Down Round and Metrics

Why Startups Should Raise Money at the Top End of Normal

Both Sides of the Table

JUNE 5, 2011

Another firm we saw tried to raise $15 million at a $60 million pre-money with similar metrics. They did an inside round, spent a bunch of money and then went through a fire sale of the business less than 2 years later. But he sold within 3 years for not a huge price after having raised more than $20 million. Here’s the problem.

Pre-Money Valuation

Pre-Money Valuation Valuation Silicon Valley Stock

Bad Notes on Venture Capital

Both Sides of the Table

SEPTEMBER 18, 2014

Him: But when I raised my first round we didn’t know how to price the company. There were no metrics. How will you price the next round? Your A round? Him: On metrics. In finance they call it “terminal value” but the truth is the price is as arbitrary at your A round as it is at your seed round.

Venture Capital

Venture Capital Liquidation Preference Valuation Term Sheet

Advice for startups in a downturn (May 2022 Edition)

VC Cafe

MAY 18, 2022

Down rounds are coming. When looking at high growth public software companies, you’ll want to compare your ARR valuation multiple to their revenue valuation multiples because of its availability as a GAAP accounting metric. Source: Pitchbook NVCA Venture Monitor. Justin Kahl, David George , A16Z. Multiples by vertical.

Term Sheet

Term Sheet Startup Valuation Ukraine

Twitter Link Roundup #178 – Small Business, Startups, Innovation, Social Media, Design, Marketing and More

crowdSPRING Blog

MAY 10, 2013

The critical metrics for each stage of your SaaS business | by Lars Lofrgren – [link]. The Damaging Psychology of Down Rounds | by Mark Suster – [link]. It’s difficult to fake corporate culture | Business Insider – [link]. 10 Myths about Startups – [link]. Why do we worry about scalability on Day 1?

Social Media

Social Media Small Business Design Media

Current Startup Market Emotional Biases

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

Marketing Down Round Startup IRR

Bad Notes on VC

Gust

SEPTEMBER 17, 2014

Him: But when I raised my first round we didn’t know how to price the company. There were no metrics. How will you price the next round? Your A round? Him: On metrics. In finance they call it “terminal value” but the truth is the price is as arbitrary at your A round as it is at your seed round.

Liquidation Preference

Liquidation Preference Valuation Term Sheet Stock

On the Road to Recap:

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

IPO Term Sheet Silicon Valley Valuation

People-First Capitalism

Reid Hoffman

JUNE 8, 2021

The burden [should] just be that we care; that if we learn something, we improve it, and that we don’t only use single output metrics and its growth at all costs. And I made a decision not to do an equity round, because I thought it would be a down round. We’ve kind of designed the kind of growth that we want.

Silicon Valley

Silicon Valley Hosting Rhode Island Design

To Follow On or Not to Follow On

This is going to be BIG.

SEPTEMBER 7, 2012

There are a lot of people that artificially group together performance metrics for venture, and try to extrapolate successful stratagies from it. 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.

Later Stage

Later Stage Down Round Pre-Money Valuation Early Stage

Unicorpse

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

Liquidation Preference Burn Rate Balance Sheet .Net

People-First Capitalism

Reid Hoffman

JUNE 8, 2021

The burden [should] just be that we care; that if we learn something, we improve it, and that we don’t only use single output metrics and its growth at all costs. And I made a decision not to do an equity round, because I thought it would be a down round. We’ve kind of designed the kind of growth that we want.

Silicon Valley

Silicon Valley Hosting Rhode Island Design

How NZ entrepreneurs can up their capital raising game

NZ Entrepreneur

JULY 8, 2019

The situation I see time and again is an over-valuation on a markedly smaller-than-anticipated business, revenue numbers not achieved, and then needing to do another raise on a lower valuation (a ‘down-round’). A simple metric – when I registered my first company in 2004, the naming space was wide open.

New Zealand

New Zealand Entrepreneur Valuation Dilution

Startup Fairy Tales and Other Tall Tales That Venture Capitalists Tell

Growthink Blog

MAY 23, 2011

Yes, you heard me right – multiple research studies, including from the Kauffman Foundation , have shown that when you remove a follow-on venture capital round from a founder or angel investor-funded company, that expected returns skyrocket. It is driven by the following: • The Best Metric for the Health of a Company is Cash Flow.

Angel Investor

Angel Investor Venture Capital Sweat Equity Cram Down

What I Would Have Said at TechCrunch Disrupt

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.

Silicon Valley

Silicon Valley Liquidity Event Seed Stage Finance

In Venture Capital, Should You Be a Momentum or a Value Investor?

David Teten

AUGUST 7, 2019

Likely signs of a Value investment: the company has challenges in filling out the round; the investors have more negotiating leverage than the founders during the closing process; the company has significantly better metrics (e.g. You could argue that when they were [raising] oversubscribed [VC rounds], Facebook, Google, Amazon, etc.,

Venture Capital

Venture Capital Valuation Stock NDA

The VC Death Trap

Rob Go

JUNE 1, 2016

Where I think funds do start having hard conversations around follow-ons is when they need to lead inside rounds or protect themselves in down rounds. This might not be true of all VC funds, and I know a number of funds that have a mantra that they treat follow-on rounds like “a new deal”.

Term Sheet

Term Sheet Portfolio Valuation Warrant

The Future of Startups 2013-2017

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

Software Review Startup Venture Capital Stock

StartUpRoar