How a Series A Investor Thinks About Your Convertible Notes

Institutional venture capital investors generally prefer to do priced rounds as opposed to investing in convertible notes. Nevertheless, these securities (be they SAFEs or convertible notes) are and will likely continue to be common among early-stage companies. Having been an investor in some of these notes and more often an investor in the first priced round in a company with existing notes, I thought it would be useful to write about how these notes can be treated in your Series A. It is a subject that entrepreneurs sometimes have difficulty with because of a lack of familiarity. The topic is important because the note treatment can change the effective Series A price and have a real impact on founder dilution. Continue reading

Demystifying the Six Documents You Will See When Raising Venture Capital

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By: Ali Rahimtula and Matt Eckert

I am delighted to collaborate with Matt Eckert, partner at the law firm Foley Hoag, on this post. I have worked with him on many investments over the years and if you are looking for an excellent corporate lawyer to help you on your next deal, you can’t do much better than Matt.

A common question we get asked by entrepreneurs we work with is what are the key deal documents that are created in a venture funding round and what – from a commercial perspective – is important for a founder or CEO to pay attention to. Continue reading

Getting Paid: Compensation Design Best Practices at Startups

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By: Ali Rahimtula, Anthony Tjan, Dick Harrington

  1. Introduction

Few topics are of higher interest and concern amongst startup management teams than compensation. Surprisingly, however, there has been relatively little written on this subject.

In early stage startups and venture-backed companies, this issue has special significance because cash is scarce. Mistakes early on can doom a startup. As a company evolves, equity becomes more valuable and the design of a compensation scheme needs to become more scientific and thoughtfully planned. Continue reading

Characteristics of Internet and Internet Enabled Companies

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By Christopher W. Brody, Ali Rahimtula

Introduction

From time to time, we have been asked what characteristics successful Internet, or Internet enabled, companies have in common. In surveying existing successful companies, we came up with the list below. Please bear in mind that no company necessarily had all of these characteristics, but all successful companies had at least some of them. Continue reading

Fundraise Like a Pro Using this Internal SaaS Metrics Playbook

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Introduction

One of the greatest pleasures of my job is meeting many early stage entrepreneurs every week. I estimate that about 70% of the companies I meet have SaaS or subscription-based revenue models. Because of this, and because a core area of our investment mandate is to invest in enterprise SaaS businesses, I wrote this piece, which was initially an internal guide to explain how to systematically analyze a company’s SaaS metrics.

What follows is a set of analytical methods that a VC may use during diligence or the general decision-making process.

This piece is intended for SaaS entrepreneurs raising a financing round. Understand how investors use SaaS metrics and how best to present them and you will increase the likelihood of getting venture funded. Continue reading