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EQUITY AND VALUATION
The only real valuation of a company is whatever someone is willing to pay for it, and a VC will pay huge amounts if they think you’ll be worth a whole lot more in the future.
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THE PROBLEM OF DILUTION
Most founders start out owning their company.
But to grow as quickly as possible, you’ll need investment, and to secure the capital you’ll need, your investors will want to own a part of your company.
The faster you grow, the greater your burn rate becomes, and the more capital you’ll...
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ANTI-DILUTION PRACTICES
This apparent horror story leads many founders to take staunch anti-dilution measures. But dilution serves a purpose: to attract skilled people and resources to your startup.
Whether it’s incentivizing a respected VC with a sizeable ownership stake, or luring top talent wit...
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THE EQUITY EQUATION
Investment decisions can become incredibly complicated, and in the case of successful startups, minute changes to ownership stakes can equate to millions of dollars. Thankfully, there’s a simple rule of thumb we can use to work out whether or not we think an investment opportunity is worthwhile.
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PRE-MONEY AND POST-MONEY VALUATION
Let’s assume both you and your investor have valued your early-stage startup at $100,000. Your investor is willing to contribute $25,000 to fund the growth of your company. How much equity should they get?
- If that $100,000 is a pre-money valuation, the company is valued at $100,000 bef...
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Other curated ideas on this topic:
And the best valuation method is…
The best valuation method is the one described by Pierre Entremont. He says you should start by defining your needs and then negotiate dilution.
The optimal amount raised is the maximal amount which, in a given period, allows the last dollar raised to be more useful to the company than har...
Are cryptocurrencies a good investment?
Cryptocurrencies may go up in value, but many investors see them as mere speculations, not real investments. The reason? Just like real currencies, cryptocurrencies generate no cash flow, so for you to profit, someone has to pay more for the currency than you did.
Cryptocurrency needs stabi...
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