Startup Funding Espresso -- Waterfalls
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing. In negotiating the valuation, it\u2019s important to understand the impact of that valuation on follow-on rounds and the exit. A waterfall analysis maps out the cap table with subsequent rounds of funding. To run a waterfall analysis, create a spreadsheet with the cap table owners and the current fundraise round. Include the owners, the pre, and post-money valuations. Then apply the standard valuation of follow-on rounds of funding that will be required.\xa0 In this exercise, it\u2019s important to gain agreement with the startup on the exit and what is required.\xa0 Many early-stage startups have unrealistic expectations about the exit value. Take into consideration the impact of convertible notes, participating and non-participating preferred shares, liquidation preferences, options pools, and various exit scenarios. Vary the valuation on the current round to see the impact on the final exit value.\xa0 Finally, discuss the results with the startup as part of your negotiations. Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.Let\u2019s go startup something today. ___________________________________ For more episodes from Investor Connect, please visit the site at: \xa0 Check out our other podcasts here: \xa0 For Investors check out: \xa0 For Startups check out: \xa0 For eGuides check out: \xa0 For upcoming Events, check out \xa0 For Feedback please contact info@tencapital.group\xa0\xa0 Music courtesy of