background preloader

Investment sizing & valuation

Facebook Twitter

Uber Turns to Saudi Arabia for $3.5 Billion Cash Infusion. Photo SAN FRANCISCO — In its quest to build a global empire, Uber has turned to the Middle East for its biggest infusion of cash from a single investor. Uber said on Wednesday that it had raised $3.5 billion from ’s Public Investment Fund, the kingdom’s main investment fund, in one of the largest-ever investments into a privately held start-up. The money was part of the ride-hailing giant’s most recent financing round and continued to value Uber at $62.5 billion.

The investment, which was months in the making, does not cash out any of Uber’s existing investors. Uber, which has viewed the Middle East as an important area in its expansion, said the investment further aligned the company with Saudi Arabia as the kingdom planned to transform its economy, reducing its dependence on oil and improving employment. Until now, Saudi Arabia has not been known for venture capital investing, though some members of its royal family have made some deals. Continue reading the main story. Startup Investing Trends. June 2013 (This talk was written for an audience of investors.) Y Combinator has now funded 564 startups including the current batch, which has 53. The total valuation of the 287 that have valuations (either by raising an equity round, getting acquired, or dying) is about $11.7 billion, and the 511 prior to the current batch have collectively raised about $1.7 billion. [1] As usual those numbers are dominated by a few big winners.

Things got a little out of hand last summer when we had 84 companies in the batch, so we tightened up our filter to decrease the batch size. [2] Several journalists have tried to interpret that as evidence for some macro story they were telling, but the reason had nothing to do with any external trend. One consequence of funding such a large number of startups is that we see trends early. I'm going to take a shot at describing where these trends are leading. I think more. One thing we can say for sure is that there will be a lot more startups. Notes. Why Startups Should Raise Money at the Top End of Normal. Editor’s Note: This is a guest post by Mark Suster (@msuster), a 2x entrepreneur, now VC at GRP Partners.

Read more about Suster at his Startup Blog, BothSidesoftheTable. I have conversations with entrepreneurs and other VCs on a daily basis about fund raising, the prices of deals, how much companies should raise, etc. I’ve stopped talking about this as much publicly because it’s such a heated, emotional topic where the points-of-view are strictly subjective and for which the answers will only be revealed in the future. I’ve decided to take all of my private points-of-view on the topic and make them public in a keynote speech at the Founder Showcase in San Francisco on June 15th. I thought I’d post on one of the topics beforehand. It’s the one bit of advice I find myself giving to entrepreneurs most frequently these days, “raise money at the top end of normal.” Huh? Here’s what I mean. Every day shareholders vote on the value of the company by buying or selling shares. Here’s the problem. How Much Money To Raise.

Image via Wikipedia I spent some time yesterday talking to an entrepreneur about this topic and I thought I'd share what I told him with everyone. When your company is growing really fast, doubling employees year over year, adding users and customers at a very rapid rate, you don't want to raise too much money. If you raise three or four years of cash, there is a very good chance that by your second year, you will be sitting on cash that you raised when your company was worth considerably less.

That's not a good thing. It's too dilutive to you and your co-founders and angels. I've got two basic rules of thumb. First, try to dilute in the 10-20% band whenever you raise money. Second, raise 12-18 months of cash each time you raise money. These rules are most applicable in the early stages. But for the seed, Series A, and Series B rounds, I think 10-20% dilution and 12-18 months of cash are ideal. The anatomy of a fundable startup. This post is sponsored by The Founder Institute. As a co-founder of several companies, an angel investor in several more, and co-maintainer of two great resources for entrepreneurs — AngelList and Venture Hacks — Naval Ravikant has a unique view of the startup and investing landscape.

That’s why he was asked to speak at the Founder Showcase event last week in San Francisco to almost 500 founders and investors, and he did not disappoint. In a great speech appropriately titled “The Anatomy of the Fundable Startup,” Naval broke down the 5 main qualities of an “exceptional startup”: 1. Traction - “Traction trumps everything” - “You want to have about 20% a month growth to look like a hot company” 2. Team - “There’s not a lot of room for non-technologists. 3. 4. 5. And while all these qualities are important, Naval explained, the most important thing is to understand that “investors are trying to find the exceptional outcomes, so they are looking for something exceptional about the company. How does a VC value a business? « The Equity Kicker. Thirteenth in a series of weekly posts by myself and Nicholas Lovell of Gamesbrief which answer the fifty questions you should ask before raising venture capital.

We expect the series to run for a year after which we will collate the posts into a book. You can find the rationale behind the series here, and the list of questions here. We welcome your comments on any and every aspect of what we are doing. ‘What is my business worth?’ Is a question every entrepreneur and investor asks themselves all the time. If you are trying to answer the question ‘what value will an investor place on my business?’ The right way for a VC to value a company The right way for a VC to value a business is to estimate what it would fetch on a successful sale and then divide that figure by the return appropriate for the risk involved.

In practice it is slightly more complicated than this because adjustments need to be made for liquidation preference and dilution from further rounds. The rules of thumb. What can I do to control the timetable/reduce the time it takes to raise venture capital? « The Equity Kicker. Twelfth in a series of weekly posts by myself and Nicholas Lovell of Gamesbrief which answer the fifty questions you should ask before raising venture capital.

We expect the series to run for a year after which we will collate the posts into a book. You can find the rationale behind the series here, and the list of questions here. We welcome your comments on any and every aspect of what we are doing. My last post in this series explained why for most startups it is sensible to allow six to nine months for a fundraising process to get from start to completion. This week I’m going to focus on what you can do to get that time down, and what you might do to get VCs operating to your timetable rather than the other way around. There are, I think, three reasons why VCs can take a long time to make their minds up about a deal: The longer you spend getting to know a company the better you understand it, and with better understanding comes less risk.

There Aren't Many Exits Over $100mm. I was reading Mark Suster's latest blog post (actually its a presentation embedded into a blog post) and I came across this slide. I don't know what the source of this data is and I don't know if this is just M&A exits or if it includes IPOs as well. It really doesn't matter for the basic point that Mark is making with this slide. Based on the NVCA statistics on the venture capital industry, there are on average 1,000 early stage financings every year. I suppose a few of those 1,000 financings are for the same company, but I doubt that many are. So we can use 1,000 as an approximation of the number of companies that get funded in a given year.

And somewhere around 50 and 100 of them exit for more than $100mm every year. At at time when the average Series A round is now north of $20mm (based on very anecdotal evidence and not at all scientific), this poses challenges for the VC industry. Are we in a valuation environment that is challenging for early stage VC investors? Color Looks To Reinvent Social Interaction With Its Mobile Photo App (And $41 Million In Funding) $41 million. From Sequoia Capital, Bain Capital, and Silicon Valley Bank. Pre-launch. That’s how much a brand new startup called Color has to work with. Your eyebrows should already be raised, and here’s something to keep them fixed there: this is the most money Sequoia has ever invested in a pre-launch startup. Or, as the Color team put it, “That’s more than they gave Google.” But the founding team goes a long way toward explaining it.

Headed by Bill Nguyen — who sold Lala to Apple in late 2009 — the company has attracted a wealth of talent. So what exactly is Color? Update: The application is now available for the iPhone at At first glance, it looks like another mobile photo app, like Path, Instagram, or PicPlz. But the beauty of Color stems from what it’s doing differently. It’s difficult to explain what Color does with a bullet list of features, so I’ll try painting an example that hopefully demonstrates how it works. Say you walk into a restaurant with twenty people in it. COLOR: Here's What No One Understands About The Huge $41 Million Round. Color Labs (startup): As a VC, how is a $41 million investment in Color justified.