Comments on: Early Stage Angel Round Valuations http://www.feld.com/wp/archives/2006/06/early-stage-angel-round-valuations.html Tue, 14 Feb 2012 01:23:00 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Brad Feld http://www.feld.com/wp/archives/2006/06/early-stage-angel-round-valuations.html/comment-page-1#comment-3094 Brad Feld Fri, 16 Jun 2006 13:00:17 +0000 http://www.feld.com/wp/?p=1087#comment-3094 Mike - yes - you are squarely in the range. Charles - you are hearing the typical tension between angels and VCs. VCs tend to respect "sophisticated / long term angels / experienced entrepreneurs as angels" and tend to be dismissive of "friends and family as angels." I've seen lots of attempts (some successful, some not) on retrades by the VCs of terms that angels thought they had - either in a convertible or in the first series of stock that they bought. It's all up for grabs in the financing - if it's a sellers market (e.g. the entrepreneur has the leverage - a hot deal with multiple VCs interested), the terms will stick. If it's a buyers market (e.g. desperate for capital, only one VC interested), the terms will often be retraded. Mike – yes – you are squarely in the range.

Charles – you are hearing the typical tension between angels and VCs. VCs tend to respect “sophisticated / long term angels / experienced entrepreneurs as angels” and tend to be dismissive of “friends and family as angels.” I’ve seen lots of attempts (some successful, some not) on retrades by the VCs of terms that angels thought they had – either in a convertible or in the first series of stock that they bought. It’s all up for grabs in the financing – if it’s a sellers market (e.g. the entrepreneur has the leverage – a hot deal with multiple VCs interested), the terms will stick. If it’s a buyers market (e.g. desperate for capital, only one VC interested), the terms will often be retraded.

]]> By: Brad Feld http://www.feld.com/wp/archives/2006/06/early-stage-angel-round-valuations.html/comment-page-1#comment-3093 Brad Feld Fri, 16 Jun 2006 12:55:07 +0000 http://www.feld.com/wp/?p=1087#comment-3093 Jeff - I put that in the category of "bad leading indicator." When the pre-money asks for a seed stage deal get to $10m, we know where in trouble again. Jeff – I put that in the category of “bad leading indicator.” When the pre-money asks for a seed stage deal get to $10m, we know where in trouble again.

]]> By: Jeff Clavier http://www.feld.com/wp/archives/2006/06/early-stage-angel-round-valuations.html/comment-page-1#comment-3092 Jeff Clavier Fri, 16 Jun 2006 07:51:23 +0000 http://www.feld.com/wp/?p=1087#comment-3092 Double that $2.5M pre- and you'll be closer to what I hear in the Valley these days, at least on the "ask" side of the transaction. Double that $2.5M pre- and you’ll be closer to what I hear in the Valley these days, at least on the “ask” side of the transaction.

]]> By: Knox Massey http://www.feld.com/wp/archives/2006/06/early-stage-angel-round-valuations.html/comment-page-1#comment-3091 Knox Massey Fri, 16 Jun 2006 01:30:40 +0000 http://www.feld.com/wp/?p=1087#comment-3091 We don't use convertibles anymore--haven't since 2003. Institutional money coming in after the angel money generally won't honor the negotiated discount, warrants, etc. Wasn't any point in having convertibles in that case. Besides, I'm not a big fan of putting my personal money into a deal for 6-12 months and then settling for the same terms as a VC. Like it or not, angels add plenty of value these days and they should be compensated. We're back to "light preferred" as Brad mentions. We've done enough rounds to know what terms will be taken by the market, so we're comfortable with that. Besides, it's more of a seller's market right now. If a fund wants to play games, we'll walk to the next in line. (won't stay that way forever, tho!) As for VC's not liking convertibles because they don't want earlier investors getting "their" terms? That's crazy AND counterproductive. That VC would never see another deal from my group again. Brad is right on the $1M-$2.5 pre with approx. $500K-$1M in. However, I've seen a couple of pre-revenue, pre-management $3.5M-$4M deals out there--which immediately make me somewhat strangely nostalgic for 1998. We don’t use convertibles anymore–haven’t since 2003. Institutional money coming in after the angel money generally won’t honor the negotiated discount, warrants, etc. Wasn’t any point in having convertibles in that case. Besides, I’m not a big fan of putting my personal money into a deal for 6-12 months and then settling for the same terms as a VC. Like it or not, angels add plenty of value these days and they should be compensated.

We’re back to “light preferred” as Brad mentions. We’ve done enough rounds to know what terms will be taken by the market, so we’re comfortable with that. Besides, it’s more of a seller’s market right now. If a fund wants to play games, we’ll walk to the next in line. (won’t stay that way forever, tho!)

As for VC’s not liking convertibles because they don’t want earlier investors getting “their” terms? That’s crazy AND counterproductive. That VC would never see another deal from my group again.
Brad is right on the $1M-$2.5 pre with approx. $500K-$1M in. However, I’ve seen a couple of pre-revenue, pre-management $3.5M-$4M deals out there–which immediately make me somewhat strangely nostalgic for 1998.

]]> By: Charles Zedlewski http://www.feld.com/wp/archives/2006/06/early-stage-angel-round-valuations.html/comment-page-1#comment-3090 Charles Zedlewski Thu, 15 Jun 2006 21:01:39 +0000 http://www.feld.com/wp/?p=1087#comment-3090 Brad, The feedback I've received from angels is their investment is only as good as its preferences. Most angels I talked to were very keen on convertible because they wanted preferences equal to the VC's when a funding occurred. Granted this was in 2002/2003 when there were a lot of angels on the wrong side of some preferred terms. Feedback I've heard from a few VC's is that they dislike convertible for this very fact: they're not so keen on others enjoying the same preferences they get, even if the others were earlier into the company. Is there some other issue or motivation I'm missing here? Brad,

The feedback I’ve received from angels is their investment is only as good as its preferences. Most angels I talked to were very keen on convertible because they wanted preferences equal to the VC’s when a funding occurred. Granted this was in 2002/2003 when there were a lot of angels on the wrong side of some preferred terms.

Feedback I’ve heard from a few VC’s is that they dislike convertible for this very fact: they’re not so keen on others enjoying the same preferences they get, even if the others were earlier into the company.

Is there some other issue or motivation I’m missing here?

]]> By: Michael Schoeffler http://www.feld.com/wp/archives/2006/06/early-stage-angel-round-valuations.html/comment-page-1#comment-3089 Michael Schoeffler Thu, 15 Jun 2006 20:26:42 +0000 http://www.feld.com/wp/?p=1087#comment-3089 We're about to go hunting for money with either early stage vcs or angels. We successfully bootstrapped into the beta stage and are getting our first revenues. Does this fit into the early round ($1MM-$2.5MM pre) type of company you were referring to? Mike We’re about to go hunting for money with either early stage vcs or angels. We successfully bootstrapped into the beta stage and are getting our first revenues.

Does this fit into the early round ($1MM-$2.5MM pre) type of company you were referring to?

Mike

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