Magnus HedemarkandGitHub
3b0b743687
Closes #5.\n\nPorted and revised with researcher, OpenCode, Jasper self-review, and independent verifier assistance.
3.5 KiB
Fundraising
Fundraising preparation makes the business case, financial assumptions, ownership effects, and financing terms inspectable. It is not legal, securities, tax, accounting, investment, or valuation advice; use qualified counsel and advisers for a transaction.
Valuation Methods
| Method | Best for | Limitation |
|---|---|---|
| Comparable companies | Businesses with relevant public peers | Few peers are truly comparable; market prices move daily |
| Comparable transactions | M&A or later-stage context | Terms and transaction data are often private |
| Discounted cash flow | Predictable, cash-generative businesses | Highly sensitive to discount rate and terminal assumptions |
| Venture-capital method | Early-stage scenario analysis | Depends on uncertain exit and dilution assumptions |
| Market multiple | Fast directional comparison | Can hide differences in growth, margin, retention, and risk |
Valuation multiples are market-cycle- and company-specific heuristics, not portable ranges. Do not reuse dated multiple tables or fabricate current figures. Obtain current, relevant comparables and disclose date, geography, revenue definition, growth, margin, retention, and capital structure. Public-cloud indices can provide market context but do not determine a private-company valuation.
Cap Table
Track authorized shares, issued shares, the option pool, outstanding options, warrants, convertibles, and fully diluted shares. Model each financing round on a fully diluted basis before accepting terms.
For each scenario, show pre-money valuation, new money, post-money valuation, option-pool changes, conversion assumptions, ownership by holder class, and dilution. The economic result depends on instrument terms, not only on the headline valuation. Do not present a typical dilution path as an expected outcome.
Term-Sheet Concepts
| Term | Question to model |
|---|---|
| Liquidation preference | Who receives proceeds first, at what multiple, and with what seniority? |
| Participation | Does preferred receive its preference and also share in remaining proceeds? |
| Anti-dilution | How do down-round terms change conversion or ownership? |
| Option pool | Is the pool increased pre- or post-money, and who bears dilution? |
| Board and protective provisions | Who controls specified operating and financing decisions? |
| Pro-rata, ROFR, and drag-along rights | How do future financings, transfers, and exits affect holders? |
Model exit proceeds across several values and security classes. Market practice varies by stage, geography, investor, and cycle; do not assume a term is standard or acceptable without counsel.
Preparation and Process
Prepare a reconciled financial model, current cap table, historical financial statements, customer and retention analysis, material contracts, corporate records, and a clear account of risks and assumptions. Plan for diligence, legal work, and timing uncertainty. Financing timelines and investor check sizes vary widely, so use a cash scenario rather than generic timing bands.
Common Pitfalls
- Presenting an optimistic forecast as a commitment rather than an assumption-led scenario.
- Starting a process without modeling cash needs if timing slips or terms change.
- Ignoring convertibles, warrants, option-pool top-ups, or preference stacks.
- Comparing valuation headlines without comparing security terms and dilution.
- Sharing sensitive customer, financial, or legal records without appropriate access controls and counsel.