CapGenius

Trying to understand how "Participating Preferred" works? Still one of our best posts >> capgenius.com/2021/07/23/par…

One of our favorite #VCs to follow is @jmkaufenberg from @rallyvc - Not many founders have gone from Zero to > $130 mil ARR as the CEO and very few of those share their insights and experiences so openly and without ego. Well worth a follow!

@miketrap @mattallen Done!

@CapGenius @mattallen Thanks! Feel free to share it broadly.

Want to create wealth? Rule #1: It's easier to make money with money than it is to make money with work. Took me too long to grasp the implications, not growing up wealthy. Here's what else I've figured out... The 3 Truths of Wealth Creation link.medium.com/68xpZg5tOjb

@adrian_m_b @mattallen @salkhanacademy Most VCs we know hate venture debt at the early stages but support getting a line in place in case it needs to be used to extend runway. Current terms with no MAC clauses, etc. make it more attractive today although offset by equity valuations being thru the roof.

@mattallen @CapGenius @salkhanacademy Agree with that re appropriate use of debt. Funny how VCs are supportive of debt when they hold shares, but less so before they hold. Majority of people don't do DCFs correctly. If they do they get the "wrong" answer, so they then fudge discount rate to get "better" answer

Founders, if you have 9 minutes I’d encourage you to watch this on the Weighted Average Cost of Capital. We all use equity to fund our tech companies, but it’s super important to put the right price on it internally. It’s likely to need to be 50-100% 💰 youtu.be/46oLXwClvkw

@mattallen @adrian_m_b @salkhanacademy At later stages debt can make a LOT of sense for a start-up, especially pre-IPO as you can virtually eliminate dilution (rem: most venture debt has an equity component). Also depends on equity valuations, which in the current market make debt less compelling.

@adrian_m_b @CapGenius @salkhanacademy Well, as we say, smart leverage is good shareholders, no matter who they are. I also want it believe that equity investors would rather a great investment over a cheap one. I know I would.

@mattallen @adrian_m_b @salkhanacademy The other challenge for calculating WACC for venture-backed startups is that they are losing money which adds another risk factor to debt, especially early-on. The real challenge is that you cannot easily calc Re because it is not easy to tie to assets that generate value. (1/2)

Investors are “Entrepreneur Friendly” when they work with founders, bring significant value to the table and understand their role. Unfortunately, EVERY investor pitches themselves this way. Do your diligence on potential investors, they'll be doing it on you.

@mattallen Part Two: Love what you are doing at Tractor and wish there were more firms with a similar approach.

Learn about some of the most commonly used financing structures for your first #startup financing - Seed, SAFE, Note - and make a decision on the best structure for YOUR COMPANY. capgenius.com/2021/08/09/see…

Way too many #startup founders get advice from "experts" who have NO place giving advice to startup founders. Seek out and listen to people who truly have experience helping turn startups into big successful companies. When you find someone like this, listen carefully.

Our next post at capgenius.com will be on stock splits, with a specific focus reverse stock splits prior to an #IPO and why as an employee with #stockoptions you should be comfortable with this process and recognize that it has ZERO impact on you.

Seed Financing, SAFE or Convertible Note. What is the best financing structure for your #startup financing? We have an opinion (Seed Financing) but understand why this is not the only answer. Want to learn more? capgenius.com/2021/08/09/see…

According to LAVCA's 2021 Mid-Year Data, Latin American #startups drew USD6.45b in #investment in the first half of the year. Read more about the region's #tech boom: bit.ly/2XoRlPq #LatAm #investors #investing

@myown_brand @_BenArms A lot of times the founders think they are talking with experts who are anything but. Plenty of successful business people think their experience extends to tech startups, it often does not. Look at "Advisors" listed for local accelerators in many midwest towns for proof of this.

@_BenArms I feel like it also could be symptomatic of ppl who don’t throw themselves into the cult of startups and maybe not as interested / capable in networking. Avoidance of those are not bad things, but shows the collective knowledge you benefit from when you do.

Having "non aligned" investors on the cap table is a big turnoff: - those who exploited founders early on (15% for $20K) - investors with warrrants (guaranteed % of company in the future) but others must pay now and dilute - wanting different deal terms in round (value/prefs)

@_BenArms And as you know, there are often opportunities to help the founder clean up the cap table as part of an early round, especially as the non-aligned folks usually lack the capital to keep things rolling. That said, selling 15% for $20k is a simple reason to just pass....

@_BenArms We constantly get questions from founders outside of Silicon Valley/Other hotspots about this sort of thing and are amazed by how often local 'experts' (usually business leaders in non-tech) give horrible advice. Pls use your expertise to explain the issues before you pass.

Participating Preferred Stock explained in excruciating (and necessary) detail. If you are starting a company or are getting ready to raise capital for one, read this post and know the content. It will help you succeed.... capgenius.com/2021/07/23/par…

When you receive a founder-friendly long-term focused term sheet, you instantly learn what kind of relationship you will have. Great post by @charlesbeeler