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Valuations 101: The Venture Capital Method

Gust

We recently started a series of posts on establishing the pre-money valuation of pre-revenue startup companies for purposes of investment by seed and startup investors. It is one of the useful methods for establishing the pre-money valuation of pre-revenue startup ventures. million ÷ 20X.

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Valuation Methods 101

Gust

This is the first of a six part series on different methods used by angel investors to arrive at pre-money startup valuations. The Venture Capital Method. The Venture Capital Method (VC Method) was first described by Professor Bill Sahlman at Harvard Business School in 1987 in a case study and has been revised since.

Valuation 174
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Want to Know How VC’s Calculate Valuation Differently from Founders?

Both Sides of the Table

Back in 1999 when I first raised venture capital I had zero knowledge of what a fair term sheet looked like or how to value my company. Due to competitive markets we ended up with a pretty good term sheet until we needed to raise money in April 2001 and then we got completely screwed. I turned them down. They were nonplussed.

Valuation 405
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Bad Notes on Venture Capital

Both Sides of the Table

On the phone … Me: So, you raised venture capital? Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. How do you think they’ll feel if your next round is at a $50 million post money valuation and their hard-earned $25,000 is worth 0.05% of your company?

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What is the Right Burn Rate at a Startup Company?

Both Sides of the Table

The more you burn the higher your investor’s leverage relative to you is if you start to run out of money and don’t have options. Valuation. I wanted to call out special attention to valuation in this debate. If you’re raised at $250 million+ valuation even more cautious.

Burn Rate 383
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Revisiting Paul Graham’s “High Resolution” Financing

Both Sides of the Table

Taking it from an investor perspective (not me, angels) I think it’s totally unfair to see early angels invest, take more risk, help you get to the next level through both sweat & money, and then pay a higher price because the round had a convertible note with no cap. I agree on all points. I chuckled.

Finance 286
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NextView’s Greatest Hits

View from Seed

At NextView Ventures we have written many pieces about venture capital — how to raise it, build your business, engage with investors, iterate your product, navigate expanding industries, etc. What Are Your Valuation Expectations? I’ve Been in Venture Capital for Two Months. VCs sure do love writing.