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Startup Orphans and the Series A Crunch – Is There One?

The Series A Crunch is a supply-demand imbalance that will result in over 1000 seeded startups being orphaned and more than $1 billion of investment evaporating. It is all part of a healthy natural selection process.

Our Seed Investing Report analyzes 4056 seed investments made into US-based technology companies since Q1 2009. For clarification, seed investments are early stage investment (typically less than $1.5 million) made by either angel investors (those investing their own money) or venture capitalists (those investing others money). Below are some of the highlights/findings of our analysis.

The “Series A Crunch” is Just Math

Despite the
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Do You Need To File A Form D With A Financing? | Ask the VC

It used to be the case that whenever a private company did a financing, it filed a Form D with the SEC in order to comply with Regulation D. Suddenly, I’m hearing of lots of situations, especially in seed and Series A financings, where companies are no longer filing Form D. Apparently a number of law firms have decided that a Form D filing is no longer mandatory. After checking with some entrepreneurs who haven’t filed a Form D, their motivation is that they want to keep their financing “secret” so they can stay in a stealth mode for longer. Jason Mendelson just wrote a post on his blog title
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Investors Weigh In With Convertible Note Caveats for Start-Ups – Venture Capital Dispatch – WSJ

Tech entrepreneurs take note: Convertible notes are not free money and, if not structured properly, can prevent you from raising additional financing.

Investors speaking at the TechCrunch in San Francisco this week had this gem and a few other choice observations about early-stage financing for start-ups.

“We’ve had companies come in for their Series A and not realize  that  they’d already given up 25% of their company” in the seed round,” said Partner Alfred Lin, referring to the fact that convertible notes are unpriced, but convert to equity stakes when founders go on to raise a priced Series A round.
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Discount or cap? A spreadsheet that shows what happens when a note converts.

Venture math can be tough. Terms like convertible note, discount and cap can complicate a seemingly easy process. A convertible note is a debt instrument typically used when a company first begins to raise capital. The valuation of the company is determined at a later date, after a Series A investment. This is when a note converts to equity at the previously agreed upon terms. A discount and cap are typically included in those terms. A discount gives a note holder’s small investment a little bit more purchasing power. But with a discount, there is no limit to the valuation of the company. That’s
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Victoria Silchenko: Equity Crowdfunding: Next Generation of Angel Investors Is Not Sorry to Disrupt

Nikola Tesla wrote once, “The present is theirs; the future, for which I really worked, is mine.” I can see this being quoted by any supporter of equity based crowdfunding (or crowdinvesting) — an innovative online tool that would give you a legitimate right to own a stake in a company you choose to invest in. Just like do.

Now, if you think you can invest too, join the club and have a nice… fight.

There are several equity-based crowdfunding portals here in the U.S. that are already operational such as , , or . But since the private investors
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What’s the Difference Between and Incubator and Accelerator?

Brad prefaced his comments by highlighting several meaningful distinctions between accelerators and incubators.”I think there is a fundamental difference between an incubator and an accelerator… (this) distinction helps people understand why, (even though) … there is a saturation point, but we are nowhere close to it. The distinction between the two is that an incubator has an economic model that is based around having people be tenants. Having people being captive within some investor’s…sphere.

The money that went into them was usually very inefficiently deployed because it was deployed against infrastructure, it was deployed against a longer arc of build-up
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2012 Startup Accelerator Report presented by .CO – Tech Cocktail

A Guide to Choosing the Best Accelerator for Your Tech Startup is a 20-page startup accelerator report that outlines five key factors for startups to consider when choosing an accelerator. Accelerators offer entrepreneurs a chance to spend several months intensely focused on their product and business – fueled by funding and mentorship, and often in shared office space – before pitching in front of investors at “demo day.” Topics discussed include: Does location matter? Which programs are more hands-on? Which ones have the biggest networks? The report also includes a list of 70 accelerators
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STARTGRID – MEET. WORK. GROW.

Startgrid connects entrepreneurs to resources, relationships and community – everything needed to build great companies. It’s where the whole entrepreneurial economy comes together.

You’ve got passion, a big idea and a clear vision. You’re working hard to build a great business. Is that enough? The difference between success and failure often comes down to having the right relationships at the right time. That could be an attorney with a particular specialty, an advisor with relevant experience or the ideal investor. Or maybe you’re looking for the next great company to invest in, provide services to, partner with or advise. Startgrid
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Stock Options versus Stock Warrants – What’s the Difference?

I frequently hear clients and some of their advisers talk about “stock options” and “stock warrants” and there is often considerable confusion between the two. In this post, I’ll briefly describe the major distinctions between these instruments and how each can be used in a privately held company.

Stock options are issued to key employees, directors and other service providers in exchange for services rendered to the company/employer. Generally, there is a stock option plan under which a set number of options (and often restricted stock) can be issued to one or more key service providers to align their interests
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AngelList Commits to Crowdfunding – Venture Capital Dispatch – WSJ

A site that connects startups and early stage investors, , is rolling out a long-anticipated equity crowdfunding service to its users this week, according to Chief Executive Naval Ravikant.
Dubbed the service has been available to a handful of companies, by invitation only, since December 2012. Eighteen startups, including , and , raised $6.7 million in funding commitments from 620 investors, via AngelList during that test period. The service is now available to any qualifying startup or “top-tier” accredited angel investor using the site. Ash Fontana, a “venture hacker” who develops
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