Corporate Finance & Securities

VC Valuation Trends in Series Seed Financings

Pitchbook recently released its VC Valuations and Trends Report, which analyzes a decade of data on VC valuations, financings, and series terms. We’ve extracted some of the highlights from the data on series seed financings below:

Series Seed Valuations at Ten Year High

Valuations in series seed rounds have increased year over year, with the median valuation for seed stage financings reaching $5.9 million in the first half of 2014. This represents a 23% increase over the 2013 median of $4.8 million. As many folks are now saying, series seed financings are now the new Series A!

Investors Take Larger Percentage in Seed Stage

Investors in software startups have taken a larger stake in companies than in prior years. In 2011, the median percentage...

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Corporate Finance & Securities

Founders, Stock, and Dilution

Successful Founders Get Diluted.

We often get asked by founders what they can do to protect against dilution. A few answers:

You can build a crap company nobody wants to invest in. You can build a cool company that doesn’t need to scale. You can pour your own money into the venture, if you have enough of it. You can scale at a slow pace. You might be able to get a loan instead of raising money through selling an interest in your company.

There are some small protections against dilution that your attorneys can fashion for you. But the reality of life for most founders of ventures designed to scale is that dilution is a normal part of success. Many founders are strongly opposed to dilution,...

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Corporate Finance & Securities

Equity or Convertible Debt, What’s Right for Your Company?

Many of our clients that are looking to raise a seed-round financing have heard from friends or advisors that convertible debt is definitely the way to go. We often recommend equity rather than convertible debt, and we explain why below. Convertible equity (a twist on convertible debt), if done right, can be a good deal for both investors and entrepreneurs. The important thing is that everyone involved understands the difference between convertible debt (or convertible equity) and equity. It’s in that spirit that we authored this post.

Understanding the basics

Before you can understand the pros and cons, you need to make sure that you understand the basic features of convertible debt and equity.

Equity Investors get preferred stock. The preferred stock has all...

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