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Given that 2/3rds of venture-backed startups fail entirely, your approach is going to massively over-estimate the likely value of options.
by roguecoder 8y ago
Given that 2/3rds of venture-backed startups fail entirely, your approach is going to massively over-estimate the likely value of options.
- sokoloff 8y agoI don't think that's the case. 2/3rds fail, 2/9ths return a small multiple, 1/9th return a substantial multiple to a typical decent VC. Valuing the shares at half the most recently priced round puts them into a quite reasonable range, IMO.
- smallgovt 8y agoThe company's valuation at the last financing round already prices in the high likelihood of failure. That is, on average, the VC industry does a good job at assigning valuations to companies (see published reports on average IRR of the VC industry). As you point out, there's huge variance in outcome which may affect your appetite for shares, but when it comes to assigning an expected value to your shares, the last financing round is an appropriate place to start.
- roguecoder 8y agoI don't know what your experience is, but what I have observed is that valuation is usually the product of multiplying how much money investors want to put in by how much stock the company is willing to give up.