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The Berkus Method: Valuing an Early-Stage Investment

Berkonomics

For those of us who’ve invested in early-stage companies, especially technology startups, we have confronted a universal problem. There are many ways to project the value of a company for purposes of pricing an investment, but all rely upon the revenue and profit projections of the entrepreneur as a starting point.

Invest 306
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Finding “stinky clauses” in legal investment documents

Berkonomics

Here’s the problem: Investors sometimes join into investment rounds that have been pre–negotiated by others, receiving the paperwork already created by attorneys from that negotiation. How do you confront the investors who have already agreed to terms and even perhaps signed their documents? Passively sign and hope for the best?

Invest 156
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The Berkus Method: Valuing an Early Stage Investment.

Berkonomics

For those of us who’ve invested in early stage companies, especially technology startups, we have confronted a universal problem. There are many ways to project the value of a company for purposes of pricing an investment, but all rely upon the revenue and profit projections of the entrepreneur as a starting point.

Invest 321
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Several more real costs of taking outsider investments.

Berkonomics

The investor organization is granted the seat as long as the investment remains, and the documents often name the first representative assigned by the investor group to the position. Email readers, continue here…] In later insights, we will explore the legal and ethical responsibilities of board members.

Invest 243
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The “Hold Your Nose” theory of legal documentation

Berkonomics

Investors sometimes join into investment rounds that have been pre-negotiated by others, receiving the paperwork already created by attorneys from that negotiation. Changing the deal that late in the game is nearly impossible, after other investors have already completed their documents and the deal supposedly put to bed.

Email 166
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What do you give up when you take outside investors?

Berkonomics

To protect against such an event, almost every professional investor includes a clause in the investment documents which allow the investor to “put” the stock back to the company after five years, requiring the company to pay back the investment plus dividends accrued during the term of the investment. Draconian terms?

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How to Ask for Help, Favors and Intros

Both Sides of the Table

I get these frequently via Twitter, Facebook or email. I provided my email address and he sent me a 688 word email (e.g. I felt I had committed so I read and responded to the email. SHORT : Whether you know the person or not – if you’re asking for help, a favor or an intro – keep your email VERY short.

Help 332