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

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. As mentioned in the Battery Ventures “State of the Opencloud report” 2022 , the bar is high for these private unicorns to transition into successful IPOs.

Israel 97

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.

Angel Investor 112

Angel Investor Venture Capital Sweat Equity Cram Down 112

Both Sides of the Table

MARCH 30, 2016

Many had started IPO’ing and we started to think about our 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. Did he want to see if Invoca could be public some day?

Balance Sheet 150

Balance Sheet Burn Rate Valuation Forecast 150

ithacaVC

FEBRUARY 1, 2018

If FFAs only invest at the beginning and do not make any follow on investments as the company raises more $$ then the only real way FFAs make money when the company is ultimately sold is if the company keeps raising future rounds at higher and higher valuations (and IPO exit may provide upside if the stock price increases over time after the IPO).

Preemptive Right 45

Preemptive Right Cap Table Valuation Dilution 45

www.mattbartus.com

DECEMBER 9, 2012

Interesting strategy, although I don't know if it justifies the added risk of having a flat (or down) round next time you go to raise. Interesting strategy, although I don't know if it justifies the added risk of having a flat (or down) round next time you go to raise. link] Brad Hargreaves. link] Roy Rodenstein.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

Scalable Startup

OCTOBER 26, 2011

It’s no longer based on a hunch, unless the company is in trouble and needs money to finish what the first round started. This problem often leads to a lowered valuation or “down round” Not a great scenario.) If the company is doing well, the second round is easier to acquire. source: Crunchbase.

Mezzanine 22

Mezzanine Due Diligence IPO Angel Investor 22

Seeing Both Sides

DECEMBER 17, 2015

In order to do this, I used data from my friends at Mattermark (my firm, Flybridge, is an investor) to look at all the companies that have raised over $25 million in total capital in the last 10 years and whose last round was greater than $10 million (thereby filtering out down rounds/sideways situations).

Boston 20

Boston B2C Down Round IPO 20

abovethecrowd.com

APRIL 20, 2016

The pressures of lofty paper valuations, massive burn rates (and the subsequent need for more cash), and unprecedented low levels of IPOs and M&A, have created a complex and unique circumstance which many Unicorn CEOs and investors are ill-prepared to navigate. In Q1 of 2016 there were zero VC-backed technology IPOs.

IPO 40

IPO Term Sheet Silicon Valley Valuation 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? Lawyers don’t make money on your seed round in any instance. They are investing in your relationship in hopes that you do an A, B and C round. Me: More dilution? Employment.

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

www.paulgraham.com

APRIL 28, 2010

In an IPO, it might not merely addexpense, but change the outcome. Those remedial actions can delay, stall or even kill the IPO. Of course the odds of any given startup doing an IPO are small.But not as small as they might seem. Down rounds are bad news; it is generally the common stockholders who take the hit.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

Reid Hoffman

JUNE 8, 2021

Airbnb was preparing for an IPO right when the pandemic hit, and everything changed in a matter of days. And I made a decision not to do an equity round, because I thought it would be a down round. And I said, I think it’s going to be a down round, because people are scared. So we’re going to do debt.

Silicon Valley 69

Silicon Valley Hosting Rhode Island Design 69

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? Lawyers don’t make money on your seed round in any instance. They are investing in your relationship in hopes that you do an A, B and C round. Maybe an IPO – who knows?

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Reid Hoffman

JUNE 8, 2021

Airbnb was preparing for an IPO right when the pandemic hit, and everything changed in a matter of days. And I made a decision not to do an equity round, because I thought it would be a down round. And I said, I think it’s going to be a down round, because people are scared. So we’re going to do debt.

Silicon Valley 36

Silicon Valley Hosting Rhode Island Design 36

This is going to be BIG.

AUGUST 21, 2023

In other words, you’re one of dozens, perhaps 100’s of companies getting the same exact e-mail where the VC says they’re really excited about what you’re doing and they work with such and such partner and the firm has done such and such IPOs, etc. That’s why down rounds exist. All they’re doing is filling a database.

Cap Table 78

Cap Table Term Sheet Database Option Pool 78

Scalable Startup

FEBRUARY 1, 2013

And so the other reason that I am very interested in delving deep into this space is that it seems like IPOs like Workday, Palo Alto Networks are sort of — they have metrics and analytics that Wall Street understands, more so than a Facebook; like “We are going to sell X number of this in the next year.”

Software Review 22

Software Review Startup Venture Capital Stock 22

Feld Thoughts

SEPTEMBER 9, 2015

Some will demonstrate strategically justifiable metrics and have fantastic ‘up round’ exits; others may see liquidation preferences kick in which will negatively impact founders and employees; others may fulfill the adage “IPO is the new down round” , which has been the case for more than half of the public companies on our list.

Liquidation Preference 70

Liquidation Preference Burn Rate Balance Sheet .Net 70

Hippoland

NOVEMBER 13, 2016

So while I’m waiting for my portfolio companies to either die or go IPO, what am I looking at as indicators of success / failure? Primarily these things: Companies dissolvingCompanies exitingCompanies raising equity rounds All of these events are concrete events that attach a numerical value to a company.

IRR 48

IRR Valuation Portfolio Due Diligence 48

Both Sides of the Table

OCTOBER 18, 2015

As I pointed out in this post about the changing structure of the VC industry , private tech companies are delaying IPOs and thus privately held tech investors are reaping more of the value prior to an eventual IPO so public investors must have felt compelled to respond. 25% “down rounds? The response?

IPO 150

IPO Venture Capital LP SEC 150