Startup Professionals Musings

JUNE 28, 2021

Entrepreneurs who require funding for their startup have long counted on self-accredited high net worth individuals (“angels”) to fill their needs, after friends and family, and before they qualify for institutional investments (“VCs”). Thus investing in startups should always be approached as a low odds game.

Angel Investor 361

Angel Investor Accredited Investor IRR Angel Groups 361

View from Seed

JANUARY 13, 2021

What has happened is that over the last 10 years, the vast majority of successful startups have raised some sort of a seed round prior to a series A. And yes, a seed fund may have a tougher time holding on to their ownership down the road, and thus get diluted down. Both factors will hurt your ownership relative to fund size.

Dilution 399

Dilution Later Stage Portfolio Technical Review 399

Both Sides of the Table

JUNE 5, 2011

2 preamble issues having read the comments on TC today: 1: I know that the prices of startup companies is much great in Silicon Valley than in smaller towns / less tech focused areas in the US and the US prices higher than many foreign markets. That’s the deal you get when you’re raising in a good market for startup financing.

Pre-Money Valuation 336

Pre-Money Valuation Valuation Silicon Valley Stock 336

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. You’re in control.

Software Review 381

Software Review Churn Rate Due Diligence New York 381

Both Sides of the Table

FEBRUARY 20, 2019

If you haven’t raised any money or if you raised a small round from angels or friends & family I would suggest you avoid setting up a formal board unless the people who would join your board are deeply experienced at sitting on startup boards. Well, once people get on boards it’s pretty tough ego-wise to convince them to step off.

Venture Capital 236

Venture Capital Startup Angel Investor Silicon Valley 236

Both Sides of the Table

MARCH 21, 2013

I recently wrote a blog post in which I pointed out that many investors & advisors discourage enterprise startups from having a professional services (PS) business and I think this is a big mistake. I think it’s important for enterprise startups to layer in professional services into your revenue stream.

Software Review 321

Software Review Software IP Technical Review 321

Startup Professionals Musings

MAY 9, 2014

Entrepreneurs who require funding for their startup have long counted on self-accredited high net worth individuals (“angels”) to fill their needs, after friends and family, and before they qualify for institutional investments (“VCs”). Thus investing in startups should always be approached as a low odds game.

Angel Investor 278

Angel Investor Angel Groups Accredited Investor IRR 278

Both Sides of the Table

SEPTEMBER 16, 2010

I know some people think the whole market has been disrupted and startups and funding work differently these days. Deep pockets – In the previous posts I’ve compared tech startup investing with poker taking analogies of The Big Short & Delivering Happiness. avoid being diluted). This is actually the norm.

Cap Table 283

Cap Table Angel Investor Liquidation Preference Dilution 283

Startup Professionals Musings

DECEMBER 16, 2017

Entrepreneurs who require funding for their startup have long counted on self-accredited high net worth individuals (“angels”) to fill their needs, after friends and family, and before they qualify for institutional investments (“VCs”). Thus investing in startups should always be approached as a low odds game.

Angel Investor 190

Angel Investor Accredited Investor IRR Angel Groups 190

The Next Web

OCTOBER 7, 2013

That’s what a couple of my friends – engineers at Google and Bloomberg who have been following the rise of startup culture with intrigue – told me recently. Startup employees are granted common shares out of something called an option pool. Every time a startup raises capital, all common shareholders are diluted.

Engineer 129

Engineer Dilution Option Pool Vesting 129

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. When he tells his stories from the 1990′s your realize that he was probably the original “lean startup.&# Think YouTube vs. the rest.

Product 350

Product Tuvalu Dilution Incubator 350

Both Sides of the Table

FEBRUARY 8, 2016

Much has changed in the past four months of the technology startup world and how outsiders value the business. Optimize for a W more than % dilution in these circumstances. Founders hate them because they’re dilutive. The terrible consequence is that some great companies struggle to get financed. Start early.

Burn Rate 150

Burn Rate Cap Table Startup Dilution 150

Both Sides of the Table

OCTOBER 12, 2014

In the old days there weren’t many fights about whether angels would take their prorata rights in financing rounds. 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. Fundraising / Negotiations Startup Lessons VC Industry'

Technical Review 336

Technical Review Later Stage Early Stage LP 336

Both Sides of the Table

MAY 28, 2018

Conversely many VCs believe that constraining cash can often lead to increases in creative solutions at a startup. 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. This is a red flag for VCs.

Burn Rate 247

Burn Rate Valuation Pre-Money Valuation Dilution 247

The Next Web

NOVEMBER 20, 2013

George Deeb is the Managing Partner at Chicago-based Red Rocket Ventures , a startup consulting and financial advisory firm based in Chicago. There are a lot of variables to go into calculating a fair equity split a startup team. So, a fair split, would be closer to 60/40 in favor of the funding founder, when diluted for the cash.

Cofounder 136

Cofounder Equity Founder Seed Stage 136

ReadWriteStart

JUNE 1, 2020

I have often been asked about Startup Funding by entrepreneurs. Many myths surround the subject of startup funding. Here is Startup Funding, a Comprehensive Guide for Entrepreneurs. You must have seen a lot of startups giving out promotions, discounts, and incentives at the early phase of their business. Debt investors.

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

Up and Running

JULY 2, 2014

Picking the right attorney in your startup is as important as picking the right business partner. My business partner and I made many mistakes in our first tech startup, and so many of them were the result of choosing a lawyer who was a terrible fit. Let me paint the picture for you: We were about two months into our startup idea.

Technical Review 118

Technical Review Angel Investor Due Diligence Dilution 118

VC Cafe

FEBRUARY 27, 2024

especially if the startup already has a product and revenue? While the answers are somewhat semantic, the pre-seed funding round is making a comeback in 2024 startup financing. Pre-seed round tends to be the first ‘institutional’ round of funding in a startup. Seed is about showing initial product market fit.

Valuation 186

Valuation Software Review Generative AI Technical Review 186

Both Sides of the Table

DECEMBER 18, 2009

We got their commitment and our existing investors bridged us until the new financing round could close. And for all of this we had no dilution and paid no money. Tags: Entrepreneur Advice Start-up Advice Startup Advice. We committed to cost focus, customer adoption and delivering our numbers. We signed deals worth $1.2

Germany 298

Germany Entrepreneur Merger Los Angeles 298

Business Plan Blog

OCTOBER 4, 2013

Aligning the Startup Team Strategy with the Capitalization Strategy. The single most important factor to raising capital for any tech startup is the management team. Furthermore, a startup works differently than a large corporation. Having too many co-founders will only lead to your eventual dilution. Early Stage.

Part-Time VPE 79

Part-Time VPE Fractional VPE Cofounder CTO Hire 79

Startup Company Lawyer

MARCH 14, 2010

After the recent announcement of the Series Seed Financing documents by Marc Andreesen, Brad Feld points out that there are now four sets of “open source&# equity seed financing documents: TechStars Model Seed Funding Documents (by Cooley). Y Combinator Series AA Equity Financing Documents (by WSGR). under $500K).

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Genuine VC

JULY 19, 2010

In the sector of internet-enabled services where a majority of the Micro VC investment has transpired, startups can fundamentally do more with less. However, the causes of the Micro VC trend are more substantially attributed to the entrepreneur demand-side of the VC equation. That’s no secret.

Seed Stage 175

Seed Stage Technical Review Dilution Offshore 175

Startup Professionals Musings

JUNE 5, 2015

Entrepreneurs who require funding for their startup have long counted on self-accredited high net worth individuals (“angels”) to fill their needs, after friends and family, and before they qualify for institutional investments (“VCs”). Thus investing in startups should always be approached as a low odds game.

Angel Investor 120

Angel Investor Angel Groups Accredited Investor IRR 120

The Next Web

JUNE 15, 2012

From Silicon Valley to Peoria, Illinois, cash-strapped startups look for inventive way to finance their business – often handing out equity to employees, consultants, vendors, and other service providers. Speed is often of the essence early on in the startup lifecycle, and that often means rushing into casual arrangements.

Equity 116

Equity Stock Options Vesting Stock 116

YoungUpstarts

SEPTEMBER 23, 2017

If you are having any issues with cash flow, you always have the option of opting for alternate business finance. Nonetheless, many entrepreneurs don’t do this because accepting ownership dilution when it isn’t necessary, is too painful. Both the choices tend to take away a few options. Plan, Plan and Plan.

Cofounder 124

Cofounder Sweat Equity Equity Dilution 124

Both Sides of the Table

AUGUST 14, 2017

ICOs certainly have a place in startup financing. Boards are not appointed to be founder-friendly lapdogs for the 1–3 founders who start companies and usually own the largest equity positions in the company.

Cofounder 217

Cofounder Stock Options Equity Technical Review 217

Hunter Walker

JANUARY 2, 2017

And the narrative for 2017 is OLD ECONOMY COMPANIES WANT TO BUY YOUR STARTUP. When Satya and I started Homebrew in 2013 one of our bets for the coming decades was that non-traditional acquirers would become more aggressive in their pursuit of technology startups. So, is it true? ” Next Level – Buying Product.

Technical Review 131

Technical Review Cap Table Acquisition Startup 131

www.seriesseed.com

MARCH 2, 2010

SeriesSeed.com Series Seed Financing Documents Blog Home Documents Blog Archives Subscribe 09/02/2010 Version 2.0   That’s because there are not that many issues to negotiate in a simple equity financing. price based anti-dilution). Then they laugh at you. Then they fight you. Then you win.”

Finance 58

Finance Term Sheet Equity Aggregator 58

ReadWriteStart

SEPTEMBER 10, 2010

I call it drip-financing. Most entrepreneurs have no choice but to avail of this sort of financing along with the mentoring and the contacts that could come with it (doesn't always come along, though). In 1M/1M, our preferred financing strategy is customers. You can get cash without diluting your ownership in the company.

Cloud 115

Cloud Silicon Valley Incubator Bootstrapping 115

David Teten

DECEMBER 2, 2019

You’ve decided to launch a technology-enabled startup with a positive social impact! Now the bad news: some venture capitallists have a bias against startups with an explicit positive social impact, on the grounds that they have a smaller addressable market, and that the founders are not sufficiently focused on creating shareholder wealth.

Technical Review 60

Technical Review SBIR Dilution Silicon Valley 60

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. So far in this post, I’ve honed in mostly on the top-quartile threshold, which masks the power-law that is exhibited in both startups and the VC industry. This would suggest that TVPI would be performing well.

LP 256

LP IRR Distribution Portfolio 256

Berkonomics

OCTOBER 10, 2024

First, few startups can use that much money today with all the virtual services available and increasingly inexpensive methods of development, prototyping and marketing. Third (if you’re keeping score), it is not wise to dilute the founder’s ownership greatly in the first round of financing. Four reasons you should reconsider.

Dilution 127

Dilution Startup Retention Valuation 127

ReadWriteStart

OCTOBER 28, 2010

Do More Faster: TechStars Lessons to Accelerate Your Startup is the new book by David Cohen , founder and CEO of TechStars, and Brad Feld , managing director of Foundry Group. A common reason for startup fatalities, particularly in the early days, is some sort of conflict between co-founders.

Cofounder 128

Cofounder Founder Equity Dilution 128

Both Sides of the Table

DECEMBER 1, 2009

This is part of my ongoing series on Startup Advice. I know this is unconventional thinking but if you want to understand more I cover my rationale on this post about The Most Common Early Stage Startup Mistakes and again in this post covering how to implement startup prenuptials. Take your inventory. Know thy weaknesses.

Hiring 289

Hiring Cofounder Dilution Startup 289

Tim Keane

JANUARY 12, 2010

Startups and angels: Along the way to success. 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.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Austin Startup

JULY 6, 2018

Background Reading: Why startups need signals. Re: cash, the more “unbundled” types of accelerators (less formalized, less equity) tend to not provide any cash upfront, but also typically “cost” less in equity, often just 1–2% of your fully diluted capitalization. Anti-Dilution. Originally published at Silicon Hills Lawyer.

Dilution 48

Dilution Startup Technical Review Equity 48

www.avc.com

SEPTEMBER 22, 2011

This "best value" can be the valuation on the last round of financing. Whatever approach you use, it should be the value of your company that you would sell or finance your business at right now. The other important data point is the number of fully diluted shares. Or it can be a public market comp analysis.

Equity 64

Equity Employee CTO Hire Fractional CTO 64