Knowing Current Market Terms for Venture Investments
written by David A. Broadwin
One area in which you might think that first-time entrepreneurs are at something of an information disadvantage to venture capitalists (or sophisticated angel investors) is knowledge of what are and what are not current market terms.
You would think that these seasoned investors would know what is being agreed to at any given time in the market. However, it turns out that some do and some don't, and some have strong opinions that are not supported by empirical evidence. For this reason, if you are seeking funding, you need to check the facts for yourself.
I was recently told by one prominent VC that 99% of the deals his fund was doing did not have a participation feature. Well, our research indicates that in New England about half of the Series B and later round deals that are done have some level of participation.
At the EEC, we publish a series of quarterly reports (which we call EEC Perspectives) covering Series A rounds and, separately, later round financings in the New England area. We report on the numbers of deals by industry in the trailing quarter, as well as pre- and post-money valuations and the types of terms are being agreed to in these deals.