3 ms·
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 fr
by 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 agoAn 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 agoit'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 agoTo 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.