Both Sides of the Table

JUNE 22, 2011

I recently spoke at the Founder Showcase at the request of Adeo Ressi. I said that at the Founder Showcase, too. And for many of these they were (over) funded 7-10 years ago and don’t necessarily all represent great returns for investors or founders. New investors hate down rounds. That’s a fact.

Saudi Arabia 309

Saudi Arabia Valuation IPO Technical Review 309

VC Cafe

FEBRUARY 27, 2024

A founder asked me what makes a $2M round “pre-seed”? And why do we still sometimes hear about pre-seed rounds that look more like a series A in pricing and size? What’s the difference between an angel round and pre-seed round and why do I believe we’ll see more pre-seed rounds taking place in 2024?

Valuation 186

Valuation Software Review Generative AI Technical Review 186

VC Cafe

FEBRUARY 27, 2023

Most founders reported (in several different surveys) that knowledge and belief in their industry/sector and personal connection is one of the key reasons they would choose one investor over another. See the recent reports by Frontline Ventures and Creandum on what makes founders choose one offer over another.

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Venture Capital Technical Review LP Institutional Investors 215

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.)

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Lean Silicon Valley Startup RSS 263

Steve Blank

APRIL 26, 2022

Most existing investors (those still in business) hoarded their money and stopped doing follow-on rounds until the rubble had cleared. Except, that is, for the bottom feeders of the Venture Capital business – investors who “ cram down ” their companies. A cram down is different than a down round. You Have a Choice.

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Cram Down Founder Venture Capital Recapitalization 417

Feld Thoughts

JUNE 10, 2022

She has a good article today in TechCrunch titled Embrace the down round (it’s going to be okay, maybe). ” Now, I’m not encouraging anyone to do a down round if unnecessary., ” Now, I’m not encouraging anyone to do a down round if unnecessary.,

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Down Round Ratchet Liquidation Preference Participating Preferred 162

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. Founders hate them because they’re dilutive. Insiders hate them and fight them. Outsiders hate them because they are worried about p **g off your existing investors.

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Burn Rate Cap Table Startup Dilution 150

Lightspeed Venture Partners

OCTOBER 7, 2012

The founders were very sympathetic; a man, laid off from his job, and his very pregnant wife, who sold their house and investing $150k into the business and are working hard to make a go of it. The two founders invested $40k in the business, and plan to license it rather than manufacture it because manufacturing seems too hard.

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Technical Review Technical Cofounder Valuation Pre-Money Valuation 110

VC Cafe

JUNE 10, 2022

But recently those round sizes and valuations have tumbled to about $10 million and $50 million, respectively, he said. As a result, founders are accepting increased dilution of the stakes they hold in their own companies. With over 1,000 global unicorns (and about 1.5 As an example, here are 34 new unicorns minted in May 2022.

Valuation 151

Valuation Marketing Israel Venture Capital 151

Berkonomics

OCTOBER 5, 2023

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 118

Silicon Valley Burn Rate Angel Investor Down Round 118

ReadWriteStart

JUNE 1, 2020

I have interacted with a lot of founders who funded their initial business expenses through credit cards. Point number 1: You must understand that funding is a business transaction between the investors and the startup founders. But, in subsequent rounds of funding inflated valuation will be normalized resulting in a down round.

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Startup Entrepreneur Elevator Pitch Seed Stage 150

Genuine VC

FEBRUARY 9, 2011

Plus, VCs often will have met the Founder/CEOs of many of a particular startup’s competitors, so they’ll have an even richer understand of the market landscape. Has there ever been a down round, inside round, a flat round, or a CEO change?

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Startup Burn Rate Technical Review Down Round 146

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

Berkonomics

MARCH 30, 2010

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.

Silicon Valley 85

Silicon Valley Burn Rate Angel Investor Down Round 85

www.quora.com

SEPTEMBER 22, 2011

Type to Add and Search Questions; Search Topics and People Startups Startup Compensation Entrepreneurship Compensation Stock Options Major Internet Companies Silicon Valley Why is there such a large founder to early employee equity drop-off? The real question here is: why is it fair for founders to get so much more?

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Equity Employee Founder Cofounder 40

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? I know how to structure around that to protect the founders from getting screwed on a multiple liquidation preference. Raising lower seems kind of like something is wrong.

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Venture Capital Liquidation Preference Valuation Term Sheet 417

Feld Thoughts

FEBRUARY 9, 2016

I have two simple rules for founders in my head from this experience. 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.

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Cap Table Down Round Liquidation Preference Founder 70

www.paulgraham.com

APRIL 28, 2010

A typical startup goes throughseveral rounds of funding, and at each round you want to take justenough money to reach the speed where you can shift into the nextgear. I think it would help founders to understand funding better—notjust the mechanics of it, but what investors are thinking. Few startups get it quite right.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

crowdSPRING Blog

MAY 10, 2013

Startup Founders: Don’t Forget to Sell the Dream | by Jason Shen – [link]. The Damaging Psychology of Down Rounds | by Mark Suster – [link]. The Start-up Hall of Shame (America’s 10 Worst States for Entrepreneurs) – [link]. Startups: You Should Value Software More | by Wade Foster – [link].

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Social Media Small Business Design Media 93

Both Sides of the Table

MAY 30, 2018

What was the post money on your last round (and how much capital have you raised)? It’s not uncommon for a VC to ask you how much capital you’ve raised and what the post-money valuation was on your last round. VCs hate “down rounds” and many don’t even like “flat rounds.” There are some simple reasons. After all?—?we

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Valuation Post-Money Valuation Pre-Money Valuation Cofounder 324

Both Sides of the Table

SEPTEMBER 27, 2010

And people like Jeff Clavier, Aydin Senkut, Dave McClure, Chris Sacca & Eric Paley (at Founder Collective) are leading the charge. Chris Sacca talked about how a $20 million exit can change a founder’s life and that shouldn’t be scoffed at. That’s awesome. I had two kids and a rental house.

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Silicon Valley Liquidity Event Seed Stage Finance 308

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. Every good founder I know writes a list of names when they are starting to prepare for fundraising. “The most important thing to do if you find yourself in a hole is to stop digging.” . This is bad.

Technical Review 68

Technical Review Deal Flow Balance Sheet Down Round 68

Startup Professionals Musings

SEPTEMBER 14, 2010

The first capital a young company receives usually takes the form of common stock, the same class of shares the founders hold. Venture capitalists and later round investors like the preferred convertible shares. These “IV drip” financings may reduce risk for investors, but put more pressure on founders. Anti-dilution protection.

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

Startup Professionals Musings

JANUARY 27, 2012

The first capital a young company receives usually takes the form of common stock, the same class of shares the founders hold. Venture capitalists and later round investors like the preferred convertible shares. These “IV drip” financings may reduce risk for investors, but put more pressure on founders. Anti-dilution protection.

Term Sheet 223

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.”

Valuation 158

Valuation Down Round Israel Venture Capital 158

View from Seed

FEBRUARY 19, 2015

This is a guest post from Rob May , a co-founder and CEO of Backupify , which raised $19.5M Hang out with other founders and CEOs. Other CEOs are the only people you can sit down and talk with about the hardest parts of your job. and sold to Datto in late 2014. Disclosure: NextView was not an investor in Backupify.).

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Founder Startup Cofounder Business Model 120

abovethecrowd.com

APRIL 20, 2016

All Unicorn participants — founders, company employees, venture investors and their limited partners (LPs) — are seeing their fortunes put at risk from the very nature of the Unicorn phenomenon itself. Their own ego is also a factor – will a down round signal weakness?

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Startup Company Lawyer

MARCH 14, 2010

Founders Institute Plain Preferred Term Sheet (by WSGR – disclaimer, I represent the Founders Institute and was involved in drafting this document). Yes for Series Seed holders and founders. Y Combinator Series AA Equity Financing Documents (by WSGR). Series Seed Financing Documents (by Fenwick & West). Drag-along.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

Gust

OCTOBER 17, 2011

The first capital a young company receives usually takes the form of common stock, the same class of shares the founders hold. Venture capitalists and later round investors like the preferred convertible shares. These “IV drip” financings may reduce risk for investors, but put more pressure on founders. Anti-dilution protection.

Term Sheet 158

Term Sheet Pre-Money Valuation Due Diligence Angel Investor 158

Both Sides of the Table

FEBRUARY 14, 2016

Why Inside Rounds are Difficult? Many founders don’t understand why inside rounds are so difficult. 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.

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Valuation Down Round Startup Later Stage 150

Gust

SEPTEMBER 17, 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? I know how to structure around that to protect the founders from getting screwed on a multiple liquidation preference. There are a million ways to do quick, easy, low-cost rounds with prices.

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Liquidation Preference Valuation Term Sheet Stock 153

VC Cafe

SEPTEMBER 6, 2024

It’s worth mentioning that the actual number is likely much higher, as rounds get reported long after they actually happened and September already started off with a bang. OpenAI co-founder and former CTO, Ilya Sutskever and his new SSI Inc. billion compared to $6.7 billion in Q1-Q2-Q3/2023. AI and all the rest. 35% of U.S.

Israel 97

Israel Down Round Silicon Valley Stealth 97

Reid Hoffman

JUNE 8, 2021

While many travel industry leaders chose to “go dark,” as Airbnb CEO and co-founder Brian Chesky put it , while they decided how to navigate next steps, Chesky took a different approach: He got candid. Today, we are thrilled to have Airbnb CEO and co-founder Brian Chesky with us. BC: Yeah, Reid. And then we had actually raised money.

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Silicon Valley Hosting Rhode Island Design 69

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?

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Finance Silicon Valley Valuation Startup 205

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

VC Cafe

NOVEMBER 30, 2022

The 2022 Founders Factories report by DealRoom and Accel shines a spotlight on the startup clusters that produced most unicorns across Europe and Israel, and then tracks the alumni of those unicorns to test where the talent goes to found their next companies. London and Tel Aviv are home to the most founder nurturing unicorn startups.

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. Rates coming down – The Fed is expected to cut interest rates this year, potentially thawing capital into startups, and opening up the IPO window (which will give funds/LPs liquidity).

Global 171

Global Generative AI Venture Capital Valuation 171