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tonydiv

The amount of dilution here is worth noting:

YC: ~10% after conversion

500 Startups: ~10% after conversion

Version One, Felicis, etc (Q1 14): $1M+ investment at $5-$7M valuation at most? Another 20%

Flybridge, A16Z, Gramercy, etc (Q2 14): $1M investment at $6-$9M valuation at most? Another 20%

Between just these 4 groups, they own 60%+ of the company. I'm not accounting for angels. In addition to this, with an option pool, cofounder, COO, and a handful of employees, I wonder how much Danielle owns.

On a less pessimistic note, I wonder if there are acquisition routes. If so, who?

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We have taken nowhere near as much dilution as you are suggesting.

I want to clarify this, because I don't want anyone else to think they should take 60% dilution before they take their real first equity round. Without revealing our entire cap table and terms (I'm transparent as I can be, but I think this would upset some of my investors) I can tell you the rule of thumb is to give up no more than 25% dilution on convertible notes before an equity round.

Generally you will sell 20% of the company in the Series A (read as: first equity round), 15% in the 2nd (Series B), another 15% in the 3rd (Series C). Our dilution position from these early rounds is still slightly TBD depending on the valuation we get in our next round, but we are sticking pretty close to this rule. Additionally, we maybe we able to hit the milestones required to sell less than 20%... so that optionality is there.

Unless your valuation is $10M+ and your notes' caps were $6M+, I don't see how investors won't own ~55%+ after Series A (before accounting for 20% option pool).

Yup.

SmartAsset (YC S12) has an awesome calculator you can use to play with various scenarios: https://www.smartasset.com/infographic/startup

Those numbers multiply, they don't add. Also, some of your numbers are wrong if you look at her post, and others are pretty high: Danielle was a known quantity for VCs from her Twilio days and you can expect she raised her rounds at a premium.

I do the numbers as: .93 (YC) * .95 (500S) * .85 (option pool) * 0.83 (seed1) * .92 (seed2) * 0.86 (seed3) = 0.49

This doesn't account for the Referly->mattermark pivot, which may have led to some restructuring.

The math might not be quite right here. Depending on how earlier investors are diluted by later investors, if at all, the 4 groups could own as little as 49% of the company.

"As little as 49%?" Yes, you're right, I didn't account for dilution, but I also didn't account for the 20 other convertible notes they've taken.

they have a few competitors (CB Insights, DataFox, Tracxn, Indicate.io), remains to be seen who wins out

generally the math wouldn't look exactly like that. the initial investors (e.g. YC) would also get diluted in the subsequent fund-raises.

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