More on CRV Model

November 10th, 2006

It doesn’t really break any new ground, but here is an interesting calculator that shows how Charles River Ventures’ QuickStart program might work.
The calculator is set up to demonstrate returns, so you can plug in different numbers for the amount of the QuickStart loan, the amounts of each subsequent fundraising round, and the exit valuation. The calculator then spits out the return to the founders and each set of investors.

This is interesting, but pretty long-term and hypothetical. I would be more interested to see a calculator that shows the effect of the QuickStart loan on a company’s cap table. E.g. how much of the company can founders preserve for themselves by using a QuickStart loan instead of a larger funding round?
I have done a million of these for my clients and thought I could try to add to the general base of knowledge here. I have no idea how to make an HTML calculator, but here is an Excel file that does the job.

The scenarios can get very complicated, but the basics could be expressed pretty simply. The main variables are:
*amount of initial loan
*amount of Series A round
*valuation at time of Series A (or percent of company sold for Series A funds)

The calculator could then spit out alternative cap tables showing founder/investor ownership percentages. One column would show ownership structure under the QuickStart model and the other would show the ownership assuming a larger VC financing. The value of the smaller, earlier financing should become readily apparent.

I made a couple of assumptions in the calculation, esp that the “VC funding” route would be for 1/2 the amount of the QuickStart Series A, and at 1/3 the valuation. Reasonable minds may disagree on the numbers, but the concept is that the target company would not need as much money in an earlier VC funding, and that the valuation at which the money comes in would be significantly lower.

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