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How to value and price your startup

by Michael Ostendorff, June 17, 2013 | Comments

What each founder should know when setting up a preliminary valuation to attract outside capital

When a founder determines it is worth his while to attempt to raise money for his concept, the basic issue becomes one of price. If, for example, the business needs $500,000 to get started, how much of the equity in that company should $500,000 in fresh cash command? A brief summary of common terminology will help illuminate the subsequent discussion. ...

There Are Two Ways To Formulate Antidilution Provisions

by Michael Ostendorff, April 2, 2013 | Comments

Understanding Full-Ratchet & Weighted Average

There are two principal ways to formulate antidilution provisions, capitalizing the terms to make it clear we are talking about the ones which have substantive bite- the "Full Ratchet" and the "Weighted Average." Full Ratchet provisions are the real killers, at least from the founder's point of view. They provide that, if one share of stock is issued at a lower price, or ...

Watch out for savage VC deal terms when raising money

by Michael Ostendorff, August 28, 2012 | Comments

Terms in a term sheet entrepreneurs should look out for

Some of the financings in ugly investment climates are typically proposed by venture capitalists on deal terms that approach the punitive. By that I mean a Series A Round (or any professional round) which contemplates a "participating preferred" with anywhere from a '2X' to a '3X' return to the holder. What those abbreviated terms mean numerically is the following: Assume ...

Software valuations average nearly $80M

by Michael Ostendorff, October 7, 2010 | Comments

A look at deal terms and valuations for software and biotech companies in the past 18 months

As software and biotechnology transactions take up an increasing percentage of overall venture capital investment and deal activity, valuations and deal terms will be an important factor in the outlook for exit opportunities and continued investment. For software companies, the average valuation over the past 18 months totaled $79.5 million, while average biotechnology valuations total $57 million. However, median valuations ...

How do you compensate key executives?

by Michael Ostendorff, September 1, 2010 | Comments

	Using the 'carrot' approach Since both startups and buyouts depend in large part on extraordinary performance by managers, one principal aim of the planners of new ventures is to put stock or stock equivalents in the hands of senior managers without occasioning tax liability. Indeed, managers may be required to accept stock instead of cash compensation in order to preserve cash flow for the ...
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Fenwick & West Venture Capital Survey - Silic

by Michael Ostendorff, August 11, 2010 | Comments

Terms of venture financings for 126 companies headquartered in Silicon Valley that reported raising

Introduction Background - Fenwick & West LLP analyzed the terms of venture financings for 126 companies headquartered in Silicon Valley that reported raising money in the second quarter of 2010. Overview of Fenwick & West Results Up rounds exceeded down rounds in 2Q10 55% to 27%, with 18% of rounds flat. This was an improvement over 1Q10, when up ...

How deal terms affect valuation & liquidity

by Michael Ostendorff, August 9, 2010 | Comments (1)

Illustrating the impact certain terms have on portfolio company valuations & exits

Recently, entrepreneur-turned-venture-capitalist-and-blogger Mark Suster had an excellent post titled, "Want to Know How VC's Calculate Valuation Differently from Founders?" In his post, he referenced the importance of deal terms to company founders and we wanted to expand upon that discussion. In summary, each party involved in a venture capital financing should be concerned with their individual return at liquidity. Deal ...

Latest Deal Terms for Adura Technologies, Inc

by Michael Ostendorff, July 23, 2010 | Comments

	A Behind the Scenes Look at the Terms for the Series A So, did Mark Zuckerberg really "give away" 84% of his company before it was even officially launched? Not too sure about that, but what we are pretty sure of is Clean Technology deals are still a popular funding pick amongst the VC world. This week we are going to take a look at Adura Technologies, Inc. and their latest round ...
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Ten tips to magnetize your business plan

by Michael Ostendorff, July 2, 2010 | Comments

	Easing the process of raising capital It is a rare entrepreneur who can raise money beyond the seed round without a well prepared, thoroughly researched business plan. It maps out the road to success. The business plan must convince investors that you know the best route to get there and that if there are twists and turns in the road, as there inevitably will be, you ...
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A look at FourSquare series B deal terms

by Michael Ostendorff, July 1, 2010 | Comments

Taking a behind-the-scenes look at the $115 million post-money financing

FourSquare Labs announced on their blog on Tuesday that it finally closed on its second round of financing. Many have been anticipating this, so this week we are going to take a look at the deal terms of this latest round. FourSquare Labs, Inc. is headquartered in New York, New York. The company provides online mobile social networking services through ...

What will VC's want for a security?

by Michael Ostendorff, June 28, 2010 | Comments

	Common stock? Preferred stock? Debt? Warrants? As one programs any financing, as in corporate finance generally, the objective is to make 2 + 2 = 5; that is to obtain added value for the issuer. In the course of a financing, the insiders are attempting to raise the maximum amount of money for the minimum amount of equity ("equity" meaning claims on the residual values of ...
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Latest Deal Terms for Xobni, Inc.

by Michael Ostendorff, June 25, 2010 | Comments

An in-depth look at the deal terms for the financing that took place in April 2010

Need some help managing your email? If so, then you might want to take a look at Xobni, Inc. (or "inbox" spelled backwards). This week we are going to take a look at their latest round of financing which was completed in April 2010. Xobni, Inc. is headquartered in San Francisco, California. The company provides a product that works with ...

Michael Ostendorff Director of Sales & Marketing, VC Experts, Inc.

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