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

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.

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Venture Capital Technical Review LP Institutional Investors 215

VC Cafe

FEBRUARY 27, 2024

Carta reports that 20% of the rounds in 2023 were down rounds, but I believe the actual number is much higher. For that and other reasons (like cash preservation) VCs moved to focus more on earlier stage, and many funds that typically invest in A started deploying more into seed rounds.

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Valuation Software Review Generative AI Technical Review 186

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

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Valuation Marketing Israel Venture Capital 151

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

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.

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Startup Burn Rate Technical Review Down Round 146

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

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

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.

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Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

Feld Thoughts

FEBRUARY 9, 2016

Then, if you end up doing a down round, it suddenly matters a lot. Don’t worry about this too much, until you do a down round. Then use the down round to clean up your preference overhang. The post Founders – Use Your Down Round To Clean Up Your Cap Table appeared first on Feld Thoughts.

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Cap Table Down Round Liquidation Preference Founder 70

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.

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Equity Angel Groups Accredited Investor Due Diligence 411

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.

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Startup Entrepreneur Elevator Pitch Seed Stage 150

ReadWriteStart

JANUARY 13, 2024

Consequently, some startups have faced struggles securing investments, resulting in down rounds where their valuations decline between funding rounds. Additionally, these down rounds can decrease employee morale, as they may dilute shares or pay cuts, affecting the overall work environment.

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Down Round Marketing Artificial Inteligence Startup 154

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.

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Technical Review Deal Flow Balance Sheet Down Round 68

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.

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Valuation Post-Money Valuation Pre-Money Valuation Cofounder 324

Startup Professionals Musings

SEPTEMBER 14, 2010

This clause attempts to protect the conversion price of stock of angel investors, prior to additional financing, from being reduced to a price equal to the price per share paid in a later “down” round. But some dilution is almost inevitable. Right of first refusal.

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Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 227

Startup Professionals Musings

JANUARY 27, 2012

This clause attempts to protect the conversion price of stock of Angel investors, prior to additional financing, from being reduced to a price equal to the price per share paid in a later “down” round. But some dilution is almost inevitable. Right of first refusal.

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Term Sheet Pre-Money Valuation Due Diligence Angel Investor 223

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.”

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Valuation Down Round Israel Venture Capital 158

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

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

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.

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Valuation Down Round Startup Later Stage 150

Both Sides of the Table

SEPTEMBER 27, 2010

If you do a $1 million angel round at $6 million pre-money and hope to do a Series A round for $2-3 million that’s fine as long as you’re doing awesome against your metric goals and the market continues to be frothy. If either condition doesn’t hold it will be hard to do anything but a flat or down round.

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Silicon Valley Liquidity Event Seed Stage Finance 308

Gust

OCTOBER 17, 2011

This clause attempts to protect the conversion price of stock of angel investors, prior to additional financing, from being reduced to a price equal to the price per share paid in a later “down” round. But some dilution is almost inevitable. Right of first refusal.

Term Sheet 158

Term Sheet Pre-Money Valuation Due Diligence Angel Investor 158

Startup Company Lawyer

MARCH 14, 2010

Given that the Series Seed is issued at a fairly low valuation, anti-dilution protection is probably not that important, as a “down round&# from a low valuation in the Series Seed is unlikely. Deleting anti-dilution rights saves several pages of text in the Certificate of Incorporation. Comprehensive protective provisions.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

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.

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Israel Down Round Silicon Valley Stealth 97

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

Startup Professionals Musings

MAY 20, 2016

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 136

Angel Groups Accredited Investor Equity Due Diligence 136

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.

Global 171

Global Generative AI Venture Capital Valuation 171

Mike Michalowicz

SEPTEMBER 29, 2014

. $10,000 is a round number and that means that it is not specific. The client is either going to figure you have no real idea what something costs, or that you’re rounding up in anticipation of expecting to be negotiated down. Round numbers are “ball park numbers.”

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Down Round Cost Customer Marketing 117

This is going to be BIG.

SEPTEMBER 7, 2012

Here are the top things I hear about follow ons and why they don't make a lot of sense to me: 1) You need to have follow on capital to protect your investments in case of a down round. If you're doing seed deals, how often does a down round in a seed deal even happen? Down from what?

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Later Stage Down Round Pre-Money Valuation Early Stage 99

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?

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Marketing Down Round Startup IRR 70

Both Sides of the Table

JUNE 5, 2016

If a company raised a big B and/or C round and needs more money the late stage guys have the bucks and that early-stage guys often don’t. So in companies with high burn rates you can find the following: Seed funds wanting to sell the company / get a return or growth investors pushing for a recap or massive down round.

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Venture Capital Silicon Valley Burn Rate LP 150

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.

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Israel Europe Balance Sheet Valuation 97

Growthink Blog

MAY 23, 2011

This combo all too often leads to various forms of deal unpleasantness, like cram-down rounds, liquidation preferences, and change of control provisions, which in turn, often lead to unhappy founders and angel investors even in somewhat successful exits. And they hire very aggressive securities attorneys to represent their interests.

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Angel Investor Venture Capital Sweat Equity Cram Down 112

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.

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Portfolio Cap Table LP Valuation 118

ithacaVC

NOVEMBER 14, 2014

Hopefully, it’s in high demand for good reasons, otherwise you risk a down round in the future. The latter won’t be enough money to grow and without the capital to grow, could risk failing or a down round. Don’t risk a down round. This method of valuing a company is further from reality than most attributes.

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Valuation Startup Down Round Early Stage 69

Berkonomics

APRIL 6, 2012

If so, the VC will contemplate a “down round” – that is: offering an investment where previous investors find their investments instantly worth less than their original value, even if the investments were made at high risk and years earlier.

Limited Liability Company 79

Limited Liability Company Post-Money Valuation Valuation Down Round 79