Understanding VC Target Ownership Percentages

Understanding VC Target Ownership Percentages

VCs often have target ownership percentages that are driven by two things: 1) ability for each investment to return 100%, 50% or 25% of their entire VC fund and 2) a VC can only be effective on so many boards; so may as well join the board of the companies where they own a meaningful amount of equity. Many VCs have a minimum ownership percentage they target when making investments. Depending on the stage the VC invests at and their strategy it is often seeking to own at least 20% of the company when leading a Series A investment, buying 10% of the company in a Series B when the A investors want half of the B round and maybe 5% of the company when joining a syndicate of a few different investors in a Series C. Many VCs will want to take 20% regardless of stage and walk away from an A, B or C round if they can not buy at least 20% or 15% of the company at that time. In ancient times (80’s, 90’s and early 2000’s) these numbers were a bit bigger with VCs seeking to own 33% minimum and even lifting that up to 45%. With the power in recent years moving from the investor to the entrepreneur the amount a startup is willing to sell in a single round has gravitated downwards to 20% and goes up a bit to make room for many elbowing VCs trying to get in. With the macro economy cooling things off we may see startups moving back to selling a third in a single financing again...
Not Getting Pushed Around by a New VC & the Playbook for Treating Existing Investors with Allocations for Future Financings

Not Getting Pushed Around by a New VC & the Playbook for Treating Existing Investors with Allocations for Future Financings

Almost all good companies go through many rounds of funding to pursue innovation and growth as well as accommodate demand from investors that want in on a great deal. I recently spoke on a panel where the topic came up about getting “thrown under the bus” where new investors try to take the entire new round and prevent existing investors from investing additional capital. With many new investors active in the market that have never founded a startup, raised angel and VC funding for their own companies or worked their way up the VC ladder from Associate to General Partner, I wanted to share “old school” etiquette on this matter and give everyone a baseline of what I think is best for all parties. When a startup is hot there will be more demand from investors for the round than available inventory in the round. This either forces the valuation of the round up and up, which will push out sophisticated investors and the least value added investors will end up taking the entire round and the company will be worse off from not having selected the best investors to support the company at a valuation they agreed to be sensible. Often times, the new CEO is heavily influenced by the new VC coming in and the new VC has strong percentage targets of 20% or more and the founders may not want to be diluted by more than 10% and so the sharp elbows come out. Sometimes the CEO will tell existing investors that they are very sorry, but the new investor is taking the entire round and they...
Irony of What’s Suitable for an Angel: Early vs Late Stage Investing

Irony of What’s Suitable for an Angel: Early vs Late Stage Investing

It’s been over 20 years that I have been talking to angel investors in the Valley and around the world about their individual investment preferences when it comes to direct individual investments and wanted to share some of the results of these conversations. The way the real world works is that until recently most VCs do not invest in pre-seed or seed stage startups. Especially as most Sand Hill Road funds increased in fund size from $50m and $250m to $700m and $1.2bn per fund as a result of 2001 and 2008 downturns. These super-sized VCs need to write bigger checks and invest in later stage financing rounds than they did in the 80’s, 90’s and early 2000’s. So angel investors filled this need for early stage seed investing. Then we saw the birth of micro-VCs like Ron Conway’s SV Angel raising institutional funds and investing at the angel / seed stage like a machine out of their funds with fulltime investment professionals focused on angel investing. We now seem to have an accelerator for every type of startup and the best ones have their own funds and invest seed capital in an institutional manner and nearly all of these financings with the micro-VCs and accelerator funds also include angel investors. This is where we expect to see the angels active. The result of all of this is that angel investors today and in recent years do have access and are welcome to invest in seed stage financings for tech startups in the Valley and around the world. However, once these startups make more progress and progress to a...
Videos from VC / Angel Investor Workshop @ Silicon Valley Innovation Center

Videos from VC / Angel Investor Workshop @ Silicon Valley Innovation Center

Videos from VC / Angel Investor Workshop @ Silicon Valley Innovation Center Click here to go to Andrew Romans’ YouTube Channel and view the videos. (Read the notes of each video to fast forward through the first 10.5 minutes of Part I. I need more time to break these into shorter videos; so feel free to skip around.) Topics covered Overview & analysis of the market from Pre-Seed, to Seed, Later Stage Seed / Seed Extension, Series, A, B, C, D to the private IPO phenomenon – understanding trends – which are crowded, overpriced, underpriced and key risk points Why investing now is more attractive than ever before What industries, sectors, company stage and geographies are best for you Convertible notes – key points and the meaning beyond the moving parts Priced equity rounds – key points and the meaning beyond the moving parts Valuation concepts on pricing valuations when investing, exiting and risk tied to perceived exit multiples Portfolio construction strategies for angels and VCs – how to allocate your capital Best practices for sourcing deal flow and conducting due diligence Tactics to get into oversubscribed deals Strategies for continuing to invest in portfolio companies a 2nd, 3rd, 4th, 5th time, etc Best practices for post investment information rights, governance, adding value and Different options to invest ranging from Angel List, to other investor platforms, angel groups, demo days, accelerators, VC funds, SPVs, tax breaks for UK, EU and Israeli taxy payers Different options to get liquidity on the secondary market before definitive liquidity event for startup / how to sell some stock before the final exit Questions & Answers from an audience of...
Join us in London for Blurred Lines in VC Sept 1, 2015

Join us in London for Blurred Lines in VC Sept 1, 2015

Join us for “Blurred Lines in VC – London” Hosted by Rubicon Venture Capital Register here: http://BlurredVC.eventbrite.com Featuring a panel of London VCs moderated by Andrew Romans, General Partner of Rubicon based in San Francisco, discussing the ever-changing nature of the startup and venture capital landscape, plus time for networking, drinks and canapés. The venture capital and startup worlds are going through major shifts today. Some call Seed Extension or Later Stage Seed the new Series A. Seed financing rounds are now covering product development through to revenue and product market fit with Series A coming in later and bigger. We’ll invite our panel of venture capital investors to discuss the increasingly blurred lines between Seed and Series A rounds, massive startup valuations, the “Private IPO” phenomenon and what they look for in their next investments. AGENDA 6:00 pm – 6:30 pm: Registration & Networking 6:30 pm – 7:30 pm: Venture Capital Panel – “Blurred Lines in VC” followed by questions 7:30 pm – 9:00 pm:  Networking, Cocktails, Hors d’oeuvres VENTURE CAPITAL PANEL  Andrew Romans Rubicon Venture Capital @RomansVentures @RubiconVCModerator    Damien Lane Episode1 Hussein Kanji Hoxton Ventures @hkanji Nick Brito Fidelity Growth Partners Europe Paul Jenkinson WHITESPACE VENTURES Jerry Ennis Smart Anchor Ventures Register here:...