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.

Comparing valuations between rounds

The Equity Kicker

A few of them have done good up rounds and the easiest way to describe the magnitude is to talk about the valuation multiple. As a refresher, the post-money valuation is calculated as the pre-money valuation plus the amount of money invested.).

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.

Valuations 101: The Venture Capital Method

Gust

We recently started a series of posts on establishing the pre-money valuation of pre-revenue startup companies for purposes of investment by seed and startup investors. It is one of the useful methods for establishing the pre-money valuation of pre-revenue startup ventures. The concept is simply…since: Return on Investment (ROI) = Terminal (or Harvest) Value ÷ Post-money Valuation. (in Post-money Valuation = $ 2.125 million.

Seed Stage Startups Are Now Graded on a Curve

View from Seed

Rather, it has been broken into bits of a series of capital raises to reach meaningful milestones… “pre-seed,” “post-seed,” and rounds in between have become the norm. Effective) post-money valuation.

Why are the majority of angel investors focused on opportunities with large TAM?

Gust

The hard and unforgiving facts are that the majority of all angel-backed ventures fail completely, losing all the money of all the investors. original post can be found on Quora @ [link] *. Because of the economic realities of angel investing, not greed.

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.

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.”

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.”

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)?

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.”

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.

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).”

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.

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.

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).

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.

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.

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

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.

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.

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.

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.

The Corrosive Downside of Acquihires

Both Sides of the Table

It has even gone so far that we now have evocative headlines in the tech press such as “ Buy or Die ,” which is what got me thinking about this post. Let’s assume $2 million in seed money. They founded their last company with no money in their pocket.

The $10 Million Photo and Other VC Stories

ReadWriteStart

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.

Why VC’s Don’t “Crossover” Invest

Agile VC

Well at this juncture Startup X’s valuation is presumably a lot higher than it was at the Series A, maybe even 5-10x+ higher.

LP 198

A VC’s take on the Season 5 premier of Sharktank

Lightspeed Venture Partners

to fund the company at a $6M post money valuation from a number of investors including Selena Gomez. pre money valuation and planned to use the money to market the app. pre money valuation). pre money valuation.

Bad Notes on Venture Capital

Both Sides of the Table

Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. If you’re wildly successful early on or if they help you achieve a great valuation they actually pay a significant price for their eventual stock even though they took much more risk than a future investor and backed you early. People seem concerned about valuation. Him: They think $14 post is a bit too high. Why don’t they set a valuation then?

Is it Time for You to Earn or to Learn?

Both Sides of the Table

at a startup that has already raised $5 million the chances of you making your retirement money on that company is EXTREMELY small. This isn’t shabby money. Anyway, I hope this post hasn’t been too harsh. I’m not all about the money.

Some thoughts on your ABBA round

VC Adventure

As valuations have risen (become “frothy” in VC speak, which is our nice way of saying “too high”) companies have started raising much larger Series A rounds. This is anecdotal – I’ll try to validate it when the numbers are released – but where companies used to raise $3- $ 5M for their Series A, one response to higher valuations has been a much larger number of companies raising larger and larger Series A rounds (say $ 6M - $ 10M ).

Founders: Learning should be your top 2013 New Year’s resolution

The Next Web

Startup courses from Udemy , a crowdsourced platform for learning: Learn how to raise money for your startup : The most popular course on Udemy, gathering advice from 7 founder CEOs including Naval (founder of AngelList), Dave McLure (founder of 500 Startups) and others.

Shark Tank Season 4 week 9 breakdown

Lightspeed Venture Partners

Season 4 week 9 of Sharktank was another fun episode, showing the importance of failing fast, being prepared for your pitch and how selecting an investor is about more than just optimizing valuation.

Revisiting Paul Graham’s “High Resolution” Financing

Both Sides of the Table

When I first read Paul Graham’s blog post on “High Resolution&# Financing I read it as a treatise arguing that convertible notes are better than equity. As I’m generally a believer in ‘pricing rounds’ I initially didn’t agree with the premise of the post.

Think ahead, if you will need more money later.

Berkonomics

Is the price paid for shares by previous investors excessive, creating a post-money valuation too high for the actual value of the company? No one wants to face this, but the need for money and the possible overpricing of the first rounds may have created an unsustainable valuation. Protecting the business Raising moneySome businesses just can’t fit within the angel capital or friends and family model for raising funds.

Want to Know How VC’s Calculate Valuation Differently from Founders?

Both Sides of the Table

Due to competitive markets we ended up with a pretty good term sheet until we needed to raise money in April 2001 and then we got completely screwed. It was accept the terms or go into bankruptcy so we took the money. Industry standard post your first round of funding will be 15-20%.

Mentorship over Money (and Office Space)

The Startup Lawyer

Good luck trying to convince even the most nascent of startups to take your investment at around a $100k post-money valuation. With the success of Y Combinator and TechStars , several incubators (sometimes referred to as “accelerators&# ) have popped up everywhere. Some have done quite well. Here in Dallas, Tech Wildcatters had a strong class and is opening up applications for the Spring 2011 class later this month.

Why Startups Should Raise Money at the Top End of Normal

Both Sides of the Table

2: As expected at least one person accused me of writing this post because I want to see lower valuations. I thought I’d post on one of the topics before hand. As the risks below get eliminated the higher the valuation investors are prepared to pay.

Bad Notes on VC

Gust

Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. If you’re wildly successful early on or if they help you achieve a great valuation they actually pay a significant price for their eventual stock even though they took much more risk than a future investor and backed you early. People seem concerned about valuation. Him: They think $14 post is a bit too high. Why don’t they set a valuation then?

Shark Tank Season 4 episode 3 breakdown

Lightspeed Venture Partners

pre money valuation). Cuban has interest in a gluten free diet, and claimed that he liked the company, but his only concern was valuation. The company came back and offered him 20% of the company for the $200k (an $800k pre money valuation).

Shark Tank Season 4 week 4 breakdown

Lightspeed Venture Partners

This deal encapsulates why most individual investors don’t make money. That’s why most entrepreneurs do not make a specific ask on valuation, but wait to hear offers from investors.

What is the Right Burn Rate at a Startup Company?

Both Sides of the Table

I was reading Danielle Morrill’s blog post today on whether one’s “ Startup Burn Rate is Normal. Burn rate in case you don’t know is the amount of money a company is either spending (gross) or losing (net) per month. (it Gross burn is the total amount of money you are spending per month. Net burn is the amount of money you are losing per month. We’re going to start aggressively spend money on marketing our product. Valuation.

Building Convertible Debt into the Premoney Valuation

ithacaVC

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. Series A premoney valuation negotiated to be $3mm. So, to calculate the Series A share price, you take the premoney valuation of $3mm and divide it by the number of premoney shares, which again will typically include the whole option pool.

Capital Market Climate Change

Ben's Blog

If you run a startup and are currently raising money, you probably planned for a somewhat different fundraising environment than the one you find yourself in today. You probably thought that valuations would be roughly the same as they were the last time you raised money. And those are big companies with real earnings, so you can imagine how a private company’s valuation might fluctuate. In June of 2000, I raised money at an $820M post-money valuation.