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TAG: Valuation

5
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Warning: "Inside" Rounds

TheFunded.com Advice

Posted by Anonymous on 2009-01-25

Tags: Funding Sources Strategy Valuation Crisis

PUBLIC:

As it is becoming harder to raise capital from venture capitalists, existing investors are facing situations where they need to lead new rounds in their own portfolio companies. This presents a big problem for valuations, especially if an investor only has convertible debt. Recently, I've heard a few stories about existing investors promising to lead a round, then pulling out or dramatically changing the terms. Worse, investors will sometimes string you along with a singed term sheet until you are out of cash, and then completely change the deal to take control.

Here are some tips if you think that you are going to need money in the next 18 months.

Know where insiders stand: You need to know where if your insiders will participate or lead a new financing event, and you should also ask them what their specific expectations are for your company performance. Assume that any inside round will be flat.

Pursue other options: Even if your insiders agree to lead a round, you should do your best to have an alternative financing option available. You will never get a fair price for your equity from insiders, since they are pricing, selling, and buying the equity at the same time and since they see all the warts and bruises.

Raise now, not later: Don't wait to raise money. Raising will take twice as long and will be twice as hard in this market. Try to raise enough capital to operate for more than 48 months, if you can.

When in doubt, do debt: If things are not moving fast enough and you have only three or four months worth of cash left, press your existing investors to do a convertible debt round that will give you eight to twelve months of low growth operating capital.

Insider sheet to attract outsiders: If everything else is failing, you may want to have your insiders draft a term sheet with a lot of room for new investors to participate. It's often easier to find outside investors with a "legitimate" term sheet in hand.

Good luck!

PRIVATE: Members Only

4
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1
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A Round Valuations Down 25 50% While B and C Rounds Non Existent

TheFunded.com Advice

Posted by fnazeeri on 2008-12-10

Tags: Venture Business Valuation Venture Debt Convertible Debt

PUBLIC:

More here.

PRIVATE: Members Only (1627 Characters)

3
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0
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Determining Valuatation for First Round

TheFunded.com Discussion

Posted by Anonymous on 2009-01-29

Tags: Negotiation Valuation Early Stage

2
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0
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Valuation Models

TheFunded.com Discussion

Posted by Anonymous on 2008-01-29

Tags: Negotiation Valuation Model

2
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0
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Need Advice: What Kind of Valuation Can I Expect?

TheFunded.com Discussion

Posted by Anonymous on 2008-03-23

Tags: Negotiation Valuation

1
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0
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Valuation Metrics in 2011 vs. 2005

TheFunded.com Discussion

Posted by Anonymous on 2011-02-13

Tags: Metrics Valuation

1
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1
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Twitter, Valued at 1 Billion, Built to Flip (Link)

TheFunded.com Discussion

Posted by Anonymous on 2009-10-17

Tags: TheFunded.com Valuation Twitter

1
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0
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Education on Term Sheets

TheFunded.com Discussion

Posted by Anonymous on 2009-09-21

Tags: Negotiation Terms Valuation Resources

1
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0
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Anyone Ever Offer Different Price Per Share for the Same Round of Investment?

TheFunded.com Discussion

Posted by Anonymous on 2008-12-20

Tags: Negotiation Valuation Equity

1
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0
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Valuation Advice

TheFunded.com Discussion

Posted by Anonymous on 2008-06-13

Tags: Negotiation Valuation

0
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0
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"The Deal" and Valuation

TheFunded.com Discussion

Posted by Anonymous on 2011-06-01

Tags: Valuation

0
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0
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Product in the Market and Almost Profitable Valuation?

TheFunded.com Discussion

Posted by Anonymous on 2011-05-26

Tags: Valuation Product Market

0
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0
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How to Determine Option Strike Price

TheFunded.com Discussion

Posted by Anonymous on 2011-04-12

Tags: Valuation Options

0
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0
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Raising Funding for a Hot Market and Timing. Can I Get the Valuation I Want?

TheFunded.com Discussion

Posted by Anonymous on 2011-02-18

Tags: Valuation

0
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0
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Steps / Requirements for a High Valuation

TheFunded.com Discussion

Posted by Anonymous on 2011-02-09

Tags: Valuation

0
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0
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Question about Pre Money Valuation Tech Startup

TheFunded.com Discussion

Posted by Anonymous on 2010-09-17

Tags: Preparation Pre Money Valuation

0
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1
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Pre Money Valuation

TheFunded.com Discussion

Posted by Anonymous on 2010-09-01

Tags: Operations Pre Money Valuation

0
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0
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Biotech / Drug Valuation Through Fda Trials

TheFunded.com Discussion

Posted by Anonymous on 2010-06-18

Tags: Operations Valuation

0
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0
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Valuation F&F Round

TheFunded.com Discussion

Posted by Anonymous on 2010-06-04

Tags: Closing Valuation Friends Family

0
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0
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Calculating Roi and Future Value?

TheFunded.com Discussion

Posted by Anonymous on 2010-02-16

Tags: Operations Valuation ROI

0
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0
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Valuation?

TheFunded.com Discussion

Posted by Anonymous on 2010-02-16

Tags: Operations Valuation

0
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0
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Setting Valuation: Internal for Options Now; External (Later) for Potential Capital Raise

TheFunded.com Discussion

Posted by Anonymous on 2010-02-14

Tags: Operations Valuation Capilizationital

0
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0
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Internal vs. External Valuation Conflict

TheFunded.com Discussion

Posted by Anonymous on 2010-02-12

Tags: Operations Valuation Conflict

0
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0
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Pre Money Valuation

TheFunded.com Discussion

Posted by Anonymous on 2010-01-22

Tags: Operations Valuation Pre Money

0
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0
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How to Respond to VC Question on Valuation Expectation?

TheFunded.com Discussion

Posted by Anonymous on 2010-01-12

Tags: Negotiation Valuation VC