rmorrison's comments

He listened without saying a word for ~15 minutes while I explained what our startup does. Then, he began "If I were you, I'd..." and proceeded to tell us specific ways he thought we could better focus our business. His advice was relevant and demonstrated a crisp understanding of our business and many of the challenges we'd face over the next several years.

My natural inclination was to jump in and start pushing back, but I just stop and decided to listen and learn from this business legend. I left extremely impressed. Even today, several years later, we're still executing on many things he foresaw after a brief interaction.

There is no "rule" about implied valuation either. Entrepreneurs can raise $3m in notes $100k at a time, usually from investors that are much less price-sensitive than VCs leading a priced round. It's a lot harder to raise a priced Series A at a $10m+ valuation than raising piecemeal notes at the same valuation cap (or uncapped notes, even).

Again, this is all manageable by the entrepreneur, but there are no "rules" like it often appears from the outside.

If you raise $2m or $3m on uncapped, no-discount notes, you basically need to turn that into a $10m+ pre-money company upon raising your Series A. If you raise $4m or 5m+ seed, it gets even harder. And this is assuming no cap or discount, which is unlikely.

You are correct that Series A rounds are usually not smaller, in which case if you raise several million seed on uncapped notes and cannot leverage that into a much more valuable company, you'll be unable to raise a Series A.

This is all manageable by the entrepreneur, but it's important to make sure you understand what's happening and where the risks are. It seems a lot of entrepreneurs don't.

The median pre-money Series A valuation for all WSGR startups is ~$8.0m [1], which is likely on the higher end.

Also, uncapped notes do not get diluted when raising your Series A, which is additional dilution for the entrepreneur.

For example, let's say you raise $5m uncapped notes with no discount. If you then raise a $3m Series A at a $8m pre-money valuation, you'll end up giving away more than 50% of your company, not counting interest or option pool. At a $15m pre-money valuation, you'll be giving away over 40% of your company.

Entrepreneurs should be equally careful with SAFEs.

[1] http://www.wsgr.com/publications/PDFSearch/EntrepreneursRepo...

This is probably the most important thing a new entrepreneur needs to realize. Envisioning a world where everybody is using your product isn't enough. You need to figure out how to get to that world from this one, and that is where many entrepreneurs don't have a strategy, and subsequently fail.

This is happening across all enterprise verticals, and this is why there is such an opportunity for enterprise startups. As Warren Hogarth says in the original article "There’s about a trillion dollars of enterprise software", much of which will "transition to [specialized] enterprise software... and create multi-billion dollar companies".

The problem is, many companies use Medidata, Oracle, MERGE, and other vendors. Inside of a single study, let alone across several. That's where Comprehend comes in. We simply help customers get the actionable insights they need, and then help them take those actions.