Numbers: November 2007 Archives
I liked 5Min the minute I saw it about five months ago. I could see that its viral aspects are pretty good, making it a self-marketing web site. I'm glad to hear that they got their series A and raised $5M.
The above mentioned TechCrunch report has something much more interesting though - the cap table of the company prior to doing the series A round, which I'm showing here right from the TechCrunch report.
Cap table is almost always confidential information for private companies, so having a chance to look at some company's cap table is always interesting.
Founders are Tal, Ran, and Hanan. As you can see the founders collectively owned 52.1% of the company prior to series A. I don't know how many seed rounds they had (their site only mentions one "seed" funding of $300K), but it looks like the founders were not good at negotiating the valuation.
As a rule of thumb, founders would be at about 50% (give or take some, depending on negotiation powers) after series A. Of course if you're a super-hero founder with a solid track record of building companies things are different, but for the first timers that's pretty much what happens. Series A is usually considered the most diluting round. So if you're founding a company, you have to either make your valuation high enough or raise less angel funding, so that you're still roughly at about 80% ownership. Otherwise by the time of series A (and usually a series B is inevitable) there is not much left. In the case of these guys most probably now that they have got their series A they are at about 9% ownership each (Hanan even less), and by series B they'll be at about 6% (these are just guestimates of course, but that's what an entrepreneur should do anyway and do the math to reverse engineer and see what makes sense). If we assume a $50M exit for these guys, 6% after all the conversation multiples and other stuff will make a founder about $2-3M. Not bad, but not impressive either.
The above mentioned TechCrunch report has something much more interesting though - the cap table of the company prior to doing the series A round, which I'm showing here right from the TechCrunch report.Cap table is almost always confidential information for private companies, so having a chance to look at some company's cap table is always interesting.
Founders are Tal, Ran, and Hanan. As you can see the founders collectively owned 52.1% of the company prior to series A. I don't know how many seed rounds they had (their site only mentions one "seed" funding of $300K), but it looks like the founders were not good at negotiating the valuation.
As a rule of thumb, founders would be at about 50% (give or take some, depending on negotiation powers) after series A. Of course if you're a super-hero founder with a solid track record of building companies things are different, but for the first timers that's pretty much what happens. Series A is usually considered the most diluting round. So if you're founding a company, you have to either make your valuation high enough or raise less angel funding, so that you're still roughly at about 80% ownership. Otherwise by the time of series A (and usually a series B is inevitable) there is not much left. In the case of these guys most probably now that they have got their series A they are at about 9% ownership each (Hanan even less), and by series B they'll be at about 6% (these are just guestimates of course, but that's what an entrepreneur should do anyway and do the math to reverse engineer and see what makes sense). If we assume a $50M exit for these guys, 6% after all the conversation multiples and other stuff will make a founder about $2-3M. Not bad, but not impressive either.
