How to Talk About Valuation When a VC Asks

Both Sides of the Table

VC firms see thousands of deals and have a refined sense of how the market is valuing deals because they get price signals across all of these deals. A second thing a VC may be trying to determine is whether your last-round valuation was significantly over-priced.

What Most People Don’t Understand About How Startup Companies are Valued

Both Sides of the Table

There is much discussion online and also in small, private groups, about why the price of technology companies – public and private – are falling. It pains me to see the typical (and predictable) responses on Twitter, “VCs want prices to drop!”

Can you overcome five risks and create wealth?


This risk can be mitigated by finding a customer willing to purchase as soon as a proven model is completed, and willing to state this in writing. Of course, we are speaking of increased valuation of your company when we speak of “wealth.”

Western Digital Rolls Out First Branded Solid State Drives


The WD Blue offers capacities of 250GB, 500GB, and 1TB, and are performance driven, with 545MB/s and 525MB/s sequential read and write speeds. The WD Green SSD is available in 120GB and 240GB, and offer up sequential read and write times of up to 540MB/s and 405MB/s, and also are "ultra-low power draw" drives, which WD says will be targeted for "everyday use". Those drives are not yet available and pricing was not released.

The Truth About Convertible Debt at Startups and The Hidden Terms You Didn’t Understand

Both Sides of the Table

When convertible debt first started being introduced as a “faster, cheaper way to get startups funded” they didn’t have pricing built into them. ” And some seed stage investors told me, “I prefer not to fight over price now.

The Damaging Psychology of Down Rounds

Both Sides of the Table

” In the article I discussed the downside of raising capital at a too high of a price and referred people to a previous article I had written encouraging founders to raise “ At the Top end of Normal ” as opposed to stratospheric prices.

Why Startups Should Raise Money at the Top End of Normal

Both Sides of the Table

2 preamble issues having read the comments on TC today: 1: I know that the prices of startup companies is much great in Silicon Valley than in smaller towns / less tech focused areas in the US and the US prices higher than many foreign markets. When prices are too high I just pass.

The Loneliness of Success that Nobody Talks About

Both Sides of the Table

They suffered in trying to live up to public perceptions and the demands to continue their successes.

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Can you profit by serving early adapters?


They allow me to preview new devices and technologies before release so that I might write about and speak about them in my “Tech Trends” keynotes. Marriott called theirs “tier pricing”. I am a gadget freak, often purchasing new technologies in their first release.

The Audacious Plan to Make Electricity as Easy as WiFi

Both Sides of the Table

It’s true the some VCs have started writing so many checks that they resemble stock pickers but the majority of us still have less than 10 board seats at any time and tend to go pretty deep so the result is that we care deeply about where we commit our time. Was there consumer demand?

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Should Startups Care About Profitability?

Both Sides of the Table

They hired a biz dev team to work on deals where their product could be embedded in other people’s products as a way to increase customer demand. If there was strong market demand for their product then this investment might pay off handsomely.

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Why Acceptance of Failure is Critical to Startup Success

Both Sides of the Table

You also ran the risk that if you hired employees quickly and then demand wasn’t as strong as expected it was incredibility hard to fire people.

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How Many Investors Should You Talk to in a VC Fund Raise? And How Do You Prioritize?

Both Sides of the Table

If you’re raising a round where a new lead investor would invest $5 million the VC fund must have no less than $100 million and if you’re looking for them to write $15–20 million as the lead their fund realistically should be at least $400 million.

The Authoritative Guide to Prorata Rights

Both Sides of the Table

For starters some funds are small and thus while they put $750k into your company to own 10% of your company they might not be able to write another $2 million if you then raise a $20 million round (10%). Or your A-round investor who wrote a $5 million for 25% of your company may not be well positioned to write another $5 million (25%) of a $20 million round. New investors sometimes want early investors to put in money to “prove” they have confidence in the new price.

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Why Super Pro-rata Rights are Not a Good Deal for Entrepreneurs

Both Sides of the Table

Yesterday I saw a Tweet from Chris Sacca fly by that prompted me to want to write a blog post helping entrepreneurs understand why they should push back against VCs asking for “super pro-rata” rights. But I didn’t want to write this article without this small disclosure.

Extracting More Than Cash From Your Angel Investors


In order to extract value beyond your Angel investors' cash, you must first assess three important parameters: (i) the relative strength of their personal brand, (ii) their ability to add operational value, and (iii) the amount of care and feeding they will demand from you.

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Understanding the Underbelly of Online Marketing & Why You’ll Lose if You Don’t

Both Sides of the Table

We short-handed this marketing mix as “ the four P’s ” – product, price, promotion and place (distribution) – this was devised in 1960 and while a little bit dated is still a useful framework. Simply write a great book?

Venture Capital Q&A Session

Both Sides of the Table

on the entrepreneur side of the table) when I raised at too high of a price. So don’t raise money at a cheap price, but don’t get too far ahead of yourself either. Pricing high also takes exit options off the table. Are the write ups worth doing or not?

The Case For & Against Cryptocurrencies (for those tired of all the noise)

Both Sides of the Table

In more than a decade of writing about the Internet and tech-enabled businesses I’ve learned that mobs don’t do nuance well.

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Report: The Bay Area Isn’t Bleeding Tech Workers After All


The impact can be seen in the skills gap — the San Francisco Bay Area has the largest skills gap among the locations covered by LinkedIn’s report, meaning that supply isn’t keeping up with demand.

How to Decrease the Odds That Your Startup Fails

Both Sides of the Table

The questions that a VC mulls before writing a check are precisely the questions you should be asking yourself. So when Sam Rosen came to me with the idea of disrupting storage with a product that is priced cheaper than existing incumbents and he could build a product that is a better service I was intrigued. What price will your customer ultimately accept? This is based on “price elasticity” and you can google that to understand it better.

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Should Startups Focus on Profitability or Not?

Both Sides of the Table

I find it amusing when a journalist writes an article about a prominent startup (either privately held or preparing for an IPO) and decries that, “They’re not even profitable!” If there was strong market demand for their product then this investment might pay off handsomely.

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Investors, MVPs and Evidence of Traction


Yesterday, I was talking to a startup founder about their MVP and they said something that finally got me to write this post: "I have a few investors interested but they want to see a product." Investors demand more than that.

Contract Traps Entrepreneurs Should Avoid At All Costs - Sweet Sixteen Kisses of Death


Agree to Bundling Without a Minimum Price. It may be necessary to apply a portion of the Pilot Fee toward the ultimate license / purchase price, in order to obtain an up-front fee. Note: This is part I of a three part series. Access part II HERE and part III HERE when they are posted.

Don’t Let Faux Unicorns Screw Up Your Financing


If such write-downs only impacted the faux unicorns and their avaricious investors, there would be little need for alarm. Prudent investors do not demand that entrepreneurs pursue bet-the-company strategies. A version of this article previously appeared on Forbes.

Want to Know How VC’s Calculate Valuation Differently from Founders?

Both Sides of the Table

I’m not sure I really even need to write this at length because Nivi absolutely nailed the topic in his article “ The Option Pool Shuffle.&#. Term Sheet Overview : The second most important economic term in the term sheet other than price is “liquidation preference.&#

US Economic Risks (Sept 2010): Impact on Investors & Entrepreneurs

Both Sides of the Table

The prices of angel deals have recently crept up, VCs have also gotten their checkbooks out again, frothy deals are happening and people are feeling bullish. VCs have also gone back to writing checks because as an industry we can’t be seen as “sitting on the sidelines” for years at a time.

Address the five risks to increase your valuation.


This risk can be mitigated by finding a customer willing to purchase as soon as a proven model is completed, and willing to state this in writing. If there are high barriers to entry with such protections as patents, long development time already spent or contracts with the major potential customers, then the risk of a competitor with more resources jumping into the frothy pool and taking advantage of the demand created by the company is minimized.

Ten Rookie Startup Mistakes You Won’t Make


Fallacy: AdVentures tend to evolve once you begin speaking with pesky customers and demanding partners. Once you prove that a substantial, addressible market segment is willing to pay a price for your solution that exceeds your costs, you can consider a licensing strategy.

Why Has LA Suddenly Gotten So Much Attention from VCs and Entrepreneurs?

Both Sides of the Table

He built & IPOd Demand Media. And of course we have great public companies that have spanned content & communications like J2 Global whose market cap as of this writing is a cool $2.5 An abbreviated version of this post appeared yesterday on TechCrunch.

Social Media, the Customer Service Spectator, or Superstar?

Eric Greenspan

That said, when a customer posts on Facebook that you should lower your prices by 50%, perhaps this is not something you should spend too much time on. However, if your customers don’t post anything at all, good or bad, perhaps your pricing is too high overall.

What Tech Entrepreneurs Could Learn from Chamillionaire

Both Sides of the Table

As a teenager he experimented with writing & producing his own rap music and received a lot of feedback from elders that he had a talent with words. He created demand. On why you should be an entrepreneur, “A lot of people do what they have to do.

A Few Key People Really Can Make a Huge Difference

Both Sides of the Table

I don’t write about LA but I write from LA. I prefer not to do any angel investments because I focus on my VC funds but it was gratifying to write some small checks to support local teams. This article originally ran on TechCrunch. I’m in Seattle this week.

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It is satisfying, but rarely profitable, serving early adopters.


They allow me to preview new devices and technologies before release so that I might write about and speak about them in my “Tech Trends” keynotes. Marriott called theirs “tier pricing”. The system was priced at $150 thousand, but we calculated that the average decision implemented for the 300 room property should be worth $5 thousand, making payback within an amazing 60 days if all worked as planned.

Your Product Needs to be 10x Better than the Competition to Win. Here’s Why:

Both Sides of the Table

It was a pleasure to write them myself. He said it was better than the Yellow Pages because he would provide pricing transparency. They would launch quickly and test whether or not there is any demand.