Corporate & Securities

Liquidation Preferences

When a startup is running low on cash, and can’t get profitable, it has two options: raise capital or sell the business.  In a challenging funding market—like 2023, 2008, or 2001—both options are problematic. Raising more capital may require a down round. And as we’ve previously discussed, down rounds are incredibly painful. Selling the business and cashing out might look better than a down round. But let’s look a little closer at one of the…

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Down Rounds

The pain is here.  By volume, size, velocity, and valuation angel deals are down. Series A deals are down. The whole alphabet of deals is down. We’re seeing founders take a lot of meetings—a lot of meetings—without much success. And that seems to be the case in the midwest and everywhere else. One result is that when deals do happen, the terms aren’t great. If you’re raising capital you already know this.  Valuations are taking a pounding!…

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SAFEs

Let’s talk about Safes. If you’re not familiar, a Safe is an option contract that lets investors pre-pay for the right to receive equity in the future. Safe stands for Simple Agreement for Future Equity. Typically the Safe converts into equity in a later financing round and because the investor pre-paid she’s given better terms than the new investors. Safes are easy. The standard template—created by the startup accelerator, Y Combinator—is six pages. By contrast, the NVCA…

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Get the Money!

How much should I raise? Every founder raising capital has asked this question. The basic answer is something like raise enough to hit your next set of milestones. Or raise enough to achieve traction. Or raise enough that you’re able to do something so impressive that investors want to buy your stock for lots of money. That’s a good start. Assuming you can figure out what that advice is aiming at—month over month growth? gross…

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How to Find Investors

Raising capital is hard. Nothing is more daunting to most entrepreneurs. And for good reason. It’s a time-consuming process shot through with rejection and, inevitably, self doubt. But capital is the lifeblood of business. If you can bootstrap on organic revenue, great. Do it. But most technology companies—particularly high-growth, high-technology companies—need years of outside capital to reach profitability. So let’s talk about how to get it. Sales, Not Marketing. Many of you don’t want to…

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Raising capital in THIS market

As we plunge into 2023—amid rate hikes, market turbulence, inflation worries, tech-industry job cuts—it feels like it’s a good time to talk about raising capital. By “raising capital” we mean finding investors—individuals and venture capitalists—to put money into your company in exchange for equity. It’s an interesting time to pursue investors. The economy is awash in uncertainty. And ordinarily that would cause investors to slow down, stop cutting checks, hide in a dark room and…

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Raising Capital: The Ultimate Strategic Guide to Funding Your Startup

Raising capital is a sales job. And for most of us, selling is hard. But with the right approach—the knowledge, tools, and mindset—it doesn’t have to be. Even if you’ve never sold a thing and the idea of it unnerves you, you can learn to sell investors on your idea, your team, and yourself. This is a guide to raising capital drawn from my first- and second-hand experience, and from the experience of veteran investors…

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Raising Capital Will Change Your Business

Raising capital will change your business. Take the decision seriously.

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Financing is a Tactic not a Goal

Raising capital is not a win, or even a touchdown. It’s a kickoff.

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