The collapse of Silicon Valley Bank will have enormous repercussions for startups and VCs in ways seen and unseen. As for the unseen, SVB had deep relationships among the various players in the venture ecosystem. Founders and investors established banking relationships with SVB in part because of the opportunities SVB provided to network within the space. It will be difficult for other lenders who don’t have these deep relationships to replace SVB in this capacity and fill this valuable role.Continue Reading Bumpy Ride Ahead for Startups After Silicon Valley Bank Crash
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The Upshot of Down Rounds
The impact of the Coronavirus and COVID-19 on venture capital investment will likely be similar to what we saw in the aftermath of the 2008 recession and the 2001 dot-com meltdown. VC investors will redirect their attention away from sourcing new deals and toward managing their existing portfolios, trying to determine which should survive and…
COVID-19 Capital Needs Addressed by Temporary Relaxation of Title III Crowdfunding Rules
Title III crowdfunding may be an attractive capital raising alternative during the current Coronavirus pandemic because it allows companies to use the internet to solicit potential investors and not be restricted to accredited investors. But some of the requirements under Regulation Crowdfunding may diminish its utility for issuers with urgent capital needs as a result…
WeWork, SoftBank and Anti-Dilution Protection
The corporate spectacle better known as The We Company IPO officially and mercifully came to an end September 30 when The We Company (“We Co.”), the corporate parent of WeWork, requested that the Securities and Exchange Commission consent to the withdrawal of We Co.’s registration statement because it “no longer wishes to conduct a public…
Seed Round Model Structures, Part I: Equity
The cost of launching an Internet-based startup has fallen dramatically over the last 15 years. This democratization of internet-based entrepreneurship resulted primarily from two innovations: open source software and cloud computing. During the dot-com era, Internet-based startups had to build infrastructure by acquiring expensive servers and software licenses and hiring IT support staff. So the…
Why Valuation is Overvalued, Part I: The Option Pool
In any seed or early stage round negotiation between a company and a VC, one of the first and most contentious issues to be negotiated is valuation. A company’s pre-money valuation will determine how much equity will need to be issued to the investor for any given amount of investment, and thus on its face…