Startup Professionals Musings

MARCH 14, 2020

Non-credible funding request or unreasonable valuation. Future unproven projections don’t set today’s valuation. Experienced entrepreneurs understand investor expectations of Board representation, preferred stock, and payments based on interim milestones. Ask only for the money you can justify.

Due Diligence 308

Due Diligence Intellectual Property Preferred Stock Startup 308

Startup Professionals Musings

JANUARY 4, 2020

The average valuation for angel investments is $2 million, which will get you $500,000 for 20 percent of your startup. Most professional investors will expect preferred stock, a board seat, rights to later rounds and perhaps anti-dilution protection. Are you flexible on the terms of the investment?

Startup 337

Startup Preferred Stock Exit Strategy Equity 337

Tim Keane

JANUARY 12, 2010

Term-sheets and Valuations: Thinking about Negotiations.   I’ve sat down with entrepreneurs and a copy of a term sheet guide I like [ “Term Sheets & Valuations - A Line by Line Look at the Intricacies of Venture Capital Term Sheets & Valuations ” by Alex Wilmerding, Aspatore Press.] The Valuation Question.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

YoungUpstarts

JUNE 26, 2020

To do that you have to show how your market is big enough (a multi-billion dollar market) to support that kind of valuation. Myth #3: Take the Highest Valuation You Can Get. Valuation is a touchy subject for most entrepreneurs. They seem to take it personally when an investor isn’t willing to negotiate on valuation.

Finance 205

Finance Silicon Valley Valuation Startup 205

Agile VC

APRIL 17, 2011

liquidation preference, 6% accumulated dividend (1). Post-money valuation probably no higher than $12M (2). Series A-1 Preferred. liquidation preference, 6% accumulated dividend. Pre-money valuation was initially set higher but was adjusted to match the Ser B valuation. Series B Preferred.

Pre-Money Valuation 113

Pre-Money Valuation Liquidation Preference Dividend Common Stock 113

Lightspeed Venture Partners

OCTOBER 7, 2012

Week three’s breakdown covered topics like how hard momentum is to turn around, and how participating preferred stock works. That’s why most entrepreneurs do not make a specific ask on valuation, but wait to hear offers from investors. This time I’ll break down week four of this season. BACK 9 DIPS.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

Startup Professionals Musings

SEPTEMBER 26, 2015

Perhaps they're way off in their valuation (usually far too high), or paralyzed by fear at seeing the other terms, because they have no idea what's normal, and what's worth a fight to the death (their startup's). In very early startups, which have no valuation, the term sheet may specify a convertible note.

Term Sheet 120

Term Sheet Demand Preferred Stock Liquidation Preference 120

ithacaVC

APRIL 25, 2012

If you want to scare off VCs, start your pitch with “we are looking to raise $X at a pre-money valuation of $Y” Stating how much you want to raise is fine and recommended. However, stating a desired pre-money valuation early in the process is not a good idea. Here is why.

Valuation 49

Valuation Pre-Money Valuation Liquidation Preference Preferred Stock 49

Scott Edward Walker

APRIL 9, 2012

(ii) why are convertible notes issued instead of shares of common or preferred stock? Part 2 will discuss the two most significant issues for founders in connection with the issuance of convertible notes: (i) the valuation cap and (ii) the discount (and how they interrelate). A high strike price undermines that goal.

Preferred Stock 87

Preferred Stock Finance Common Stock Liquidation Preference 87

Gust

SEPTEMBER 29, 2011

For a traditional VC financing round structured as a sale of preferred stock, the best resources I can recommend are the Term Sheet Series by Brad Feld and Jason Mendelson and Startup Company Lawyer by Yokum Taku. (For more on working with startup lawyers, see Mark Suster’s classic post, How To Work With Lawyers At A Startup.).

Finance 178

Finance Term Sheet Preferred Stock Bridge Financing 178

Startup Professionals Musings

AUGUST 1, 2016

Non-credible funding request or unreasonable valuation. Future unproven projections don’t set today’s valuation. Experienced entrepreneurs understand investor expectations of Board representation, preferred stock, and payments based on interim milestones. Ask only for the money you can justify.

Due Diligence 120

Due Diligence Intellectual Property Preferred Stock Seed Stage 120

ithacaVC

APRIL 25, 2014

For example, cell E2 is the spot to put in the negotiated pre-money valuation. The model includes a simple waterfall analysis using both participating and non-participating preferred (see line 44 and then columns M and O). The larger the preferred stock liquidation preference the larger the impact of participating preferred.

Cap Table 79

Cap Table Preferred Stock Pre-Money Valuation Liquidation Preference 79

Scott Edward Walker

APRIL 22, 2012

(ii) why are convertible notes issued instead of shares of common or preferred stock? This part 2 will address the economics of a convertible note seed financing and the three key economic terms: (i) the conversion discount, (ii) the conversion valuation cap and (iii) the interest rate. What is a Conversion Valuation Cap?

Pre-Money Valuation 72

Pre-Money Valuation Finance Liquidation Preference Founder 72

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. One possibility is to negotiate a higher valuation and offer warrants (i.e., Home About Matt Client references Contact. 10,000,000.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

Startup Company Lawyer

MARCH 14, 2010

To differentiate it from typical “Series A&# preferred stock, which comes with certain expectations with regard to rights. There is no real rule to what a particular series of preferred stock is called. a couple of million dollars), and (iv) is only investing a small amount (i.e. under $500K).

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

View from Seed

OCTOBER 15, 2014

Examples of housekeeping include the following list, though not every item will appear every time: Finance: Cash out date, burn rate, 409A valuation, cap table, common/preferred stock dashboard. However, these are important updates for your board to know.

Seed Stage 331

Seed Stage Cap Table Metrics Burn Rate 331

The Startup Lawyer

JUNE 22, 2010

For this article, let’s assume this equity is the Series A Preferred Stock purchased by a venture capital fund. For example, if a venture capital fund purchases Series A Preferred Stock at $1.00 per share, the discount may allow the angel investor to purchase the same Series A Preferred Stock at $0.75

Pre-Money Valuation 82

Pre-Money Valuation Angel Investor Preferred Stock Valuation 82

Startup Professionals Musings

MARCH 7, 2015

The average valuation for angel investments is $2 million, which will get you $500,000 for 20 percent of your startup. Most professional investors will expect preferred stock, a board seat, rights to later rounds and perhaps anti-dilution protection. Are you flexible on the terms of the investment?

Preferred Stock 120

Preferred Stock Exit Strategy Equity Angel Investor 120

ReadWriteStart

JANUARY 28, 2022

This article will assist you in gaining a fundamental understanding of equity valuation, kinds of equity, and other related topics. These characteristics, comparable to those found in the fixed income market, can convert into common stock, call clauses, and other features. Importance of equity valuation. What is Company Equity?

Valuation 108

Valuation Equity Warrant Common Stock 108

Both Sides of the Table

AUGUST 30, 2010

Funnily enough I just answered this question yesterday on Quora when somebody asked, “Why would an early-stage investor specifically NOT prefer a convertible note structure to straight equity (e.g. a priced/valued preferred stock financing)?&#. Here is my answer with some minor editing: _. 20-25% dilution).

Equity 319

Equity Early Stage Angel Investor Valuation 319

The Startup Lawyer

JANUARY 10, 2012

In most equity financing rounds, an investor will ask for (and get) a term called a liquidation preference. A liquidation preference is the amount that must be paid to a preferred stock holder before any sale proceeds may be paid to the holders of common stock (i.e., founders, option holders, etc.).

Liquidation Preference 73

Liquidation Preference Pre-Money Valuation Participating Preferred Preferred Stock 73

Gust

OCTOBER 5, 2011

Mandatory Conversion : The Notes and any accrued interest will be converted into the Company’s next issued series of preferred stock resulting in new money of not less than $1,000,000 (an “ Eligible Financing ”) at a discount to the per-share price of such preferred shares of 25% (the “ Conversion Price ” ).

Finance 79

Finance Preferred Stock Term Sheet Early Stage 79

Steve Blank

OCTOBER 24, 2017

Traditionally, in exchange for giving the company money, investors would receive preferred stock, and founders and employees owned common stock. Preferred stock had specific provisions that gave investors control over when to sell the company or take it public, hiring and firing the founder etc.

Founder 269

Founder Technical Review CTO Hire IPO 269

The Next Web

JUNE 17, 2015

This typically comes down to the security, voting rights and valuation of the deal. For the security, shoot for convertible note or common stock deals, where you can; say no to preferred stock requirements that may impede your ability to raise future capital. For example, let’s stay your startup is worth $1,000,000.

Equity 60

Equity Valuation Preferred Stock Common Stock 60

Both Sides of the Table

SEPTEMBER 5, 2012

What the entrepreneurs were really saying is, “I don’t want to take a lower valuation now, while I don’t have customers or a full team. They can occur legitimately in a company whose valuation skyrockets unexpectedly as in, “your last round was at $50 million and you want to raise 9 months later at $750 million.

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

K9 Ventures

MAY 14, 2011

The incubators invest usually for an equity stake and buy equity at a extremely low valuation (for example, 7% for $15,000, which implies a pre-money valuation of less than $200,000). Common Stock. Convertible Note or Preferred Stock. Convertible Note or Preferred Stock. Preferred Stock.

Preferred Stock 125

Preferred Stock Seed Stage Incubator Early Stage 125

Gust

OCTOBER 21, 2011

What these approaches have in common is that they cap the investors’ upside such that even in the most spectacular of liquidity events, unless the notes convert to equity first at a lower valuation, angels don’t get anywhere near the payoff awarded to equity holders. Most would agree this is not a fair outcome.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Lightspeed Venture Partners

OCTOBER 1, 2012

pre money valuation). Cuban has interest in a gluten free diet, and claimed that he liked the company, but his only concern was valuation. Since an early exit caps the upside potential, getting in at the right, low valuation is necessary to be able to make a high multiple on your investment. This would never happen in real life.

Pre-Money Valuation 158

Pre-Money Valuation Valuation Participating Preferred Preferred Stock 158

Ben's Blog

JULY 16, 2013

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. But they most certainly are not.

Down Round 78

Down Round Marketing Preferred Stock Post-Money Valuation 78

Startup Company Lawyer

MARCH 12, 2009

Any company that raises venture financing will need to be a C corp in order to issue preferred stock. Most venture and institutional investors favor C corps because they may have separate classes of stock, allowing for the creation of various levels of preferences, protections, and share valuations.

LLC 61

LLC Stock Options Preferred Stock Stock 61

Berkonomics

MAY 22, 2014

Like most angel investors, I have preferences for the terms and conditions of investment and intend to negotiate with entrepreneurs on those terms, such as valuation, company structure, the makeup of the board of directors, liquidation preferences and others.

Early Stage 79

Early Stage Accredited Investor SEC Private Placement 79

Berkonomics

DECEMBER 20, 2018

That party is only concerned with its royalty revenues and growth – and not profit from or valuation of its business. Starting next week, we’ll examine the process and advantages of raising money using various financial tools from notes to preferred stock to other more esoteric tools.

IP 54

IP Intellectual Property Investment Bankers Product 54

ithacaVC

APRIL 5, 2011

One rule of simple cap tables is to issue “normal” stock to founders (common stock only) and investors (typically preferred stock, but sometimes common stock to early friends and family). For clarity, it is impossible to issue stock without putting a value on the company.

Common Stock 45

Common Stock Stock Cap Table Preferred Stock 45

Scott Edward Walker

MAY 15, 2012

What Happens If a Startup is Acquired Prior to the Note’s Conversion to Shares of Preferred Stock? As discussed in part 1 , in the context of a seed financing, a convertible note is a loan that typically automatically converts into shares of preferred stock upon the closing of a Series A round of financing.

Finance 64

Finance Founder Accredited Investor Preferred Stock 64

Early Growth Financial Services

OCTOBER 2, 2014

In short, convertible equity is a form of financing that gives investors the right to preferred stock once a triggering event occurs. So I figured now’s the right time to answer a few questions and fill in some blanks. So what’s that mean?

Equity 44

Equity Preferred Stock Seed Stage Founder 44

K9 Ventures

NOVEMBER 21, 2011

You raised a Series A round, a Series B round, and this year are just about to raise a big Series C round at a great valuation. If there is one piece of advice I would give to the founders of BST, it is to consider selling a part of their personal stock in the company at that stage.

Founder 87

Founder Common Stock Preferred Stock Stock 87

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). That is normal for a pre-money % as it will drop down to about 10% post money depending on size of round and valuation.

Cap Table 67

Cap Table Pre-Money Valuation Option Pool Liquidation Preference 67