Both Sides of the Table

JULY 22, 2010

Other founders, “as a privately held company we don’t disclose our valuation.&# Me, “dude, I’m not a journalist. I just want to figure out what a fair valuation is.&# I figured all the VC’s talked so we should. This starts with understanding how VCs and entrepreneurs often see valuation differently.

Valuation 405

Valuation Liquidation Preference Pre-Money Valuation Term Sheet 405

Both Sides of the Table

JUNE 5, 2015

In the old days VCs funded off of a “pre-money” valuation. If you add the pre-money valuation (let’s say $8 million) to the amount of money you’re raising (let’s say $2 million) you get the post-money valuation. How much is in the option pool? Why do investors care about this?

Pre-Money Valuation 150

Pre-Money Valuation Option Pool Post-Money Valuation Dilution 150

Both Sides of the Table

NOVEMBER 4, 2009

Let’s assume that the company raised it at a normal VC valuation, which means it gave up 33% of the company and thus $5 million / 33% = $15 million post-money valuation. When we next spoke he had found out that the CEO had about 5% and there was no management option pool in place. He hadn’t thought to ask.

Stock Options 418

Stock Options Stock Liquidation Preference Option Pool 418

Both Sides of the Table

AUGUST 17, 2009

Assuming normal valuations at fund raising rounds you’ll be down to 6-12% after you’ve created a stock-option pool and raised capital. But these people seldom make retirement money from the stock options on these companies. It is hard enough to have a great financial outcome when you start with 100%.

Founder Vesting 365

Founder Vesting Intellectual Property Stock Options IP 365