It’s a Golden Age for Entrepreneurs….
Cheaper than ever to start a company.
• Incubators: Y-Combinator, 500Startups, …
• Resources: Startup Digest, Lean Startup, TC, VB
Technology is easier to learn, access, &c.
Driving valuations up
… And Investors Understand This.
I see lots of great companies that are:
• Capital efficient
• High velocity in coding and releasing
• Product in market with traction
• Clear customer insight on what works
• Battle-tested founding teams
• Clear, concrete ask on what $$$ they need
While we’re in a Golden Age for
Entrepreneurs, it is raising the bar
for most very early stage
You need to prove more on very
little money, because so many other
start-ups are already doing so.
Early Stage Valuations
Plain vanilla Series A
• VC: 20-30%
• Option pool: 10-20%
• Founders & Angels keep rest
Items we watch
• Founder incentive must be very high
• Maintaining a clean cap table is important
Stuff beyond your control
• The market
• The corporate politics on the other side
Stuff in your control
• Which founding teams you back
• Staying focused on execution until deal is signed
• Attracting alternative bidders
Adapted from Glenn Kelman, CEO Redfin, describing
working w/ Pierre Lamond at his Plumtree.
Then Pierre Lamond, the Sequoia partner on the
deal, began working out of our office, acting as
the virtual CEO. Pierre made a point of being
there the day one of his other companies went
public. We looked at a news photo of all the
smiling people, who seemed to be living in a
gated community, on a planet I would never visit.
Then Pierre said “that company was once even
more screwed up than you are.”
Investigate and reference check any investor
• Past successes
• Past failures
Assess the friendliness of terms
• This tells you a lot about alignment w/ founders