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One thing I think might be important to distinguish is how different companies coming out of YC (and not in YC) are in different stages. No matter how many tim

One thing I think might be important to distinguish is how different companies coming out of YC (and not in YC) are in different stages. No matter how many times the partners told our batch to not compete over valuations, it still happened. Personally I felt like without a competitive price tag, we wouldn't be looked at as a promising company even though we had less traction than other companies. We had a (rightfully) pretty lame raise after YC. I think one thing that might help is to be explicit with the companies, give them some idea of what their perceived stage is and what valuation range would be a good place for them to start.

logicallee 11y ago
what's a "competitive price tag" for a "pretty lame raise" mean in valuation for you? I was shocked to see the article say: >I'd close the first, say, $200k from the first reasonably good investors that offer it on reasonable terms--say a $5 million pre-money valuation or higher. This removes some uncertainty and pressure, gives you capital to execute with while raising the rest of your round, puts you in a stronger position, etc. It's worth a discount for all of this. (Emphasis added.) Which means that a $5M seed-stage is a 'dicount'! (The true price would be at a higher valuation.) That is a shocking phrase to use, when selling a company for $5M outright is a pretty good outcome for 95% of people who create a company in the tech space.
- peterjancelis 11y ago
  An investor buying $200K preferred equity at 5 million pre is not implying that investor would buy the entire company for 5 million cash. The preferred equity makes high valuations possible as the first $200K goes back to the investor.
  - huac 11y ago
    it's kind of a nuance, but an early stage investment is a bet on the founders/core team as much as it is on the idea. so you want the founders to retain significant equity (i.e. not purchase outright) to align the incentives.
- argonaut 11y ago
  To echo the other commentators, another way to think about this is: a seed stage company like this is worth ~$0 if the investor owned 100%. But it's worth $X million, if the investor only owns 20%; the "team commitment" factor being a multiplier on the total valuation that has an inverse relationship with the investor's ownership percentage.

logicallee 11y ago

what's a "competitive price tag" for a "pretty lame raise" mean in valuation for you? I was shocked to see the article say: >I'd close the first, say, $200k from the first reasonably good investors that offer it on reasonable terms--say a $5 million pre-money valuation or higher. This removes some uncertainty and pressure, gives you capital to execute with while raising the rest of your round, puts you in a stronger position, etc. It's worth a discount for all of this. (Emphasis added.) Which means that a $5M seed-stage is a 'dicount'! (The true price would be at a higher valuation.) That is a shocking phrase to use, when selling a company for $5M outright is a pretty good outcome for 95% of people who create a company in the tech space.

peterjancelis 11y ago
An investor buying $200K preferred equity at 5 million pre is not implying that investor would buy the entire company for 5 million cash. The preferred equity makes high valuations possible as the first $200K goes back to the investor.
- huac 11y ago
  it's kind of a nuance, but an early stage investment is a bet on the founders/core team as much as it is on the idea. so you want the founders to retain significant equity (i.e. not purchase outright) to align the incentives.
argonaut 11y ago
To echo the other commentators, another way to think about this is: a seed stage company like this is worth ~$0 if the investor owned 100%. But it's worth $X million, if the investor only owns 20%; the "team commitment" factor being a multiplier on the total valuation that has an inverse relationship with the investor's ownership percentage.