07 3 / 2010
Better Place… the coolest start up with the biggest valuation
If there’s a start up that will most likely to go IPO and be worth more than Google and Facebook; it’d probably be Better Place. Better Place is has an awesome business model with their charging stations for electric car. It solves a lot of issues with electric cars:
- The heavy costs of electric cars is in the battery; by them ‘owning’ the batteries it lower costs for users/drivers buying cars through economies of scale
- Drivers will be on subscriber model much like mobile phone accounts, where they buy miles like how to buy minutes. Probably a la carte or all you can eat (drive)
- Batteries are swapped at electric charging stations, so drivers don’t have to sit their for hours to ‘fill up’ their cars to drive.
- Forces manufacturers to make interchangeable and modular designs for batteries
- Can leverage solar or wind mill farms so countries can be independent from oil
They’ve also signed up Isreal, Denmark as whole countries to implement their charging stations, cities in California, Austrailia have also signed up as well. They also have partnered with Renault and Nissan to also make cars to their specs as well. So they have the traction. And I think they’re company will also make all the other green tech grow faster as well.
Better Place recently did a Series B (second round) round of investment; receiving $350 million while giving up only 28% of the company making it’s valuation at $1.25 billion. HSBC led the round with $125 million.
So not only were to able to get a huge amount of money, they didn’t have to give up control of their company in doing so. While everybody focuses on ‘oohs and ahhhs’ of the valuation, the most important part is the maintaining control.
If there was the one piece of advice that I recommend any start up about to take funding… is always fight to maintain control, having at least 51% percent of the company (or 65% would be nicer depending on Board terms). If not, you’re still just working for ‘the man.’
Other things to really examine before signing term sheets for investments is liquid preferences and protective provisions. Meaning if your investor has to see at least 8x the return on investment before you get to see any cash exit; you may or may not be screwed. You have to make sure that the protective provisions do not become ‘investors preferences.’
And oh founders should also negotiate for single or double triggers; meaning if your company gets acquired and there’s a change of control or if you get fired, your shares get accelerated in vesting.
The final recommendation is how the funding will be delivered. Will it be one lump sum, trenched out into 2 or 3 amounts or will it be delivered in a ‘just-in-time’ type of way. Nowadays, most will want it trenched out, but watch out for conditions or ‘benchmarks’ in order to receive the next amount. And if it’s just-in-time, make sure the amount the fund has plenty of follow up reserve funding, so they just don’t run out of money on you.
Curious, if Better Place was able to get their funding all in one lump sum or not…
