Comments on: The Art of a Valuation (17 E-mails Later and a Few Rules of Thumb) http://blog.zelkovavc.com/the-art-of-a-valuation-17-e-mails-later-and-a-few-rules-of-thumbi-recently-had-an-e-mail-correspondence-with-a-first-time-entrepreneur-about-valuation-they-requested-pre-money-of-north-of-100m-an/ Tue, 10 Jan 2012 13:31:11 +0000 http://wordpress.org/?v=2.9.1 hourly 1 By: Jay Levy http://blog.zelkovavc.com/the-art-of-a-valuation-17-e-mails-later-and-a-few-rules-of-thumbi-recently-had-an-e-mail-correspondence-with-a-first-time-entrepreneur-about-valuation-they-requested-pre-money-of-north-of-100m-an/comment-page-1/#comment-18 Jay Levy Thu, 04 Mar 2010 02:58:39 +0000 http://blog.zelkovavc.com/?p=18#comment-18 For a startup with little or no revenue there arent to many math formulas to be used to get to as a valuation. As i mention most companies should plan on giving up 20% - 45% for each round of funding. What impacts the exact number are things like the team, overall concept, competitive environment, type of investors involved, other terms, etc. <br><br>Your goal as an entrepreneur raising money should be to get the money from the best investors you can at a valuation that is fair and everyone is comfortable with. For a startup with little or no revenue there arent to many math formulas to be used to get to as a valuation. As i mention most companies should plan on giving up 20% – 45% for each round of funding. What impacts the exact number are things like the team, overall concept, competitive environment, type of investors involved, other terms, etc.

Your goal as an entrepreneur raising money should be to get the money from the best investors you can at a valuation that is fair and everyone is comfortable with.

]]> By: gilitred http://blog.zelkovavc.com/the-art-of-a-valuation-17-e-mails-later-and-a-few-rules-of-thumbi-recently-had-an-e-mail-correspondence-with-a-first-time-entrepreneur-about-valuation-they-requested-pre-money-of-north-of-100m-an/comment-page-1/#comment-17 gilitred Wed, 03 Mar 2010 21:28:00 +0000 http://blog.zelkovavc.com/?p=18#comment-17 Jay,<br>Nice work putting things lound and clear.<br>How about Valuation for a startup with little of no rev? is there any known formula or it's everybudy guess?<br>I just spoke with a friend who did few startups and his take that it's pure a bargaining and in today market and atmosphere , a typcial investment will no exceed $4MM. please help Jay,
Nice work putting things lound and clear.
How about Valuation for a startup with little of no rev? is there any known formula or it's everybudy guess?
I just spoke with a friend who did few startups and his take that it's pure a bargaining and in today market and atmosphere , a typcial investment will no exceed $4MM. please help

]]> By: Jay Levy http://blog.zelkovavc.com/the-art-of-a-valuation-17-e-mails-later-and-a-few-rules-of-thumbi-recently-had-an-e-mail-correspondence-with-a-first-time-entrepreneur-about-valuation-they-requested-pre-money-of-north-of-100m-an/comment-page-1/#comment-15 Jay Levy Tue, 02 Mar 2010 04:56:24 +0000 http://blog.zelkovavc.com/?p=18#comment-15 Larry - <br><br>The deal never happened, the sense i got was the entrepreneur really felt he shouldnt have to give up much (i.e. less than 5%) of the company. <br><br>On convertible it ranges from 10% - 40% with on average around 25%. Also there are different ways this can be handled, one is via a discount the other is via warrant coverage. Ill go into more detail in a future post. Larry –

The deal never happened, the sense i got was the entrepreneur really felt he shouldnt have to give up much (i.e. less than 5%) of the company.

On convertible it ranges from 10% – 40% with on average around 25%. Also there are different ways this can be handled, one is via a discount the other is via warrant coverage. Ill go into more detail in a future post.

]]> By: rimalovski http://blog.zelkovavc.com/the-art-of-a-valuation-17-e-mails-later-and-a-few-rules-of-thumbi-recently-had-an-e-mail-correspondence-with-a-first-time-entrepreneur-about-valuation-they-requested-pre-money-of-north-of-100m-an/comment-page-1/#comment-14 rimalovski Tue, 02 Mar 2010 03:55:56 +0000 http://blog.zelkovavc.com/?p=18#comment-14 Good post. Though the math is simple once people get it, the concept is foreign to most who have not been entrepreneurs/VCs before. You did a nice job laying it out clearly and concisely. I will bookmark for future the next investment opp I encounter a first timer. <br><br>Share your pain on the PMV disconnect. Had a similar experience on a university spin-out ~2 years ago, where they were seeking a $2m raise for a prototype stage telecom software startup with 4 developers (mostly part time) and no CEO. I proposed a mid-low single digit pre, and they were shocked as they had a $20m pre in mind, based upon some quantitative analysis they had followed from some finance textbooks (e.g., DCF). I tried to help them see our position, introduced them to several law firms, etc. all to no avail. I then encouraged them to go talk to other investors and secure a better valuation. In the end, they elected to bootstrap while they tried to land their first paying telco customers. >2 years later they are still not funded. Good post. Though the math is simple once people get it, the concept is foreign to most who have not been entrepreneurs/VCs before. You did a nice job laying it out clearly and concisely. I will bookmark for future the next investment opp I encounter a first timer.

Share your pain on the PMV disconnect. Had a similar experience on a university spin-out ~2 years ago, where they were seeking a $2m raise for a prototype stage telecom software startup with 4 developers (mostly part time) and no CEO. I proposed a mid-low single digit pre, and they were shocked as they had a $20m pre in mind, based upon some quantitative analysis they had followed from some finance textbooks (e.g., DCF). I tried to help them see our position, introduced them to several law firms, etc. all to no avail. I then encouraged them to go talk to other investors and secure a better valuation. In the end, they elected to bootstrap while they tried to land their first paying telco customers. >2 years later they are still not funded.

]]> By: Larry M http://blog.zelkovavc.com/the-art-of-a-valuation-17-e-mails-later-and-a-few-rules-of-thumbi-recently-had-an-e-mail-correspondence-with-a-first-time-entrepreneur-about-valuation-they-requested-pre-money-of-north-of-100m-an/comment-page-1/#comment-13 Larry M Tue, 02 Mar 2010 00:27:00 +0000 http://blog.zelkovavc.com/?p=18#comment-13 What happened to the deal? Did you educate the entrepreneur? Did it work out?<br><br>I find it interesting that the entrepreneur wasn't better educated, especially with the abundance of blog postings focused on financing. <br>I wouldn't expect everyone to understand convertible debt/warrants/liquidation pref etc., but the simple Round A to Round B should be common knowledge if you're seeking funding.<br><br>Is there typically a discount for the convertible debt? Say 15-20% discount to the new money? What happened to the deal? Did you educate the entrepreneur? Did it work out?

I find it interesting that the entrepreneur wasn't better educated, especially with the abundance of blog postings focused on financing.
I wouldn't expect everyone to understand convertible debt/warrants/liquidation pref etc., but the simple Round A to Round B should be common knowledge if you're seeking funding.

Is there typically a discount for the convertible debt? Say 15-20% discount to the new money?

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