Trending Sources

How Investors Think About Valuation of Pre-Revenue Startups

SoCal CTO

They might have some seed money and are thinking or raising a Series A based on success of an early release (MVP). Because of this, I've always tried to stay up-to-speed on how early-stage investors look at valuation of companies. Bill Payne is an expert on how early-stage investors should look at valuation. He just post: Establishing the Pre-money Valuation of Pre-revenue Startups. Especially interesting is the Valuation Worksheet towards the end.

How much capital should you raise?

Version One Ventures

Many new founders think that because they’ve secured their seed round, it will be easy to find investors for the next round, and the next… However, a startup needs to demonstrate significant progress between funding rounds. Take the money, but do it wisely.

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.

Series Seed or Convertible Note? Which one is more founder friendly? Which one do investors prefer?

Gust

That said, the primary entrepreneur-friendly reason for doing a Convertible Note (and the reason that no serious investor under regular circumstances will therefore do an uncapped note) is: The valuation negotiation is put off until the next round. Assuming the company is able to make effective use of the seed money to greatly increase the value of the enterprise, all of that value therefore accrues to the founder, rather than the investor.

How the Seed-Stage VC Trend Began, The Downsides of Unicorns & Much More

Both Sides of the Table

*. If you are a 20-something tech entrepreneur you could be forgiven for thinking that seed-stage investors, Angellist Syndicates and widely available angel money always existed. I was out to raise my first seed money in my second startup of $500,000.

How does Convertible Debt work?

Gust

Debt is a fancy word for a “loan” That is, I lend you money, and you agree to pay back the money that I loaned you at some known point in the future, along with a specific additional amount of money (called “interest”) which is your payment to me for having been willing to loan you money in the first place. Equity is a fancy word for “ownership” That is, I give you money and you give me part ownership of the company.

A Year in Review: 2016

Version One Ventures

In other words, any correction in public valuations happened quickly and has now stabilized. From Series A and onwards, fundraising takes longer and valuations are typically below the expectations and benchmarks of 2015. At the same time, seed money is still abundant due to the proliferation of micro VC over the past few years. This has been an important year for us as a firm, as well as the market in general.

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

VC Ready Blog

Many entrepreneurs want to put a value on their company before the ink on their incorporation documents is dry, but valuing an early stage company is as much art as science, and a bad valuation can be worse than no valuation at all. And, of course, there is the entrepreneur’s natural bias that inevitably sneaks into the valuation. Because of all the variables and uncertainties, companies are often better off if they avoid setting a formal valuation at the outset.

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

VC Ready Blog

Many entrepreneurs want to put a value on their company before the ink on their incorporation documents is dry, but valuing an early stage company is as much art as science, and a bad valuation can be worse than no valuation at all. And, of course, there is the entrepreneur’s natural bias that inevitably sneaks into the valuation. Because of all the variables and uncertainties, companies are often better off if they avoid setting a formal valuation at the outset.

Is Canva the Company That Will Disrupt the Design World? Not Quite

crowdSPRING Blog

It launched in 2013 with $3 million in seed money from American and Australian investors, and offers a series of templates intended to make good design easier to execute and more accessible. The latest funding valued the startup at $345 million, more than double the company’s $165 million valuation a year ago. Canva, the graphic design platform promoting itself as tool that empowers the world to design, is not new.

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

www.businessinsider.com

Your Money. Top Startup Advisor Paul Graham Just Warned Against Taking Googles Money. This Chart Shows Why VCs Are Willing To Give Hyped Startups Absurd Valuations. Grahams startups go through a months-long process of coaching to help them build products and raise money.

2009 VC Fundraising Strategy

Startup Economy

Investor shift focus on existing portfolio companies by allocating more follow-on reserve; thus, less money for new companies reduce risks in early/seed stage capital allocation set a higher bar in funneling investment opportunities advertisement-based business model is no longer a viable option for most companies in internet/mobile holds more negoting leverage on valuation. Tags: Investment Seed money business model venture capital early stage

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. Raising money, scaling the team.

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

This is going to be BIG.

How else can you explain this headline matching a story about a professional social network still trying to explore revenues raising $17mm on an $80mm valuation? They're also falling over themselves to put tons of money into the really big funds with long track records of success.

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. But these thoughts have been aired before and are now part of the usual rhetoric about the seed bubble.

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

How long will the “seed stage bubble” last?

andrewchen.co

How long will the “seed stage bubble” last? It’s never been easier to raise seed funding, and there’s warnings that we’re in the midst of a “seed stage bubble.” @andrewchen. Read what Im reading · Featured essays.

Seed Bubble Watch 1st Half 2013

Possible Insight

Well, it’s been almost three years since I started watching for quantitative evidence of a “bubble” in seed-stage technology funding. Seed stage valuations have been flat since 2011. Rather, I want it maximally sensitive to sudden influxes in new seed money.

Diversification – The Alternative to Market Timing

Rob Go

I think that over time, this is the best way to handle market swings as a seed stage investor who is a) playing in a highly unpredictable part of the market and b) has a very long time horizon. Valuation Discipline. We have a pretty strong sense of what realistic valuation ranges are and aren’t for seed stage companies. Our model works when our seed dollars go it at a price that allows us to be well compensated for the risk we took if things go reasonably well.

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. The flip side of that coin is that angels are by definition not professional money managers. VCs can pack a powerful punch.

How to Fund a Startup

www.paulgraham.com

A typical startup goes throughseveral rounds of funding, and at each round you want to take justenough money to reach the speed where you can shift into the nextgear. At Viaweb we got our first $10,000 ofseed money from our friend Julian, but he was sufficiently richthat its hard to say whether he should be classified as a friendor angel. The advantage of raising money from friends and family is thattheyre easy to find. Another concept we need to introduce now is valuation.

Life As A Startup Consultant

Seed Stage Capital

Startups either a) have no money to pay you with, or b) have been trained to think that they should always be helped for free (a practice probably fostered by large law firms that defer fees for some period of time). If you want to work with startups, the money has to be secondary.

How to Start a Startup

www.paulgraham.com

You need three things to create a successful startup: to start withgood people, to make something customers actually want, and to spendas little money as possible. The way a startup makes money is to offer people bettertechnology than they have now. Andyet theres a lot of money at stake. Microsofts originalplan was to make money selling programming languages, of all things.Their current business model didnt occur to them until IBM droppedit in their lap five years later.

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.

Entrepreneurs that Got Filthy Rich in 2011

Inc Startups

Eric Lefkofsky provided $1 million in seed money to Andrew Mason to develop the idea for the coupon buying site. percent of the company, the company’s valuation, at about $4 billion, pegs his net worth at over $100 million.

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.

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 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. Alan Patricof of Greycroft wrote a telling article for Business Insider titled: You Think It’s Hard To Raise Money For A Company?

The Legal Side of Entrepreneurship

YoungUpstarts

Startups need to understand how to manage the seed money they receive from investors and VCs. “And if you have a valuation cap; a higher cap is always better than a lower cap.” by John Vrionis, partner at Lightspeed Venture Partners.

VCs in seed clothing: Chris Dixon, Mark Suster, and Naval Ravikant interviewed

Venture Hacks

The topic was VC signaling in seed rounds — and how these signals help or hurt your ability to raise money in the next round. SlideShare: VC signaling in seed rounds. Chris Dixon: The problem with taking seed money from big VCs. VC signaling in seed rounds.

Why You're Not Getting the Most Out of Your Board

Inc Startups

If you’re a venture-backed tech company or even an early-stage business fueled by angel or seed money I assume you have a good group of board members or advisors who will give you time to be helpful and they want to be helpful.

Understanding the Risks of VC Signaling

Both Sides of the Table

I recently wrote a blog post on understanding how the size and age of a venture capital fund might affect you when you’re raising money. invested in the seed round they have more inside knowledge than I do. Why are VC’s really doing seed deals? Seeds deals.

To Follow On or Not to Follow On

This is going to be BIG.

In the late 90's, it wasn't surprising that companies with no revenue that were funded at 100 million dollar valuations didn't survive. 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. If you're doing seed deals, how often does a down round in a seed deal even happen? Some VCs just toss in seeds as options.

How You May be Signaling Price without Knowing It

Both Sides of the Table

He’s struggling to raise money. People are raising in record times and with wacky valuations. His company had raised seed money already. I asked him what his valuation expectations were and he said he wasn’t fixated on that.

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.

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.

Venture Seed vs Angel Seed

Immersive Web

Among the many great discussions, the most critical one in my mind centered on the impact that the source of money can have on an early, seed startup. The discussion covered two main sources of seed funding: Vc and true angel. Isn’t seed money just seed money? Most seed investments, however, are just that — seeds. Not sprouts or full grown plants, just seeds. Look for seed money from angels.

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What you should know about Angel Investors and Convertible Notes

Don Dodge on The Next Big Thing

The average deal size (seed stage) is about $250K. They invest in what they know, where they can apply their experience, and in deals where their money can have impact. Convertible Notes – Some Angel investors will use Convertible Notes to fund seed stage companies. Valuation – Early stage companies are hard to value. If you are only raising $100K of seed money it doesn’t make sense to spend $25K to $50K on lawyer fees for Series A docs.

Venture Seed vs Angel Seed « Immersive Web

Immersive Web

Immersive Web Home About Venture Seed vs Angel Seed I really enjoyed the Boston Angel Boot Camp on June 1. Among the many great discussions, the most critical one in my mind centered on the impact that the source of money can have on an early, seed startup. The discussion covered two main sources of seed funding: Vc and true angel. Isn’t seed money just seed money? Most seed investments, however, are just that — seeds.

Is Canva the Company That Will Disrupt the Design World? Not Quite

crowdSPRING Blog

It launched in 2013 with $3 million in seed money from American and Australian investors, and offers a series of templates intended to make good design easier to execute and more accessible. The latest funding valued the startup at $345 million, more than double the company’s $165 million valuation a year ago. Canva, the graphic design platform promoting itself as tool that empowers the world to design, is not new.

Is Canva the Company That Will Disrupt the Design World? Not Quite

crowdSPRING Blog

It launched in 2013 with $3 million in seed money from American and Australian investors, and offers a series of templates intended to make good design easier to execute and more accessible. The latest funding valued the startup at $345 million, more than double the company’s $165 million valuation a year ago. Canva, the graphic design platform promoting itself as tool that empowers the world to design, is not new.