View from Seed

DECEMBER 4, 2019

Over the last 10 years, we’ve been in a bull market with considerable froth in late stage financing activity and valuations. These growth rounds may be more dilutive than planned, but will still occur without punitive terms and allow founders, teams, and early investors to emerge with very successful outcomes at the very end.

LP 256

LP IRR Distribution Portfolio 256

Startup Professionals Musings

SEPTEMBER 30, 2012

They don’t realize that this option would likely be their worst nightmare, since it costs millions for the road show, usually dilutes your equity to a tiny fraction, and takes away all your entrepreneurial control. IPOs in 2008, the market was up to a still trivial 159 in 2011. After a record low of 39 U.S.

Exit Strategy 239

Exit Strategy IPO Investment Bankers Entrepreneur 239

Startup Professionals Musings

NOVEMBER 4, 2013

They don’t realize that this option would likely be their worst nightmare, since it costs millions for the road show, usually dilutes your equity to a tiny fraction, and takes away all your entrepreneurial control. IPOs in 2008, the market was up to a still trivial 128 in 2012 (compared to 675 in 1996). After a record low of 39 U.S.

IPO 224

IPO Founder Exit Strategy Investment Bankers 224

Startup Professionals Musings

JULY 5, 2011

They don’t realize that this option would likely be their worst nightmare, since it costs millions for the road show, usually dilutes your equity to a tiny fraction, and takes away all your entrepreneurial control. companies made the IPO transition in 2009, out of thousands of startups. Only about a dozen U.S.

Exit Strategy 235

Exit Strategy IPO Entrepreneur Investment Bankers 235

Tim Keane

JANUARY 12, 2010

For angel groups, the distinction between groups and VCs on this issue is dwindling, especially as angel groups do bigger rounds of financing.   Note that this applies only to earl stage Series A-type equity financings and assumes no cash dividends are paid to investors. . times the investment.). here of 7.65 [2].

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Feld Thoughts

MARCH 24, 2017

In general, these investments were rarely competitive at the time of their first financing. They’re a rare venture fund that doesn’t exercise pro-rata rights over the lifetime of an investment, meaning they dilute alongside company founders, which they believe better aligns their interests as seed investors with the entrepreneurs.

Founder 77

Founder LP Technical Review Seed Stage 77

Babbling VC

OCTOBER 3, 2011

This is very difficult to do if you constantly have to worry about running out of capital in your fund or not having enough reserves to avoid dilution. Exits will feed future intermingling amongst the entrepreneurs and the funds financing them. If IPO's return, you basically will have two to three public markets you can sell into.

LP 82

LP Europe Germany Venture Capital 82

David Teten

JANUARY 19, 2021

The value ascribed by subsequent investors (in a secondary); buyers (acquisition); or the public markets (IPO). Part of the magic of revenue-based financing is how historical performance and strong, achievable financial projections are ultimately the backbone of how RBI/RBF investment decisions are made.” Volatile, uncapped.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

Feld Thoughts

FEBRUARY 28, 2023

Corporate law: In Germany, most companies in general and most VC-financed companies are structured in the legal form of a “Gesellschaft mit beschränkter Haftung” (GmbH). Often, this integration results in VC-financed GmbH companies having little to do with the GmbH as envisaged by the law.

Germany 178

Germany Liquidation Preference Option Pool Advisory Board 178

www.mattbartus.com

SEPTEMBER 24, 2011

We will grant him/her X% fully diluted shares up front, and every time he/she makes an introduction, he/she will vest in 100 shares.” Matt is a lawyer representing technology companies through all phases of their lifecycle, from pre-incorporation, seed & VC financings, exit transactions and IPOs (read more). Recent Posts.

Equity 40

Equity Vesting Silicon Valley Intellectual Property 40

Haystack

JULY 8, 2018

valuation, that’s sort of like a new IPO, but without the lockup period. I do feel, however, we are in a unique time as it relates to capital 1) in the market and 2) focused on technology — and this has created never-before-seen conditions, mega-financings from traditionally public or indirect investors.

Early Stage 95

Early Stage Dilution Private Equity Equity 95

Both Sides of the Table

MARCH 30, 2016

Many had started IPO’ing and we started to think about our future. Great companies get financed. They had to focus on getting a “W” one day over the short-term dilution impact of raising at a price lower than they had set out to achieve. forward sales with some as high as 12x sales.

Balance Sheet 150

Balance Sheet Burn Rate Valuation Forecast 150

Startup Company Lawyer

JANUARY 31, 2011

Automatic conversion: on a $1M equity financing with no conversion discount and no price cap , provided that the transaction documents provide for a right to purchase a pro rata share of future financings. (I Optional equity conversion: on other equity financings with no conversion discount and no price cap.

Preferred Stock 60

Preferred Stock Liquidation Preference IPO Common Stock 60

K9 Ventures

OCTOBER 10, 2017

This post is intended to be a dynamic document, and I will attempt to update it from time to time with new questions that may arise or as financing trends evolve. Q: What amount of financing is considered Pre-Seed? It’s a legitimate stage of financing in the venture eco-system as of this writing (October 2017).

Seed Stage 82

Seed Stage Finance Later Stage Equity 82

The Equity Kicker

MARCH 3, 2016

I think a bigger part of the explanation lies in deal dynamics – it’s easier for companies maximise valuation in private financing auctions than it is in IPOs. However, whilst I haven’t seen a full analysis, I doubt this additional downside protection would be enough to explain all the difference in valuation.

Liquidation Preference 60

Liquidation Preference Participating Preferred Valuation IPO 60

ithacaVC

FEBRUARY 1, 2018

The treatment of the friends, family and angels (FFA) as the startup matures and raises larger rounds of financing over time is interesting. In this situation, the FFAs are diluted from an ownership percentage, but enhanced economically. Without friends and family and angels there would not be many companies for VCs to look at!

Preemptive Right 45

Preemptive Right Cap Table Valuation Dilution 45

Scott Edward Walker

JUNE 9, 2011

two or three times the Original Purchase Price) to create more flexibility with regard to an IPO. First, founders should push for a low multiple of the Original Purchase Price (e.g.,

Term Sheet 60

Term Sheet Conversion Rights Venture Capital Liquidation Preference 60

www.payne.org

SEPTEMBER 22, 2011

3 Dilution. In addition, IPOs are a special scenario, where the preference usually goes away and all stock classes are in equal footing). Those new shares are created out of thin air by the company, and will dilute all of the current stockholders. In a startup, dilution happens, and you just need to factor it in.

Equity 56

Equity Employee Vesting Preferred Stock 56

Professor VC

DECEMBER 8, 2015

I think we will see more of these in 2016 and beyond as IPOs are still far and few between and unicorns struggle to justify their stratospheric valuations. Obviously, Musk and Thiel both did fine off the eventual Paypal IPO (and even better subsequently with Facebook and Tesla). At the IPO, Musk held a 14.2%

Merger 28

Merger LP IPO Redemption 28

www.mattbartus.com

DECEMBER 9, 2012

If you are a company that is fundraising, keep in mind that there are a few different levers you can pull to change the amount of dilution that the founders will experience. 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.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

Professor VC

JUNE 20, 2011

Financing, that is.I One truth of start-up financing is that it generally takes twice as long and twice as much money to accomplish your milestones. Most companies dont come close to their rose colored financial models prepared when going out for Series A financing. As I said up front, I have mixed emotions about the financing.

San Jose 28

San Jose Angel Investor Term Sheet Venture Capital 28

Austin Startup

MARCH 7, 2021

In 2019 and 2020, we saw hundreds of millions of dollars in non-dilutive funding go to Texas startups, most of which had never worked with the government before. At the same time, early-stage companies are thinking beyond the high prices of Silicon Valley to put down roots and find financing and growth partners.

Texas 90

Texas San Antonio Houston Dallas 90

Seeing Both Sides

JANUARY 13, 2015

Financing: holy crap - we are running out of money in 6 months! The founders are getting restless because they have been diluted, have less responsibility and realize that the company isn''t going to reach $1 billion in 3 years. Financing: The "hopes and dreams" financing stage is over. Is it time to consider an exit?

Mezzanine 20

Mezzanine IPO Finance Business Model 20

Both Sides of the Table

SEPTEMBER 18, 2014

It’s like we need a finance 101 course for entrepreneurs. In finance they call it “terminal value” but the truth is the price is as arbitrary at your A round as it is at your seed round. And now I have to explain to team that they’re taking more dilution than they expected if we do a down round.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Both Sides of the Table

SEPTEMBER 10, 2021

And the loosening of federal monetary policies, particularly in the US, has pushed more dollars into the venture ecosystems at every stage of financing. What Has Changed in Financing? even before the pandemic itself has been fully tamed. We have global opportunities from these trends but of course also big challenges.

Pre-Money Valuation 471

Pre-Money Valuation Valuation Venture Capital Early Stage 471

abovethecrowd.com

APRIL 20, 2016

Why the Unicorn Financing Market Just Became Dangerous…For All Involved. The pressures of lofty paper valuations, massive burn rates (and the subsequent need for more cash), and unprecedented low levels of IPOs and M&A, have created a complex and unique circumstance which many Unicorn CEOs and investors are ill-prepared to navigate.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Ben's Blog

MAY 24, 2021

IPO market. There are a number of trends concerning IPOs and capital formation to note: First, the raw number of IPOs has declined significantly: From 1980-2000, the US averaged roughly 300 IPOs per year; from 2001-2016, the average fell to 108 per year. In the first quarter of 2021 alone, SPACs raised $87.9

SEC 36

SEC Accredited Investor IPO Technical Review 36

Gust

SEPTEMBER 17, 2014

It’s like we need a finance 101 course for entrepreneurs. In finance they call it “terminal value” but the truth is the price is as arbitrary at your A round as it is at your seed round. And now I have to explain to team that they’re taking more dilution than they expected if we do a down round. Me: More dilution?

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Seeing Both Sides

NOVEMBER 26, 2012

Whether you are raising a $250K seed round or navigating a $100M IPO, the capital markets - in all of its various forms - are a fundamental constituent in the business-building journey. Adding some debt onto your balance sheet will lower your cost of capital and your dilution, which is better for existing investors and the management team.

Balance Sheet 42

Balance Sheet Entrepreneur Dilution Portfolio 42

Austin Startup

AUGUST 1, 2017

TL;DR: In a market that has historically idolized huge, splashy financings and exits, an increasing number of entrepreneurs are realizing that everyone else’s definition of success — particularly among certain large VCs — isn’t necessarily aligned with their own. And large checks require very large exits to achieve good returns.

Liquidation Preference 48

Liquidation Preference Common Stock Valuation Silicon Valley 48

Ben's Blog

AUGUST 17, 2020

The conventional wisdom finance professionals are often taught is that you should not pay a higher multiple today than what you’d expect to be paid upon exit — that is, your entry multiple should equal your exit multiple. Not too shabby!

Valuation 36

Valuation Balance Sheet Cofounder Forecast 36

Hunter Walker

NOVEMBER 10, 2024

Here’s why: It used to be that all venture investors had largely the same goals and incentives, up until maybe the growth round pre-IPO. They are likely to own the most of the company with their first check, and take substantial dilution pre-exit. Now even the Series A investor is often playing a different game than the seed VCs.

Cap Table 132

Cap Table Dilution Valuation .Net 132