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Post-moneyvaluation probably no higher than $12M (2). Im a former Silicon Valley entrepreneur turned East Coast VC. How to Evaluate Firms for a Seed VC Syndicate 10 July 2012, 5:13 pm What A VC Orders for Breakfast Says 27 June 2012, 10:16 am To Leave or Not to Leave as Your Startup Grows 12 June 2012, 12:21 pm.
Andrew Krowne and I recently co-wrote an article in Tech Crunch , Why SAFE Notes Are Not Safe for Entrepreneurs. This is a fundamental issue that does, indeed, boil down to understanding the post-moneyvaluation of a company. Many entrepreneurs lose track of what they have been cooking up in the cap table.
Many firms do it in a way that can be more detrimental to entrepreneurs. If you don’t understand the concept of “signaling&# please read the blog post I wrote on Understanding VC signaling. Like Brad Feld I’m syndication agnostic but I have a slight preference toward working with others.
A company raises $1m of seed money from angels in a convertible note with a $6m cap. Assuming equity is raised at or above that cap, the total dilution, before the new money, is 16.6% (equivalent to an equity financing of $1m at a $6m postmoneyvaluation. So they recapitalize the company.
The end result though is that the dynamics around series A rounds has started to seem pretty murky for entrepreneurs. Below are some broad guidelines on the major topics around series A’s that I hear entrepreneurs thinking about. There are broadly three buckets of series A’s, and therefore, three valuation buckets.
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