Terence Nunis’ Post

This is business. Every party wants the best deal they can get. Startups are inherently risky investments.  Venture capitalists ask for high equity stakes to compensates for the risk of investing in early-stage companies. They have to aim for a high return on their investment because they have investors to answer to, and the pressure to return many times the investment from the fund.  A larger equity stake gives them a greater potential return. The startup should not normally take the first offer on the table, but negotiate. They need to keep an eye on the capitalisation table so that they can manage future rounds of funding without giving out too much equity too early. This can be managed through deal structures such as a Simple Agreement for Future Equity (SAFE), debt funding, or convertible notes which delays setting a price on the stake until specific conditions are met. One way of balancing the power dynamics of the deal is to have alternate funding such as another set of investors, or a credit line, or proof of market access, or milestones reached. Investors want the comfort of seeing their risk managed. Terence Nunis Terence K. J. Nunis, Consultant Chief Executive Officer, Equinox GEMTZ

This is business. Every party wants the best deal they can get. Startups are inherently risky investments.  Venture capitalists ask for high equity stakes to compensates for the risk of investing in early-stage companies. They have to aim for a high return on their investment because they have investors to answer to, and the pressure to return many times the investment from the fund.  A larger equity stake gives them a greater potential return. The startup should not normally take the first offer on the table, but negotiate. They need to keep an eye on the capitalisation table so that they can manage future rounds of funding without giving out too much equity too early. This can be managed through deal structures such as a Simple Agreement for Future Equity (SAFE), debt funding, or convertible notes which delays setting a price on the stake until specific conditions are met. One way of balancing the power dynamics of the deal is to have alternate funding such as another set of investors, or a credit line, or proof of market access, or milestones reached. Investors want the comfort of seeing their risk managed. Terence Nunis Terence K. J. Nunis, Consultant Chief Executive Officer, Equinox GEMTZ

🇬🇧 Join us today at 2pm for our webinar: "Funding Fit: Early Stage Investment Advice for UK Startups". Gain expert insights from Ben Davies, Nic Lenz, and Elliott Gaspar as they dive into key topics including being 'investment ready,' key attributes investors look for in your startup, funding avenues, SEIS/EIS, valuations, and more! Grab your free spot 👉 https://hubs.li/Q02C0w-70 #startupfunding #investmentadvice

💡 Dilution in Venture Capital Funding: What Founders Need to Know For many startups, raising venture capital (VC) funding is a milestone moment. However, it comes with its own set of challenges—one of the most critical being equity dilution. So, what is dilution, and how does it affect founders? Let’s break it down. 🔍 What is dilution? Dilution occurs when a company issues new shares, reducing the ownership percentage of existing shareholders. This is common in VC funding rounds as startups issue additional shares to raise capital. 🤔 Why Does Dilution Matter? For founders, dilution impacts: 1️⃣ Control: Reduced ownership can mean less influence over critical business decisions. 2️⃣ Financial Gains: A smaller stake can lower potential returns during exits like IPOs or acquisitions. 📊 How Dilution Happens Here’s an example: A startup has 1,000,000 shares pre-Series A, with founders owning 60% (600,000 shares). After issuing 500,000 new shares to investors, the founders' ownership drops to 40% (600,000/1,500,000). 🔑 Key Strategies to Manage Dilution 1️⃣ Negotiate a Higher Pre-Money Valuation: A higher valuation reduces the number of shares issued to raise the same amount of capital. 2️⃣ Founder Stock Pools: Consider setting aside shares early on for future funding rounds. 3️⃣ Anti-Dilution Protections: Ensure you understand and negotiate these clauses, as they can impact your equity during down rounds. 4️⃣ Be Selective with Investors: Partner with investors who bring strategic value beyond capital. 🚀 The Founder’s Perspective Dilution isn’t inherently bad—it’s the cost of growth and scaling. The goal is to strike a balance between raising capital and retaining sufficient equity to remain motivated and maintain influence over your vision. #VentureCapital #StartupFunding #EquityDilution #Entrepreneurship #FoundersTips #BusinessGrowth

Five ways startups can impress investors during due diligence

Valid take by Ryan Hinkle at Insight partners about startup M&A needed to unblock liquidity crunch in VC investing cycle. Summary points; + "Startup investors should be looking to M&A this year to bring more capital back into the system" + "The current liquidity shortfall in the startup world stems from the lack of exits in the market" + "A commitment today is a return in three to five years, becomes a new commitment in three to five years. And so the cycle spins. That wheel has stopped spinning, or at least slowed dramatically.” + "Exits are key to unblocking the whole system, because IPOs are still few and far between" + "The value-optimizing path is an IPO, the fastest path to receiving dollar liquidity is to sell a company” https://lnkd.in/gwkM7Qfs

In his latest article on SAFE Financing, Emerging Companies & Venture Capital attorney Chris Lynch delves into the evolution of the SAFE and its impact on startup financing. Chris compares the advantages and disadvantages of the SAFE against other investment contracts, offering valuable insights for entrepreneurs and investors. Read on to understand the complexities of early-stage investments and how to navigate them successfully. https://loom.ly/LyiCmTw

The Seed VC’s Perspective — How to Approach Startup Investing with a Strategic Mindset https://buff.ly/3TljPU7 Understanding the mindset of a startup investor is crucial in navigating the world of venture capital. Investors need to adopt a strategic approach, focusing on long-term growth and sustainability. This involves thorough research, risk assessment, and a deep understanding of market trends. By thinking like a startup investor, one can identify promising opportunities and make informed investment decisions. Embracing innovation and staying agile are key principles in this dynamic landscape. Adopting a proactive and calculated investing strategy can lead to successful outcomes for both investors and startups. #VCInsights #StartupInvesting

Do startups need a valuation before securing investment? 💭 Enter SAFEs: a financing instrument for early-stage startups, where instead of pricing the round, companies give investors the right to receive shares at a future equity financing valuation. SAFEs offer a simpler, more flexible, and more efficient way for startups to raise funds and for investors to secure a stake in emerging companies, focusing on a company’s future potential rather than complex negotiations. Here’s a high-level look into how SAFEs fit into the world of startup funding 🔗 https://hubs.ly/Q02KFW_00 (P.S. this is a sneak peek into course content for our Investor Lab… 👀) #safe #investmentvehicle #startupfunding #investor

SHIFTS IN VENTURE CAPITAL FIRMS’ WORK WITH STARTUPS There is a focus on more than just financial support now. This additional support is in the form of strategic and experience-based support, which is a boon to startups and should translate into more startups succeeding and scaling. https://lnkd.in/eZyAtdRq