Steve Blank
APRIL 26, 2022
Cram downs are back – and I’m keeping a list. Except, that is, for the bottom feeders of the Venture Capital business – investors who “ cram down ” their companies. A cram down is different than a down round. Cram downs wouldn’t exist without the founder’s agreement. Stopping Cram Downs.
Startup Professionals Musings
JUNE 2, 2013
Angels expect at least a working prototype and a hint of market acceptance (traction) before investing. The target market better be a big one, like over a billion dollars, with a double-digit growth rate, large enough to absorb multiple entrants. Before that, rely on friends, family, and fools. Scalability.
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Startup Professionals Musings
MARCH 22, 2020
In the interim, there is no market for the shares, and no dividends or interest. That means writing down and signing the terms of the agreement, after making sure everyone understands them. Insist on paying market rates for commercial loans, since the IRS can instigate some nasty consequences on “gifts.”
Both Sides of the Table
APRIL 20, 2011
He also says it is important to be able to participate in follow on rounds so as not to get “crammed down”. Then they consider if it is a big enough market. Howard gives an example of an entrepreneur wildly overstating a market size. First Round Capital makes 20-25 investments a year with an average size of $500k.
Both Sides of the Table
MAY 5, 2013
a) doing what is effectively a down round preemptively when I don’t have to, by underpricing my current round in this market vs. b) accepting the market price along with some risk of taking a down round in the future, if I don’t hit my milestones, why would I ever choose b)?” We know that.
Steve Blank
NOVEMBER 2, 2009
In times when venture capital is hard to get, investors extract high costs for failure (down-rounds, cram downs , new management teams, shut down the company.) Marketing demand creation programs (Search Engine Marketing, Public Relations, Advertising, Lead Generation, Trade Shows, etc.)
Startup Professionals Musings
MARCH 9, 2018
In the interim, there is no market for the shares, and no dividends or interest. That means writing down and signing the terms of the agreement, after making sure everyone understands them. Insist on paying market rates for commercial loans, since the IRS can instigate some nasty consequences on “gifts.”
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