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Although some founders might pursue high valuation as a way to get validation, the majority or at least good founders pursue high valuations to avoid dilution.
by danielpal 14y ago
Although some founders might pursue high valuation as a way to get validation, the majority or at least good founders pursue high valuations to avoid dilution.
Another big reason would for recruiting. I've seen that's become increasingly common that job offers include options as prices instead of percentages. Eg you'll get $500,000 in stock based on the last round valuation as opposed to saying 0.5%. This is increasingly common in later stage companies and it seems to be very effective. Now companies in early stage with high valuations can do the same.
- deleted 14y ago[deleted]
- danielpal 14y agoI am not sure if that is true. That worrying about dilution is a form of downside risk mitigation. Primarily, if you don't worry about dilution you'll loose control (unless you have some sort of special stock that gives you more voting power). Control for me is probably the most valuable thing I have. And, Although selling stock is not the only way to loose control, if you don't worry at all you'll loose control fairly quickly. Lastly, your employees will also loose moral as they see VC's own pretty much the whole company.