4 ms·

Most early stage deals, like the ones you'll find on WeFunder or AngelList, typically do not have valuations or financials to share simply because it's too earl

Most early stage deals, like the ones you'll find on WeFunder or AngelList, typically do not have valuations or financials to share simply because it's too early on for a company to seriously offer that. Why waste time putting together financial and valuation models, when you could be working on the product and trying to grow?

agilebyte 13y ago
Because if you can be working on a product right now you don't need outside investment?
- irollboozers 13y ago
  No, rather it's that as a founder you have limited time to expend, and spending effort getting traction will have a much larger return than trying to optimize for the various requests of angel investors. There are also enough quality investors out there who use signals other than hand-wavy financial reports that you could be spending your time to get.
vladimirralev 13y ago
These guys are asking for very specific prices on their website. They must have some kind of valuation behind it. I just need to know how they came up with this number. Also, both IRS and SEC have rules and guidelines on how to do valuation on startups - they use things like committed potential customers, founder reputation, CVs and things like this. Every startup has to do valuation before issuing stock options for example.
- Major_Grooves 13y ago
  When I did the "valuation" on my startup for crowd-funding (Seedrs), when it was nothing more than a wire-frame and an idea in my head (and an MBA research project, but you almost make me feel like I should be ashamed to admit that or something), I just did it based approximately on the valuations that various accelerator-type programmes (including YC) were giving. I came up with 14% for £30k, giving a valuation of £214k. Low enough to get investment fairly quickly - nobody complained. How on earth are you meant to do a books-based valuation of an early-stage pre-revenue company? You have to give a specific valuation so people know what they are getting.
  - vladimirralev 13y ago
    Just google it. There are many methods to do valuation of startups. And again, you can not issue stock options without IRS-supervised valuation. Most startups on the website are post-seed with more than 3 people on the team already BTW. So it's pointless to discuss pre-seed valuation at all. Whatever numbers you have in your valuation I need to know how you got them to decide if it makes sense. (Edit: You may be from the UK, so it's a little different than US. I was speaking for the US case here.)
    - irollboozers 13y ago
      You're mistaken, almost all of them are seed-stage, minus one. You can issue stock whenever you want. But I realize that your point is that you'd prefer due diligence and transparency on terms before using a site like WeFunder. The thing is, most investments at that stage don't have that much due diligence beyond market size, team, and traction. I think this is where you're misunderstanding.
      - vladimirralev 13y ago
        You're mistaken. Most of these companies are raising >500K, this is not seed money. Seed is typically less than 100K. There are at least 10 companies that come from YC, which means they already got their seed round. You can't do seed twice by definition.
        irollboozers 13y ago
        There is no definition of 'seed', so I'm not sure where you're getting these ideas. Seed is just pre-Series A. I am a YC W13 founder and I just raised a 'seed' round. Our investors signed the paperwork as a 'seed' round. We raised >$500k.
        vladimirralev 13y ago
        That would be highly unusual. But it doesn't matter that much to me if it's true. We were simply talking about different thing when saying "seed". No harm done. http://www.investopedia.com/terms/s/seedcapital.asp http://www.investopedia.com/terms/s/seedcapital.asp
- arbuge 13y ago
  In my experience most seed stage startups raising money do what I call "reverse valuations". They figure 2 things: - how much money they want to raise. Say $500k. - how much equity they're prepared to give up. Say 10%. --> and there you have it. $5m valuation!
EGreg 13y ago
Because a basic model can take 20 hours, and then is useful in supporting the valuation in discussions. It can literally bump the value of your company post-investment, similar how an MS on your resume can get you a bigger salary. You COULD do without it, but it's not so obvious why you should always omit it.

agilebyte 13y ago

Because if you can be working on a product right now you don't need outside investment?

irollboozers 13y ago
No, rather it's that as a founder you have limited time to expend, and spending effort getting traction will have a much larger return than trying to optimize for the various requests of angel investors. There are also enough quality investors out there who use signals other than hand-wavy financial reports that you could be spending your time to get.

vladimirralev 13y ago

These guys are asking for very specific prices on their website. They must have some kind of valuation behind it. I just need to know how they came up with this number. Also, both IRS and SEC have rules and guidelines on how to do valuation on startups - they use things like committed potential customers, founder reputation, CVs and things like this. Every startup has to do valuation before issuing stock options for example.

Major_Grooves 13y ago
When I did the "valuation" on my startup for crowd-funding (Seedrs), when it was nothing more than a wire-frame and an idea in my head (and an MBA research project, but you almost make me feel like I should be ashamed to admit that or something), I just did it based approximately on the valuations that various accelerator-type programmes (including YC) were giving. I came up with 14% for £30k, giving a valuation of £214k. Low enough to get investment fairly quickly - nobody complained. How on earth are you meant to do a books-based valuation of an early-stage pre-revenue company? You have to give a specific valuation so people know what they are getting.
- vladimirralev 13y ago
  Just google it. There are many methods to do valuation of startups. And again, you can not issue stock options without IRS-supervised valuation. Most startups on the website are post-seed with more than 3 people on the team already BTW. So it's pointless to discuss pre-seed valuation at all. Whatever numbers you have in your valuation I need to know how you got them to decide if it makes sense. (Edit: You may be from the UK, so it's a little different than US. I was speaking for the US case here.)
  - irollboozers 13y ago
    You're mistaken, almost all of them are seed-stage, minus one. You can issue stock whenever you want. But I realize that your point is that you'd prefer due diligence and transparency on terms before using a site like WeFunder. The thing is, most investments at that stage don't have that much due diligence beyond market size, team, and traction. I think this is where you're misunderstanding.
    - vladimirralev 13y ago
      You're mistaken. Most of these companies are raising >500K, this is not seed money. Seed is typically less than 100K. There are at least 10 companies that come from YC, which means they already got their seed round. You can't do seed twice by definition.
      - irollboozers 13y ago
        There is no definition of 'seed', so I'm not sure where you're getting these ideas. Seed is just pre-Series A. I am a YC W13 founder and I just raised a 'seed' round. Our investors signed the paperwork as a 'seed' round. We raised >$500k.
        vladimirralev 13y ago
        That would be highly unusual. But it doesn't matter that much to me if it's true. We were simply talking about different thing when saying "seed". No harm done. http://www.investopedia.com/terms/s/seedcapital.asp http://www.investopedia.com/terms/s/seedcapital.asp
arbuge 13y ago
In my experience most seed stage startups raising money do what I call "reverse valuations". They figure 2 things: - how much money they want to raise. Say $500k. - how much equity they're prepared to give up. Say 10%. --> and there you have it. $5m valuation!

EGreg 13y ago

Because a basic model can take 20 hours, and then is useful in supporting the valuation in discussions. It can literally bump the value of your company post-investment, similar how an MS on your resume can get you a bigger salary. You COULD do without it, but it's not so obvious why you should always omit it.