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To begin with, it is important to understand some basic facts about the world of entrepreneurial finance: There are many more entrepreneurs than there are investors, with the result that only one company out of every 400 that seeks venture funding actually receives it. Gust takes advantage of the cloud, and you should, too.
Finance Friday’s gets off the ground with today’s post by introducing you to an imaginary startup, the entrepreneurs that we’ll being following throughout the series, and their first challenges: splitting up the founders’ equity and addressing the case where one of the founders provides the initial seed capital for the business.
Again, I see nothing wrong with this, although entrepreneurs often prefer convertible debt as it defers the valuation discussion and leaves the Series A price for the venture firm to set. He also said they typically only invest at a $1 million pre-moneyvaluation or less. A Lot of Horn Tooting over a Kazoo sized deal.
pre-moneyvaluation you certainly would want to exercise your right to continue investing if you had prorata rights. The “big boom” in startup financing started around March 2009? Just 3 years ago there was talk of institutional investors “not being able to write small enough checks.”
(Dilution is the progressive shrinking of each executive’s equity percentage as the startup raises each round of financing.) When founders delay raising each round, they are typically hoping to achieve certain milestones that will raise the startup’s valuation. million, with a valuation of $10 million. As shown in Figure 9.5
Instead of “We are worth about $5m because we have done XYZ and we need to raise $1m, so let’s sell 20%&# it’s better to think about valuation as an output variable, like “Let’s raise $2mm and sell 33%, our (pre-money) valuation is therefore $4mm.&# That’s a nice way of putting it.
Contact The Startup Lawyer: Home Page About Contact FAQs Glossary Ryan Roberts Law: Home Page SocialNetworks: Facebook Twitter LinkedIn Flickr Delicious Digg Last.FM Contact The Startup Lawyer: Home Page About Contact FAQs Glossary Ryan Roberts Law: Home Page SocialNetworks: Facebook Twitter LinkedIn Flickr Delicious Digg Last.FM
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