The startup valley of death curve or startup J curve plots the cash balance of a business against time. A lean startup business can be identified by the shape of its curve during the bootstrapping period.
Enterprise value (EV) and equity or market value (MV) are two different terms used in the determination of the value of a business. Enterprise value is the value placed on the net operating assets of a business by all stakeholders, whereas equity value is the value placed on all assets of the business less its net debt by equity holders.
When a business outgrows the funding provided by angel investors it might seek more substantial investment from a Series A funding round. The Series A round is often a trigger for the conversion of convertible loan notes and an increase in the stock options pool. The Series A capitalization table is used to show the effect on the percentage ownership of a business following these changes.
When a business has outgrown funding from family and friends it might seek more substantial investment from business angels to fund for example product development, prototype production and market research. The angel investors cap table is used to show how the current shareholders, including the founders, are diluted by the introduction of this seed investment.
When a business is in its early stages and has perhaps developed an idea but does not yet have a working prototype of its product or traction and revenue, it often needs to be funded by outside investment capital from family and friends or other pre-seed investors. The pre-seed investors cap table can be used to demonstrate how the founders are diluted by the introduction of this outside investment.
This free equity investment Excel template can be used to estimate the amount of equity which an investor might require in order make an investment in a startup business. The calculator takes into account the return required by the investor and the number of years to exit.
Angel funding is used to provide a startup business with equity investment to fund growth. The angel investor is seeking higher returns for the risks involved and tries to limit the initial valuation placed on the business in order to maximize their equity percentage.