Both Sides of the Table

JULY 17, 2018

Hire when it feels like you're bursting at the seems or missing a critical skill on existing team or have figured out how to scale growth  —  @msuster 6/ Raising capital at very high prices helps avoid short-term dilution. But if you raise at too high a price you make it harder to raise next round.

Founder 242

Founder Dilution Software Review Later Stage 242

Both Sides of the Table

OCTOBER 14, 2011

million pre-money valuation, which is a $10 million post-money) you get diluted by 25% (2.5m / 10m). But understanding how you’re likely to get diluted over time is a more difficult concept. So here is our crack at explaining the world of dilution to you. This post originally appeared on TechCrunch. million at a $7.5

Dilution 394

Dilution Pre-Money Valuation Startup Valuation 394

View from Seed

JANUARY 13, 2021

And yes, a seed fund may have a tougher time holding on to their ownership down the road, and thus get diluted down. We’ve had multiple companies in our early funds that hit bumps and had to raise flat rounds, which hurts from a dilution standpoint but doesn’t wipe out our position. So yes, seed funds will own less. But guess what?

Dilution 399

Dilution Later Stage Portfolio Technical Review 399

Startup Professionals Musings

SEPTEMBER 10, 2018

Of course, all co-founders need to remember that allocated percentages will be diluted as angel and VC investors are brought in. Keep your wits about you to make sure that dilution is done equitably and evenly. The CFO may have a major financial background, but might be a minority owner.

Equity 238

Equity Cofounder Technical Cofounder Intellectual Property 238

Startup Professionals Musings

JANUARY 30, 2022

It takes focus to resist adding a long list of features that seem to make the opportunity larger, but dilute to focus of both you and potential customers. The first chasm is getting the customer requirements right, product or service, to satisfy a real need that a large number of customers will pay real money to satisfy.

Technical Review 375

Technical Review Startup Dilution Early Stage 375

Both Sides of the Table

MARCH 19, 2013

That it is non-dilutive financing? Let’s say you can supplement that with $1 million in professional services revenue at $500,000 gross margin. Need I point out that the $500,000 is still profitable revenue that can contribute to your central costs of running your business?

Technical Review 403

Technical Review Startup Software Review API 403

Both Sides of the Table

FEBRUARY 6, 2013

it’s the most expensive dilution you’ll ever face. And the folks at Startup Grind have been kind enough to invite me to present this morning in Mountain View on the topic. Quick summary: Be careful not to have too many co-founders. And you need to be careful about giving up control to cofounders as much as VCs.

Cofounder 388

Cofounder Early Stage Startup Silicon Valley 388

Both Sides of the Table

SEPTEMBER 5, 2012

In a standard VC term sheet there is a standard term called an “anti dilution provision” and they are in nearly 100% of deals. It has nowhere near the same dilutive effects as a full ratchet except in extreme edge cases. But my $500k, while only buying 10% of the company (and now diluted down to 7.5%

Ratchet 354

Ratchet Liquidation Preference Equity Stock 354

View from Seed

MAY 2, 2019

The challenge with pre-seed rounds is that pricing will sometimes be pretty dilutive. The downside is that YC is itself quite dilutive, the program itself may not be a great fit, and there are many many companies out of your batch that won’t be one of the anointed winners. The Pre-YC Pre-Seed.

Early Stage 214

Early Stage Dilution Valuation .Net 214

Startup Professionals Musings

JUNE 28, 2021

Thus every serious investor reserves a certain amount of his investment capital for follow-on rounds, which allows them to stay to course to success, even with dilution. They will need more money. If you subscribe to truths one to five, startup investing can be lucrative.

Angel Investor 361

Angel Investor Accredited Investor IRR Angel Groups 361

Both Sides of the Table

SEPTEMBER 15, 2022

But here’s the magic few people ever talk about … We’ve created more than $1.5 billion in value to Upfront from just 6 deals that WERE NOT immediately up and to the right.

Technical Review 416

Technical Review Pre-Money Valuation San Francisco Valuation 416

Startup Professionals Musings

MAY 26, 2023

Make sure new solutions offered actually build your brand, rather than dilute it. The cost of any new product these days must include education and rollout marketing, perhaps equal or greater than the development costs. Even more important than solution marketing is building your brand. Solution may require new category development time.

Product 354

Product Technical Review Artificial Inteligence Dividend 354

Both Sides of the Table

MAY 9, 2018

I also had to negotiate a follow-on round at a portfolio company because new investors were trying to force a bit option-pool top-up that would dilute the founders and existing shareholders and existing investors were fighting over prorata rights. Some were interesting, some weren’t.

Software Review 381

Software Review Churn Rate Due Diligence New York 381

Both Sides of the Table

MARCH 11, 2011

Too many entrepreneurs focus on dilution. But over-optimizing for dilution is a bad attribute relative to focusing on creating a big & winning company. Bill thinks that most companies your success is usually binary. So the most important thing is to surround yourself with people who can help you succeed.

Product 350

Product Tuvalu Dilution Incubator 350

Startup Professionals Musings

AUGUST 21, 2019

A common practice is to hire local employees who know the geographic culture, even though this may well dilute the company culture. This usually marks the end of organic growth, as partnerships and alliances aid growth, but again dilute the focus on culture. Product-line expansion. Efficiency and scale.

Dilution 224

Dilution Merger Flash Global 224

Both Sides of the Table

SEPTEMBER 17, 2011

Dilute your cash, equity or both. But it will not help your business grow faster. What will it do? Focus the most senior person in the company’s time away from critical decision making on daily business. Create hassles for post-merger integration of technology or teams. Lead to bad blood on your existing team.

Operations 292

Operations CTO Hire Startup Early Stage 292

View from Seed

OCTOBER 24, 2019

The reality is that if a founder raised every one of these rounds, and lead investors always got their “target” ownership, the level of dilution would be ridiculous. No good investor would want the founder/CEO of a company to have insufficient ownership by the series A, and every founder I know is sensitive to taking too much dilution.

Dilution 149

Dilution B2B Burn Rate Early Stage 149

Startup Professionals Musings

APRIL 27, 2019

It takes focus to resist adding a long list of features that seem to make the opportunity larger, but dilute to focus of both you and potential customers. The first chasm is getting the customer requirements right, product or service, to satisfy a real need that a large number of customers will pay real money to satisfy.

Technical Review 255

Technical Review Dilution Early Stage Product Development 255

Startup Professionals Musings

NOVEMBER 10, 2012

It takes focus to resist adding a long list of features that seem to make the opportunity larger, but dilute to focus of both you and potential customers. The first chasm is getting the customer requirements right, product or service, to satisfy a real need that a large number of customers will pay real money to satisfy.

Startup 254

Startup Technical Review Dilution Early Stage 254

Both Sides of the Table

MARCH 21, 2013

It also is a great way to finance your business without facing dilution before you actually raise venture capital and when the valuation you might get from angels is less than you’d want. So it wouldn’t bother me if 90% of your year-one revenue was PS provided it was done with a specific plan for year-2 software sales.

Software Review 321

Software Review Software IP Technical Review 321

Startup Professionals Musings

DECEMBER 18, 2013

It takes focus to resist adding a long list of features that seem to make the opportunity larger, but dilute to focus of both you and potential customers. The first chasm is getting the customer requirements right, product or service, to satisfy a real need that a large number of customers will pay real money to satisfy.

Entrepreneur 252

Entrepreneur Marketing Technical Review Dilution 252

Startup Professionals Musings

MAY 9, 2014

Thus every serious investor reserves a certain amount of his investment capital for follow-on rounds, which allows them to stay to course to success, even with dilution. They will need more money. If you subscribe to truths one to five, startup investing can be lucrative.

Angel Investor 278

Angel Investor Angel Groups Accredited Investor IRR 278

Startup Professionals Musings

AUGUST 11, 2021

Most of you aspiring entrepreneurs probably have long searched for that special idea that will catapult you and your startup to success. Yet, my experience as a business advisor and investor has convinced me that the magic is not the idea, but you and the execution.

Dilution 428

Dilution Entrepreneur Merger Acquisition 428

Both Sides of the Table

OCTOBER 12, 2014

This might happen because to meet all investors needs they end up selling too much of the company, taking too much dilution and feeling beat up. Aren’t they getting screwed? Sometimes entrepreneurs get screwed. If you listen to conventional wisdom this is the only thing happening. As I like to point out, the truth is often more nuanced.

Technical Review 336

Technical Review Later Stage Early Stage LP 336

Both Sides of the Table

MAY 28, 2018

Of course there are times where 15% dilution is more appropriate and other times it can be 33% but in a first meeting we’re just trying to establish general ranges for reasonableness. Every VC knows that the amount you raise is often a proxy for your valuation.

Burn Rate 247

Burn Rate Valuation Pre-Money Valuation Dilution 247

Both Sides of the Table

SEPTEMBER 28, 2014

I have long advised startup companies to “ raise capital at the top end of normal ” and by that I mean it’s ok for founders to want to raise at a high price (and thus minimize dilution) but if your valuation is completely out of whack with your underlying performance and if you ever need to raise more capital it becomes VERY difficult (..)

Burn Rate 383

Burn Rate Balance Sheet .Net Valuation 383

Both Sides of the Table

JANUARY 4, 2014

It either needed to get more aggressive in pricing, pivot to a new business or business model or raise more capital (and take the dilution) in order to have more time to figure things out. The company hadn’t performed well financially and need to make changes. We sat down the three of us.

Founder 340

Founder Cofounder Sacramento Technical Review 340

Steve Blank

OCTOBER 22, 2024

What are the physical specs – unique hardware needed ( dilution cryostats , et al) power required , connectivity, etc. What number of qubits do they think is need to run Shor’s algorithm to factor 2048 bits. How will the computer be programmed? What are the software complexities?

Technical Review 267

Technical Review Illinois Algorithm Software Review 267

Startup Professionals Musings

APRIL 23, 2017

It takes focus to resist adding a long list of features that seem to make the opportunity larger, but dilute to focus of both you and potential customers. The first chasm is getting the customer requirements right, product or service, to satisfy a real need that a large number of customers will pay real money to satisfy.

Customer 191

Customer Entrepreneur Technical Review Dilution 191

Both Sides of the Table

FEBRUARY 8, 2016

Optimize for a W more than % dilution in these circumstances. Founders hate them because they’re dilutive. But I would point out that raising money is an existential event and I think in the coming 12-18 months you may see loss ratios (companies going out of business or selling in fire sales) go up. Down rounds are corrosive.

Burn Rate 150

Burn Rate Cap Table Dilution Startup 150

Startup Professionals Musings

DECEMBER 16, 2017

Thus every serious investor reserves a certain amount of his investment capital for follow-on rounds, which allows them to stay to course to success, even with dilution. They will need more money. If you subscribe to truths one to five, startup investing can be lucrative.

Angel Investor 190

Angel Investor Accredited Investor IRR Angel Groups 190

Both Sides of the Table

JUNE 5, 2011

But the reality is that you’re faced with two problems: 1) the earlier the stage the riskier and thus more write-offs so you need to have enough ownership percentage in your winners to make up for the losers and 2) the earlier stage your check the more likely the company will need many more funding rounds behind you and thus you face dilution.

Pre-Money Valuation 336

Pre-Money Valuation Valuation Silicon Valley Stock 336

Steve Blank

NOVEMBER 13, 2018

Unless you have them capture the unique aspects of the culture, it will become diluted and disappear among the new hires. These shouldn’t be random assignments but instead, offer a roadmap of possible choices and directions. Loss of Community? Your original hires embody the company culture. Declare them cultural co-founders.

Part-Time VPE 334

Part-Time VPE Employee Cofounder Hiring 334

VC Cafe

FEBRUARY 27, 2024

To reduce the impact of dilution, the expectation is that startup valuation should more or less double between the pre-seed to the seed, and seed to series A (ideally backed by reasonable traction/ revenue multiples). That’s yet another reason for micro funds to move earlier in the fundraising timeline.

Valuation 186

Valuation Software Review Generative AI Technical Review 186

View from Seed

AUGUST 17, 2021

at exit due to dilution. It creates dilution, and investing in these rounds increases your effective post-money. If the company wasn’t that capital efficient, the fund may end up owning 2.5% In this case, the effective post-money is $2.5M / 2.5% = $100M. So it’s like this same fund actually invested $2.5M

IRR 205

IRR Dilution Founder Portfolio 205

Startup Professionals Musings

AUGUST 31, 2018

Totally new and risky products will dilute your focus, and may confuse existing customers. The work required here is a full analysis of the best markets to pursue, based on future growth projections of your customer segment, as well as those to avoid. Expand your product line, staying close to the core.

Angel Investor 167

Angel Investor Dilution Software Review Distribution 167

View from Seed

SEPTEMBER 9, 2014

So when founders lose focus, they dilute their power and effectiveness, which diffuses the force of their impact. The most valuable resource a founder has is his/her time and energy. Every hour of the founder’s day and every decision that is made needs to have as big an impact as possible.

Hiring 336

Hiring Cofounder Startup Technical Cofounder 336