the percent of ownership given to the investor, calculated as “investment/post-money valuation.”

What’s Driving Big Valuations in E-Commerce?

Recent Buzzes - VC Experts, Inc.

E-commerce sites are being "pinned" to Pinterest and "tweeted" on Twitter, providing key word-of-mouth marketing to the consumer, by the consumer, that is not only increasing brand equity but also post-money valuations. For instance, privately held/venture capital backed e-commerce sites like Gilt Groupe, Chegg, and Etsy have valuations above average; and potential competitor Plum District is not far behind.

Make Price the Last Thing

David Cohen

Entrepreneurs will name the pre-money or post-money valuation, and sometimes they even lead with the pricing. That’s a lot of money , you think. You might even end up raising more money than you expected, and that could impact the price positively. I receive lots of pitches, and one of the things I notice is that sometimes these pitches are very clear on pricing.

Common Stock vs. Preferred Stock in Venture Funding Transactions

Growthink Blog

The liquidation preference means what is sounds - namely that preferred stock holders with this right get all of their money back (i.e. I get the same question a lot from entrepreneurs raising equity capital (venture capital or angel funding).

The Post Money of Your Series A is Not My Problem

ithacaVC

I was giving some advice the other day on how to approach Series B investors in terms of valuation. Company X raised its Series A at a pre-money valuation of $5mm and it raised $4mm dollars. So the post-money valuation after the Series A was $9mm. Easy facts, but note that because the Series A round was rather large compared to the pre-money valuation the resulting post-money valuation is substantial.

Taking Corporate VC: When It Makes Sense

View from Seed

But mainly we did it because these corporate VCs were among the only groups willing to invest at PayPal’s somewhat inflated post-money valuation, during the middle of the dot-com crash when traditional VCs pulled back sharply and other sources of funding were constrained.

The Pre-money vs. Post-money Confusion With Convertible Notes

Feld Thoughts

The other day, Mark Suster wrote a critically important post titled One Simple Paragraph Every Entrepreneur Should Add to Their Convertible Notes. Most notes are ambiguous as to whether they convert on a pre-money or a post-money basis. If the entrepreneur knows this and is using it proactively so they get a higher post-money valuation, that’s fair game. pre ($25m post).”

Founders – Use Your Down Round To Clean Up Your Cap Table

Feld Thoughts

Mark Suster wrote a great post yesterday titled The Resetting of the Startup Industry. Mark’s post is one of the first in this cycle that I’ve seen from a VC giving clear, actionable advice. But, more importantly, is another point Mark buries later on, which includes an awesome post of his from 2010. But, as you raise more money at higher valuations, this will normalize.

Model Cap Table

ithacaVC

I thought it might be useful to post up a model cap table ( Cap Table Model with Waterfall ). In other words, it shows both pre-money and post-money very clearly. For example, cell E2 is the spot to put in the negotiated pre-money valuation. The green box at row 45 just provides a nice double check on post-money valuation calculations. This cap table can be used by a pre-funded startup and then a financing can be layered in.

Investing Notes From The Inaugural Pre-Seed Summit

Haystack

with a median post-money valuation of $10.7M — these are the highest Pitchbook has recorded. I continue to contend there are potentially four stages of seed — pre, seed, second/extension, and post — and that as a manager I designed my fund to be able cut a meaningful check at any phase. Earlier today, the folks from Afore Capital hosted their inaugural “Pre-Seed Summit” in San Francisco.

Warrants In A Deal With An Advisor

Ask The VC

He has made his money as an entrepreneur and now travels alot but will be available for consultancy for us. The terms associated with this matter – if the time he has to exercise the warrants is long enough (say 10 years) then it’s likely he’ll never have to shell out the money to actually buy the stock. It sounds like your post money valuation is around £ 500,000 (if £24,000 is about 5% of the company).

Sizing Option Pools In Connection With Financings

A VC : Venture Capital and Technology

Investors like to require that an unissued option pool is in the pre-money valuation calculation when they put money into early stage companies. If you don't entirely understand what I am talking about here, go click on that link at the start of the post. This post is about how to size the option pool. Let's say you are raising $1mm at $4mm pre-money. And the investors want the option pool to be in the pre-money valuation.

Latest Deal Terms and Valuations for Associated Content, Inc.

Recent Buzzes - VC Experts, Inc.

This week we are going to review the deal terms on the rounds of financing and also the Post-Money valuations that we have calculated for them over the past few years. Yahoo, Inc. recently stated that they have agreed to buy Associated Content, Inc. for approximately $100 MM as reported by various media outlets. After only raising roughly $21 MM while private, could this be a pretty good deal for both Associated Content, Inc. as a company and also its investors?

Latest Deal Terms for CardioDX, Inc. and Intrapace, Inc.

Recent Buzzes - VC Experts, Inc.

Post-Money Valuation: Subscribe Today! Post-Money Valuation: Subscribe Today! See how the Valuation & Deal Term Database works in this 5-minute video demonstration

Why You Need a Reverse Roadmap

Inc Startups

Young entrepreneurs are so focused on the short run--get the money and get the business started--that they don’t sit down and do the math. Follow-on investors New investors Post-money valuation Management stake (%) Management value ($) Next Round (date?)

Why the New Seed Might Be a Bad Seed

This is going to be BIG.

At Brooklyn Bridge Ventures , I want to be part of the first money to go into a company, no matter what you call it. If their entry valuation is that much lower because more dollars are in the Series A, they will still be able to make their return. in seed money instead of $1.5M

Valuation for Seed Stage Investments

Ask the Angels

Question: My partner and I are trying to agree on an initial valuation to establish an equity share percentage for a seed stage company that is not yet operating. Answer (By Bob Aholt): The topic of valuation is probably the most talked about, and certainly the most negotiated subject in our Angel deals. Your partner’s valuation premise is certainly unique. pre-money valuation. Post money valuation = $2m.

Latest Deal Terms for Oodle, Inc.

Recent Buzzes - VC Experts, Inc.

Post-Money Valuation: Subscribe Today! By Justin Byers, Lead Business Intelligence Analyst If you are looking for good deal on a treadmill or maybe a vehicle, then you will likely take a look at the local classified ads.