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Venture Financing

Your Startup Isn’t Worth Your Valuation Cap

valuation cap goes up in smokeI’ve heard many entrepreneurs claim their startup to be worth $X million, based on the “valuation cap” [Note the bold, underlined, italicized text!] they received in a recent convertible note financing. Don’t make this mistake!

Take a minute to consider how the valuation cap works. In a typical convertible note, investors convert into shares of preferred stock at the lower of (1) a discount to the price paid by preferred stock investors (typically 20%), and (2) the valuation cap. So your valuation cap is really the HIGHEST price a noteholder can possibly pay upon conversion. If I say “the most I’d ever pay for your sh*tty car is $1,000,” your car isn’t suddenly worth $1,000. I simply don’t think it’s worth a penny more than that.

But who cares?! I promise I wouldn’t be wasting your time if it didn’t matter.

Venture Financing

Land Investor Introductions With This One-Two Punch

294HEveryone knows that you’re supposed to get introduced to angel investors and venture capitalists – before simply cold-emailing (or Twitter stalking). We hear it from entrepreneurs and we hear it from investors (Chris Sacca’s Lowercase Capital has NEVER invested in a company that approached via [cold] email).

What we don’t hear enough about is “how do I actually get introduced?” If you’re a veteran of an established startup ecosystem, this isn’t a problem. But for first-time entrepreneurs or those located outside the established ecosystems, landing investor introductions can be a make-or-break hurdle for your startup.

Here are two tips to land investor introductions…they might be closer than you think.