When In Doubt on Pre-Money Valuation, Smart Guys Procrastinate

Recent Buzzes - VC Experts, Inc.

If there simply is no way to get a handle on the pre-money valuation in an angel round, the trick is to postpone the valuation/pricing decision until a future event. Typically this event is the first professional (some times called the Series A) round of financing, when the company is more mature. At this point, professional VCs are investing and perhaps competing to invest, in which case the price is fairly established by definition through an informal auction

Pre-Money Valuation vs Number of Founders | @altgate

Altgate

I was working on some data analysis around the topic of angel round pre-money valuations (which I’ll post soon) and came up with the following interesting charts. What is interesting is that you see a peak pre-money valuation of $3.16

Trending Sources

When In Doubt on Pre-Money Valuation, Smart Guys Procrastinate

Recent Buzzes - VC Experts, Inc.

If there simply is no way to get a handle on the pre-money valuation in an angel round, the trick is to postpone the valuation/pricing decision until a future event, typically the first professional (some times called the Series A) round of financing, when the company is more mature, professional VCs are investing and perhaps competing to invest, in which case the price is fairly, established by definition through an informal auction. By Joseph W.

The Challenge Of Figuring Out Your Pre-Money Valuation

YoungUpstarts

Sometimes the list of challenges may feel never ending – from writing the business plan to finding the right partner – but one of the single most important challenges entrepreneurs face is calculating a realistic, defensible pre-money valuation. .

Hugh opportunities do NOT command amazing pre-money valuations.

Berkonomics

Dave’s note: Popular Bill Payne returns this week with a thoughtful take on valuations. Yet, at the pre-revenue stage of development, angel investors price both companies at a pre-money valuation of $1.5 Starting up Raising money

Why Does Startup Pricing Vary by Location?

Gust

After all, they just read in TechCrunch that investors funded a company similar to theirs at an $8 million pre-money valuation! The valuation of startup companies shouldn’t be impacted by location, should they?

Huge Opportunities Do NOT Command Huge Pre-money Valuations

Angel Investing News

Yet, at the pre-revenue stage of development, angel investors price both companies at a pre-money valuation of $1.5 It is possible to grow a company to a valuation of $30 million on one or two angel rounds of investment. But, the working capital and management team necessary to grow a company quickly to sufficient revenues to justify a $200 million valuation will require raising lots more capital.

2012 Valuation Survey of Angel Groups

Gust

This summer I conducted our third annual survey of the pre-money valuation of pre-revenue companies recently funded by angel groups in North America. Access to our 2010 and 2011 surveys can be found at 2011 Valuation Survey of North American Angel Investor Groups. For the first time, we asked for data from specific business sectors, as follows: All pre-revenue deals. Pre-revenue life Science, biotech and medical device deals. 2012 Valuation Survey.

Why Does Startup Pricing Vary by Location?

Gust

After all, they just read in TechCrunch that investors funded a company similar to theirs at an $8 million pre-money valuation! The valuation of startup companies shouldn’t be impacted by location, should they?

Web-Based Worthworm Helps Determine PMV For Startup Investment Purposes

YoungUpstarts

One of the challenges for investing in startups has always been the lack of an established way for founders and investors to actually measure and decide on the valuation of the startup concerned. ” Ideaspotting investment pre-money valuation valuation Worthworm

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. The concept is simply…since: Return on Investment (ROI) = Terminal (or Harvest) Value ÷ Post-money Valuation. (in Post-money Valuation = $ 2.125 million.

Comparing valuations between rounds

The Equity Kicker

A few of them have done good up rounds and the easiest way to describe the magnitude is to talk about the valuation multiple. As a refresher, the post-money valuation is calculated as the pre-money valuation plus the amount of money invested.).

Why Raising Too Much Money Can Harm Your Startup

Both Sides of the Table

Amongst the most often asked questions I get from founders is, “How much money should I raise?” Every time you ask for money you’re faced with the possible of feeling literally and figuratively like a failure. You have money, you spend it.

Valuations 101: Scorecard Valuation Methodology

Gust

In 2011, the valuation of pre-revenue, start-up companies is typically in the range of $1.5–$2.5 Scorecard Valuation Methodology. This method compares the target company to typical angel-funded startup ventures and adjusts the average valuation of recently funded companies in the region to establish a pre-money valuation of the target. In most regions, the pre-money valuation does not vary significantly from one business sector to another.

2011 Valuation Survey of North American Angel Groups

Gust

During the summer of 2010, I developed a workshop, A New ACEF Valuation Workshop for Angels and Entrepreneurs. To provide some reference points, I surveyed thirteen angels groups in North American to determine their recent experience in negotiating the pre-money valuation of pre-revenue companies. See the 2010 data reported here: Current Pre-money Valuations of Pre-revenue Companies. 2011 Angel Group Valuation Survey.

10 Rules of Thumb for Startup Investment Valuation

Gust

Once you have a potential investor excited about your team, your product, and your company, the investor will inevitably ask “What is your company’s valuation?” How much is NewCo worth to investors at this point (pre-money valuation)? Image via eHow.com.

A VC’s take on the Season 5 premier of Sharktank

Lightspeed Venture Partners

to fund the company at a $6M post money valuation from a number of investors including Selena Gomez. pre money valuation and planned to use the money to market the app. pre money valuation). pre money valuation.

How to Raise Investor Funding for Your Startup

Early Growth Financial Services

Baze, Partner at Partech Ventures, Carlos Diaz, CEO at Kwarter, and EGFS’ Chief Strategy Officer Glenn McCrae covered raising funds, how-to pitch VCs, and potential sticking points around valuation. We recently participated in a panel discussion and workshop at Ubifrance. Nicolas L.

Understanding How Dilution Affects You at a Startup

Both Sides of the Table

” Everybody knows that when you raise money at a startup your ownership percentage of the company goes down. million pre-money valuation, which is a $10 million post-money) you get diluted by 25% (2.5m / 10m). This post originally appeared on TechCrunch.

Startup Fundraising Trends: Ask the VCs

Early Growth Financial Services

Median pre-money valuations have increased by 43% so far in 2014 compared to 2013. In case you missed our recent webinar, we featured panelists Lucas Nelson, Principal, Gotham VC; Marlon Nichols, Director, Intel Capital; Alan Wink, Director of Capital Markets for EisnerAmper LLP; and Sirk Roh, COO for Early Growth Financial Services. Not only was the conversation lively, there was even a bit of a West Coast versus East Coast smackdown.

Sizing Option Pools In Connection With Financings

A VC : Venture Capital and Technology

Investors like to require that an unissued option pool is in the pre-money valuation calculation when they put money into early stage companies. Let's say you are raising $1mm at $4mm pre-money. And the investors want the option pool to be in the pre-money valuation. Without revenue coming in, five employees will suck up half of that money over 12 to 18 months. We've talked about this issue before here at AVC.

Founders Should Set Aside More Equity for Their Team & “Split the Pain” With Investors

Hunter Walker

No one wants to run out of equity pool midway between financings (and larger seed rounds these days usually means more hiring pre-A)! What if we split the pain [ie increase pre-money valuation slightly on our end and founders take slightly more dilution off their end]?”

More on Liquidation Preferences

Altgate

@altgate Startups, Venture Capital & Everything In Between Skip to content Home Furqan Nazeeri (fn@altgate.com) ← Pre-Money Valuation vs Number of Founders Where Do Tech VCs Invest? But first, let’s look at pre-money valuation by liquidation preference.

10 Rules of Thumb for Startup Investment Valuation

Startup Professionals Musings

Once you have a potential investor excited about your team, your product, and your company, the investor will inevitably ask “What is your company’s valuation?” How much is NewCo worth to investors at this point (pre-money valuation)?

A Five-Minute Tutorial On How To Value Your Startup

Startup Professionals Musings

As an entrepreneur looking for professional investors, one of the quickest ways to lose credibility and get rejected is to start with a ridiculously high pre-money valuation. Equally bad is professing no valuation estimate at all, asking investors to “make me an offer.”

Kevin Learned’s Perspective on Valuation

Angel Investing News

Kevin recently wrote a series of articles on the valuation of early stage enterprises, which I believe to be noteworthy. Part IV – New Data on Pre-Money Valuations. Angel Investors Fundable Deals Valuation angel investors angels early stage businesses pre-money valuation valuation

10 Ways to Size Your Company’s Value for Funding

Startup Professionals Musings

Once you have a potential investor excited about your team, your product, and your company, the investor will inevitably ask “What is your company’s valuation?” How much is NewCo worth to investors at this point (pre-money valuation)?

What is it Like to Negotiate a VC Round?

Both Sides of the Table

I am reminded of this problem every time my firm does a financing where a note went before us but more specifically I was reminded by this great post by Brad Feld to talk about the pre-money vs. post-money conversion issue. In the old days VCs funded off of a “pre-moneyvaluation. Pre-money ($8m) + investment ($2m) = Post-money ($10m) and the investors now own 20% of your company $2m / $10m.

What Costs Are Considered Reimbursable To The Founders Of A Startup Company?

Ask The VC

The issues of amounts far outweighs the structural issues, but the structural issues sometimes signal that there was an intent to see the money get paid back at the close of the financing. Other investors will view this as part of the investment required by the founders to justify the pre-money valuation. Q: What costs are considered reimbursable to the founder of a start-up company?

Cost 79

Price Cap Liquidation Preference Windfall Regulators

The Startup Lawyer

Depending on the delta between the price cap and the pre-money valuation of the qualified equity financing, the convertible note investors could receive a windfall in terms of liquidation preference. The Potential Problem Let’s say Series A investors invest at a pre-money valuation that [.]. Most convertible notes have a price cap as a feature term.

How Investors Think About Valuation of Pre-Revenue Startups

SoCal CTO

They might have some seed money and are thinking or raising a Series A based on success of an early release (MVP). Because of this, I've always tried to stay up-to-speed on how early-stage investors look at valuation of companies. Bill Payne is an expert on how early-stage investors should look at valuation. He just post: Establishing the Pre-money Valuation of Pre-revenue Startups. Especially interesting is the Valuation Worksheet towards the end.

Mathematical vs. Economic Dilution of Startup Equity: Thinner Slices of an Extra-Large Pizza

Gust

Suppose it raises $2 million at a $6 million pre-money valuation. Back from a hiatus, it’s time to venture forward once more. I appreciated hearing from those who asked about upcoming posts.

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

Both Sides of the Table

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. It was accept the terms or go into bankruptcy so we took the money. Thus the “true&# pre-money is only $2.4

When Should Startup Founders Discuss Valuation with Seed VCs?

View from Seed

Or, in the case of a convertible note, they’ll explicitly state a valuation cap. On the positive side for a founder, directly stating a high valuation expectation up front can anchor the negotiations to a higher level, assuming that an investor takes the leap of faith to invest.

How to Evaluate an Offer from a Startup Incubator

The Startup Lawyer

The following are some issues to consider and actions to take before accepting an incubator’s offer: (1) Calculate Valuation and Determine Value. Pre-money valuations startups receive from incubators are typically low…really low. If an incubator offers your startup $25,000 in exchange for 6% equity, the pre-money valuation is a whopping $391,667. The “revised for the cash investment only&# pre-money valuation is $600,000. (2)

Should Investors in the Same Round of Financing Ever Get Different Prices?

Both Sides of the Table

We plan to raise at a $5 million pre-money valuation. million pre-money. They might have all of their money smoked. If you were on Twitter on Saturday you might have noticed a lively discussion with Dave McClure, Fred Wilson, Chris Dixon and myself.

The Silliness Of Recapping Seed Rounds

Feld Thoughts

A company raises $1m of seed money from angels in a convertible note with a $6m cap. Assuming equity is raised at or above that cap, the total dilution, before the new money, is 16.6% (equivalent to an equity financing of $1m at a $6m post money valuation. ” They are running out of money. The term sheet converts all the convertible debt into a post-money valuation of $100, essentially making the convertible debt worthless.

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. Detailed descriptions will be published over the next few weeks: The Scorecard Method: This method compares the target company to typical angel-funded startup ventures and adjusts the average valuation of recently funded companies in the region to establish a pre-money valuation of the target.

What to Expect When You're Expecting Venture Capital Returns

This is going to be BIG.

If you could return investors nearly triple their money and mid 20's returns consistently, compared to the 8% long term return in the public equities market, they'd more than accept that. I assumed the following: Seeds are done as a $1mm round on a pre-money valuation of $5mm.

Startups Should Revolve Around Their Founders if They Want to Succeed Big

Andrew Payne

From a statistical analysis of over 6,000 startups, the paper (and article) argue (roughly) that founders with board control, the CEO position, or both, can “harm the firm’s prospects, reducing pre-money valuation by up to 22%.”