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.

Venture Capital 215

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.)

Lean 263

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.

Cram Down 417

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.,

Down Round 162

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.

Burn Rate 150

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.

Technical Review 110

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

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.

Startup 150

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?

Startup 146

Startup Burn Rate Technical Review Down Round 146

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?

Equity 40

Equity Employee Founder Cofounder 40

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.

Cap Table 70

Cap Table Down Round Liquidation Preference Founder 70

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

Valuation 324

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.

Silicon Valley 308

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.

Term Sheet 227

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

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.

Valuation 150

Valuation Down Round Startup Later Stage 150

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

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

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

Feld Thoughts

APRIL 21, 2016

. “Many Unicorn founders and CEOs have never experienced a difficult fundraising environment — they have only known success. 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.

Marketing 70

Marketing Down Round Startup IRR 70

Growthink Blog

MAY 23, 2011

Usually unbeknownst to all, the decision around pursuing or accepting a venture capital round will be the most important factor in determining the investment return for the founder and the original angel investors in the company. But here is the key – contrary to popular wisdom it is negatively correlated.

Angel Investor 112

Angel Investor Venture Capital Sweat Equity Cram Down 112

Hunter Walker

AUGUST 8, 2023

Restructures, Down Rounds, and Pay to Plays. Funds will get rightsized , which helps better align investors and founders in what defines a successful outcome. Whatever gets reported is just the tip of the iceberg. And fascinating new advances (and needs) in AI, climate, biology, etc are driving tech-IP driven startups.

Portfolio 118

Portfolio Cap Table LP Valuation 118

NZ Entrepreneur

SEPTEMBER 16, 2020

The statistics show that even though most founders bet their time and resources that their startups will be the best in the world, 90% of those new startups won’t be in operation in 10-15 years. Founders are typically ambitious when projecting sales volumes. No one can predict the future and it’s especially true in the startup world.

Startup 86

Startup Sales Cycle Down Round Revenue 86

Both Sides of the Table

JUNE 5, 2016

Angels / seed often wanted to exit early and late-stage wanted more ownership than founders would sell so secondary transactions were common. 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. In fact, sometimes they were synergistic.

Venture Capital 150

Venture Capital Silicon Valley Burn Rate LP 150

Both Sides of the Table

MARCH 30, 2016

Investors sat with the founder & CEO, Jason Spievak, and asked him what he wanted to do about the future. Luckily we were never a unicorn so we didn’t have to have a destructive massive down-round that makes it harder (but not impossible) to get done. forward sales with some as high as 12x sales.

Balance Sheet 150

Balance Sheet Burn Rate Valuation Forecast 150

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

The Equity Kicker

MARCH 24, 2015

Everyone loves a high valuation and it’s natural for founders to want to minimise dilution. They will most probably go on to raise multiple rounds of venture capital after all. And don’t forget the prime directive of fundraising strategy: set things up so that you never do a down round.

Valuation 60

Valuation Down Round Dilution Venture Capital 60

ithacaVC

NOVEMBER 14, 2014

If you are advising startup founders, I strongly suggest having them read all 4 of the posts to get the lay of the startup valuation land. A founder is about to raise their first round and asking me how to value their company. [1]. Hopefully, it’s in high demand for good reasons, otherwise you risk a down round in the future.

Valuation 69

Valuation Startup Down Round Early Stage 69

Both Sides of the Table

JUNE 30, 2016

Amongst the most often asked questions I get from founders is, “How much money should I raise?” Reflexively founders want to raise as much money as they can because they figure it will give them more resources, better chances of competing and a longer runways before they have to do the often painful job of asking, yet again, for money.

Pre-Money Valuation 292

Pre-Money Valuation Valuation Early Stage Startup 292

Both Sides of the Table

SEPTEMBER 28, 2014

by Michael Woolf that is worth any startup founder reading to get a sense of perspective on the reality warp that is startup world during a frothy market such as 1997-1999, 2005-2007 or 2012-2014. Burn rate in case you don’t know is the amount of money a company is either spending (gross) or losing (net) per month. (it

Burn Rate 383

Burn Rate Balance Sheet .Net Valuation 383

This is going to be BIG.

JANUARY 17, 2016

They might have to get another round in, and that round will most certainly be a down round. They might be doing board meetings more frequently, coaching first time founders through layoffs and debating with their partners which companies they should bridge until things thaw out. They're just.

Dilution 60

Dilution Portfolio China Down Round 60

The Equity Kicker

JANUARY 25, 2016

However severe our current situation is, I’m sure there will be plenty of short term negatives, including more job losses, company failures and down rounds. We need a new disruptive capitalism that is designed for a much more mature internet market, one that can bring founders, investors, and employees together.

Venture Capital 60

Venture Capital Angel Investor Startup Participating Preferred 60