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It may not be too high if you look at the VC money they had raised. $6M had been invested so if that was a 50% stake then you are looking at a 4x return for the
by carson 17y ago
It may not be too high if you look at the VC money they had raised. $6M had been invested so if that was a 50% stake then you are looking at a 4x return for the VC. Isn't that about right?
- jdrock 17y agoThe buyer doesn't do his valuation based on what's put into the company.
- carson 17y agoI'm not sure the comment was about valuation it was about the purchase price. The buyer has to pay what the company is willing to take and part of that equation is how much the VCs that gave them $6M want for a return.
- webwright 17y agoNot true (or at least not ALWAYS true). Do you think corpdev guys are immune to anchoring? Here's a study: "Take a minute and answer this two-part question: 1. Is the percentage of African nations in the United Nations higher or lower than 65? 2. What is the percentage of African nations in the United Nations? This was one of the queries that Amos Tversky and Daniel Kahneman posed in their 1974 paper in Science called “Judgment Under Uncertainty: Heuristics and Biases.” It turns out that the answer you provide to the second question is heavily swayed by that first question. The average estimate for question two was above 45 percent. When question one was lowered from 65 percent to 10 percent, the average estimation of question two was dropped to 25 percent. " Source: http://sethgodin.typepad.com/files/26237737-fixed-to-flexible-the-ebook.pdf http://sethgodin.typepad.com/files/26237737-fixed-to-flexibl... In a financial negotiation, setting an anchor can be powerful. a VC investment (and accompanying valuation) is an anchor.