Dear SaaStr: What Happens When You Can’t Meet The Expectations From the Valuation of Your VC Financing?
It varies e based on the situation.
- If it was a small round done with SAFEs or promissory notes, the price usually adjusts to a 20% or so discount to the next round, if there is one. So the issue is solved there, in a sense.
- If it was a bigger round, but you can still close a “round extension” at the last round price, in the end, everyone will OK with it. They may complain a bit, but in the end, everyone is OK with round extensions at the same price, even years later.
- If the company is later sold at a lower price than the last round, you may have to adjust the last round price. They may not agree to the acquisition otherwise.
- In the end, what matters most is the “3x Rule” — that you sell for at least 3x the price of the last round. If you do in the end, it works out.
Look at the end of the day, professional investors know not every startup works out, and not every round is a huge up-round. They get it. Unless — they’ve invested a lot 🙂
The more money that goes in, the bigger the stakes, the bigger the drama here.
If you’ve done everything you can, and you don’t run out of money, and sell for at least more than the last round price — it will work out, one way or another.
If you’ve raised a ton, if you’re a struggling unicorn with no path to profitability and no growth — then it’s a total mess.
A related post here:
(overpriced image from here)
- SEO Powered Content & PR Distribution. Get Amplified Today.
- PlatoData.Network Vertical Generative Ai. Empower Yourself. Access Here.
- PlatoAiStream. Web3 Intelligence. Knowledge Amplified. Access Here.
- PlatoESG. Automotive / EVs, Carbon, CleanTech, Energy, Environment, Solar, Waste Management. Access Here.
- PlatoHealth. Biotech and Clinical Trials Intelligence. Access Here.
- ChartPrime. Elevate your Trading Game with ChartPrime. Access Here.
- BlockOffsets. Modernizing Environmental Offset Ownership. Access Here.
- Source: https://www.saastr.com/dear-saastr-what-happens-when-you-cant-meet-the-expectations-from-the-valuation-of-your-vc-financing/
- :is
- :not
- 000
- 1
- 2019
- a
- acquisition
- and
- Another
- At
- based
- before
- bigger
- Bit
- but
- Campaign
- CAN
- Chapter
- Close
- COM
- company
- content
- converting
- Customers
- data
- day
- Discount
- do
- done
- Dont
- Drama
- embed
- embedded
- end
- Even
- Every
- everyone
- everything
- expectations
- extensions
- financing
- For
- from
- get
- Goes
- Growth
- happens
- Have
- here
- HTTPS
- huge
- if
- image
- in
- into
- invested
- Investors
- issue
- IT
- Know
- Last
- later
- least
- Lot
- lower
- Matters
- May..
- Meet
- money
- more
- most
- next
- no
- Notes
- of
- on
- ONE
- or
- otherwise
- out
- path
- plato
- Plato Data Intelligence
- PlatoData
- Post
- price
- professional
- profitability
- raised
- related
- round
- Run
- same
- sell
- sense
- site
- situation
- small
- So
- sold
- startup
- Still
- Stop
- Struggling
- subscribers
- T
- than
- that
- The
- then
- There.
- they
- this
- Title
- to
- Ton
- Total
- true
- unicorn
- usually
- Valuation
- VC
- visitors
- was
- Way..
- What
- when
- will
- with
- Work
- work out
- works
- years
- you
- Your
- youtube
- zephyrnet
More from SaaStr
Dear SaaStr: Should We Allow Refunds in a Multi-Year SaaS Contract Paid Upfront?
Source Node: 1601405
Time Stamp: Feb 4, 2022
Q1 is Your Last Chance to Get the Hires Done You Need for 2022
Source Node: 1883689
Time Stamp: Jan 27, 2022
My App Stack: Carin van Vuuren, CMO of Greenhouse | SaaStr
Source Node: 2225326
Time Stamp: Aug 20, 2023
Gartner: Overall IT Spend Has Slowed. But Software? That’s Still Growing.
Source Node: 1930288
Time Stamp: Jan 30, 2023
Dear SaaStr: Who Should Our First Head of Customer Success Report To? | SaaStr
Source Node: 2350539
Time Stamp: Oct 26, 2023
Marc Benioff: Our Engineers Come Into the Office 10 Days a Quarter. But Sales and Marketing? 3 Days a Week. | SaaStr
Source Node: 2297765
Time Stamp: Sep 28, 2023
Fractional CROs and CMOs: The Only Times I’ve Ever Seen Them Work
Source Node: 1895455
Time Stamp: Jan 13, 2023
Dear SaaStr: How Does a First Time Founder Identify 10x Hires? | SaaStr
Source Node: 2246950
Time Stamp: Aug 31, 2023
10+ Actionable Things You Can Do To Scale Faster In The Early Days
Source Node: 1857299
Time Stamp: Jul 3, 2021
Want Happy Customers? Implement the 5-Visits-Plus-2-Badges Rule. For Your Customer Success Team — And You. (Updated)
Source Node: 1959020
Time Stamp: Feb 14, 2023