Blog: Term Sheet Analysis

Exit Scenarios: Understanding Preference Rights

Understanding the legal economic rights on terms sheets for preferred shares – and how they affect founders and other shareholders – is critical for any new financing round or exit strategy. It is commonly perceived that startups will either completely fail, or enjoy a huge exit. When researching actual startup exits, however, (M&A, IPO or … Continue reading Exit Scenarios: Understanding Preference Rights

Stock Options in Tech Companies: What Are They Worth?

Identifying the key valuation questions for CFOs, key employees, and advisors that were granted stock options in private companies Determining an exercise price for a new grant of stock options, understanding at which company value your stock options are at the money, or valuating stock options at fair market value for secondary deals or an … Continue reading Stock Options in Tech Companies: What Are They Worth?

Investment in Startups: Main Impacts of Change in Investors’ Term Sheets

During the last few years, the trend of venture capital firms and other investors requesting liquidation preferences in term sheets has significantly changed. In the last three or four years, investors have switched from fully participating preferred shares in most previous deals, to non-participating preferred shares in a majority of deals. In this article, we’ll … Continue reading Investment in Startups: Main Impacts of Change in Investors’ Term Sheets

From Seed Convertible Note to Series A Round – The Real Impact for Startups’ Founders

Many startups at the seed stage raise capital from private investors and issue convertible notes or notes known as ‘SAFE’ (Simple Agreement for Future Equity).  At this stage, their cap table is still relatively simple, and includes exclusively common shares and perhaps a few options granted to key employees. The problem for companies’ post-money Series … Continue reading From Seed Convertible Note to Series A Round – The Real Impact for Startups’ Founders

Tech Startups Valuation Challenges

Very interesting article from the Wall Street Journal, about the challenges that startups and hi-tech companies face today when trying to properly valuate their pre-money value. It’s just another example of how AlgoValue is a tool that can help you better valuate your startup, through our powerful and comprehensive online valuation and cap table analysis platform.We … Continue reading Tech Startups Valuation Challenges

Is Post-Money Value Relevant?

Most investors in start-up companies rely on post-money value for purposes of determining the impact of a new round of financing or a grant of stock options. This is misguided. Why? A company’s post-money value is typically based on a very simplified version of its cap table. It ignores differences in share classes, including the … Continue reading Is Post-Money Value Relevant?