VC Cafe

FEBRUARY 27, 2023

The result is mass layoffs (over 119,000 in the US since the beginning of 2023 and it’s only Feb), down rounds (even for Silicon Valley darlings like Stripe) and fund terms that go above the 2/20 standard. Gil Dibner captured that sentiment in a recent Twitter thread: We talk to a fair number of LPs.

Venture Capital 215

Venture Capital Technical Review LP Institutional Investors 215

Both Sides of the Table

FEBRUARY 8, 2016

Don’t assume that you can “just do a down round” if necessary. Down rounds are corrosive. So if your fund raising isn’t moving consider lowering price to shore up your balance sheet and reduce risk. Optimize for a W more than % dilution in these circumstances. Insiders hate them and fight them.

Burn Rate 150

Burn Rate Cap Table Valuation Startup 150

VC Cafe

JUNE 10, 2022

new unicorns created each day), startups may find themselves raising down rounds as they struggle to justify previous valuations. But the valuations weren’t necessarily given as a function of revenue, and often with multiples on ARR that we don’t see in today’s market. With over 1,000 global unicorns (and about 1.5

Valuation 152

Valuation Marketing Israel Venture Capital 152

VC Cafe

SEPTEMBER 6, 2024

Israel’s most promising startups in 2024, according to Israeli news website N12 News Israel Are we past the worst in down rounds? Data by Carta shows that the down round percentage for Series A through Series D fell from Q1 to Q2 of this year. AI and all the rest. 35% of U.S.

Israel 97

Israel Down Round Silicon Valley Stealth 97

Steve Blank

APRIL 26, 2022

For the common shareholders (employees, advisors, and previous investors), a cram down is a big middle finger, as it comes with reverse split – meaning your common shares are now worth 1/10th, 1/100th or even 1/1000th of their previous value. (A A cram down is different than a down round.

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Cram Down Founder Venture Capital Recapitalization 417

Berkonomics

OCTOBER 31, 2024

And fifth: Competitive risk. If there are high barriers to entry with such protections as patents, long development time already spent or contracts with the major potential customers, then the risk of a competitor with more resources jumping into the frothy pool and taking advantage of the demand created by the company is minimized.

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Valuation Down Round Early Stage Demand 117

VC Cafe

JANUARY 2, 2023

As Fred Wilson put in in his post ‘What will happen in 2023’ “I believe that ‘new normal’ is more or less where we were in 2015 where seed rounds were done around $10mm, A rounds were done around $15mm to $25mm, B rounds were done around $25mm to $50mm, and growth rounds had a cap at 10x revenues.”

Valuation 159

Valuation Down Round Israel Venture Capital 159

Both Sides of the Table

JULY 29, 2010

The A round was done in February 2000 (end of the bull market) and my B round was done in April 2001 (bear market). As a result I had to do a down round. Down rounds are psychologically really difficult on companies and can make it harder to do later rounds. I eventually needed more money.

Venture Capital 282

Venture Capital Term Sheet Valuation Stock Options 282

Startup Professionals Musings

NOVEMBER 25, 2020

Unreasonably high early valuations hurt the entrepreneurs, as well as professional investors, later when a second round becomes a down round or can’t be negotiated. A startup that is listed on a crowdfunding platform gets no formal pushback or negotiation on its declared valuation.

Equity 411

Equity Angel Groups Accredited Investor Due Diligence 411

Both Sides of the Table

JUNE 30, 2016

And if you raise the “5 on 20” and don’t grow into your next-round valuation you’re stuck because venture investors HATE doing down rounds. The data suggests that the investors have a much easier time hitting a $100–200 million outcome than a $400–500 million outcome so it’s easier to commit at lower prices.

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Pre-Money Valuation Valuation Early Stage Startup 292

Startup Professionals Musings

AUGUST 6, 2023

Unreasonably high early valuations hurt the entrepreneurs, as well as professional investors, later when a second round becomes a down round or can’t be negotiated. A startup that is listed on a crowdfunding platform gets no formal pushback or negotiation on its declared valuation.

Angel Groups 201

Angel Groups Accredited Investor Due Diligence Equity 201

VC Cafe

SEPTEMBER 26, 2022

Many startups that raised money in 2021 on inflated valuations that were detached from their actual value, are struggling to raise up-rounds and face difficult choices these days: down rounds, early sellout or failing altogether. A good way to think about valuation in seed/pre-seed is to reverse engineer the next round.

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Founder Startup Valuation Pre-Money Valuation 187

Both Sides of the Table

JUNE 5, 2011

Even if you have an interesting story to tell most investors won’t want to go through the brain damage of doing a “ down round ,&# which creates tension between them and early investors. They get a cheaper price, they wipe out much founder stock value and they reissue you new options.

Pre-Money Valuation 336

Pre-Money Valuation Valuation Silicon Valley Stock 336

Berkonomics

AUGUST 10, 2017

It is not a strong bargaining position for the CEO to ask for money to complete a product promised for completion with the previous round of funding. And professional investors often penalize the company with lower-priced down rounds or expensive loans as a result.

Silicon Valley 97

Silicon Valley Burn Rate Angel Investor Down Round 97

crowdSPRING Blog

FEBRUARY 21, 2014

How You Get Slaughtered in a Down Round: When Taking Venture Capital Doesn’t Go as Planned – crowdspring.co/MvF29W. Facebook and WhatsApp: The Nineteen-Billion-Dollar App – crowdspring.co/1jOdRlK. DHL Pranked UPS Into Advertising For Them – crowdspring.co/1jOeA6v. “If you want to sell ads, sell ads.

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Social Media Small Business Design Media 92

Both Sides of the Table

SEPTEMBER 28, 2014

Simply put – down rounds are very hard to achieve psychologically because insiders fight against them (rightly or wrongly) and outsiders have a mental gap that if your valuation is going down your company is forked up and they often just pass.

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Burn Rate Balance Sheet .Net Valuation 383

VC Cafe

NOVEMBER 30, 2022

Atomico’s founder Nicklas Zennstrom recently called the end of the high valuations era and urged founders and VCs to remove the stigma from down rounds. It’s enough to take a look at the global unicorn club of 1,191 startups valued at $1 billion or above to understand that challenging times are ahead for many of them.

Israel 97

Israel Europe Balance Sheet Valuation 97

VC Cafe

JANUARY 29, 2024

Many startups extended runway, cut costs and took on painful down rounds or expensive debt to avoid raising in 2023. However, there’s a light at the end of 2024 You can tell the market doesn’t believe that we’ve hit rock bottom yet. Those ‘band aids’ are running their course and it might get worse (i.e.

Generative AI 172

Generative AI Global Venture Capital Valuation 172

Both Sides of the Table

FEBRUARY 14, 2016

Why Down Rounds are Harder Than You May Think. Down rounds are hard. A slight down round is achievable but massive “hair cuts” are very hard to do. Also, new investors will be worried that the down round will cause founders or senior management to depart and no VC wants to replace management.

Valuation 150

Valuation Down Round Startup Later Stage 150

ReadWriteStart

JUNE 1, 2020

But, in subsequent rounds of funding inflated valuation will be normalized resulting in a down round. You might have seen that valuations of several unicorns were suddenly slashed down. Point number 3: Never raise money with an increased valuation. It might be tempting to do so.

Startup 150

Startup Entrepreneur Elevator Pitch Seed Stage 150

Both Sides of the Table

SEPTEMBER 18, 2014

And now I have to explain to team that they’re taking more dilution than they expected if we do a down round. A down round? Raising lower seems kind of like something is wrong. Me: More dilution? I thought it was a convertible note with a cap? Didn’t you consider that raising at $8 million was a possibility?

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Genuine VC

FEBRUARY 9, 2011

Has there ever been a down round, inside round, a flat round, or a CEO change? While the actual answer to this question won’t necessarily provide a definitive answer about the ability for the company to access both cash and additional capital, it will open up a discussion about it.

Startup 146

Startup Burn Rate Technical Review Down Round 146

OnlyOnce

JANUARY 18, 2022

I won’t go deep on extending the metaphor to a bad night of blackjack, but I’m sure it has a lot in common with down rounds and ultimately things like Chapter 11. That’s probably the equivalent of running a company that’s just going sideways.

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Down Round .Net Finance Startup 62

Both Sides of the Table

MAY 30, 2018

Of course valuation is in the eye of the beholder but if that VC thinks your last round valuation was way too high then he or she is more likely to politely pass rather than try and talk down your valuation now. VCs hate “down rounds” and many don’t even like “flat rounds.” There are some simple reasons.

Valuation 324

Valuation Post-Money Valuation Pre-Money Valuation Cofounder 324

abovethecrowd.com

APRIL 20, 2016

Also, they have a strong belief that any sign of weakness (such as a down round) will have a catastrophic impact on their culture, hiring process, and ability to retain employees. Their own ego is also a factor – will a down round signal weakness? A down round is nothing. Get over it and move on.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Ben's Blog

JULY 16, 2013

When you go to fundraise, you will need to consider the possibility of a valuation lower than the valuation of your last round, i.e., the dreaded down round. Down rounds are bad and hit founders disproportionately hard, but they are not as bad as bankruptcy. Yes, we did a down round.

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Down Round Marketing Preferred Stock Post-Money Valuation 73

Hunter Walker

AUGUST 8, 2023

Restructures, Down Rounds, and Pay to Plays. Whatever gets reported is just the tip of the iceberg. The reality is lots of companies – many of them quite promising – have already undergone, or will be facing, next financings which “clean up” old cap tables.

Portfolio 103

Portfolio Cap Table LP Valuation 103

Berkonomics

OCTOBER 18, 2018

For investors, a subsequent down round at a lower valuation than the last, or an exit opportunity at a loss are all opportunities for the affected stakeholder to show a side that can sometimes shock an entrepreneur or CEO.

Valuation 96

Valuation Dilution Down Round Employee 96

Feld Thoughts

APRIL 21, 2016

Also, they have a strong belief that any sign of weakness (such as a down round) will have a catastrophic impact on their culture, hiring process, and ability to retain employees. Their own ego is also a factor – will a down round signal weakness?

Marketing 70

Marketing Down Round Startup IRR 70

Both Sides of the Table

JUNE 22, 2011

New investors hate down rounds. They will enter the “triage phase&# of the market where they figure out which of their existing deals will survive. Many good companies will not get funded. Vultures will start circling looking for deals. Get funded now, if you can.&#. That’s a fact.

Saudi Arabia 309

Saudi Arabia Valuation IPO Technical Review 309

A Crowded Space

DECEMBER 9, 2013

In VC: I see a fair number of deals that have reached some point of stagnation that are seeking a flat or down round. “The most important thing to do if you find yourself in a hole is to stop digging.” . This is bad. Tread very carefully. . 4) High Concentration of Investments - Berkshire Hathaway is massive. And yet, Mr.

Technical Review 68

Technical Review Deal Flow Balance Sheet Down Round 68

ReadWriteStart

NOVEMBER 22, 2010

According to Barry Kramer, a partner in the firm and a co-author of the survey, during the third quarter, "up rounds exceeded down rounds 52% to 30% with 18% flat.

Silicon Valley 115

Silicon Valley Venture Capital Valuation Down Round 115

Seeing Both Sides

JANUARY 9, 2009

Seeking to assuage the nervous entrepreneurs amongst the portfolio companies that were in attendence at his networking lunch reception, he assured them, "We [Intel Capital] intend to continue forward and be very supportive of your down rounds this year". But Intel Capital will be happy to invest in their down rounds.

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Down Round Forecast Portfolio Government 20

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.)

Lean 263

Lean Silicon Valley Startup RSS 263

crowdSPRING Blog

MAY 10, 2013

The Damaging Psychology of Down Rounds | by Mark Suster – [link]. What Steve Jobs Can Teach Us About Management and Leadership – [link]. 7 A/B Testing Blunders That Even Experts Make – [link]. Urgency and accountability are two sides of the innovation coin – [link]. “Embrace skeptics. ” [link].

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Social Media Small Business Design Media 93

Lightspeed Venture Partners

OCTOBER 7, 2012

As Cuban pointed out, this is a “down round” Zomm is seeking $2M for 10% of the company, implying an $18M pre money valuation today. Some partial answers came up, including spending on a new version of the product with additional features, and excessively high inventories relative to actual sales in holiday 2011.

Technical Review 110

Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

YoungUpstarts

JUNE 26, 2020

I always caution entrepreneurs not to take too high a valuation in any round because it sets very high expectations for the next round. A down round, which can damage a company and make it difficult to raise money in the future. Unfortunately, most startups don’t meet their initial rosy projections. What happens then?

Finance 205

Finance Silicon Valley Valuation Startup 205