Your periodic reminder: charge more. I feel pretty ambivalent about valuations, by which I mean that 2019 will clearly be lowest valuation for early software companies compared to year X and all years later in human history, and I don’t know whether X is 2020 or 2025 or 2030.https://twitter.com/jmj/status/1180525455973076992 …
Venture capital (VC, this segment of finance) describes valuations in one of two ways, historically because there are some people you want to describe valuations as low to (people giving you money) and some you want to describe them as high to (people you give money to).
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If you end up owning 10% of a company for $1M, that is the “post-money (or post) valuation. Since the company is worth $10M *with your money in it*, the “pre-money” valuation is notionally $9M. If you and a friend are in the know, you can say “I got in $1M at $9M pre.”
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Back to the gamesmanship aspect, of an entrepreneur says “I think my company is worth $15M” and a VC says “We agree, we would happily invest $3M at a $15M post-money valuation”, the entrepreneur may think they just got what they wanted but probably didn’t. This happened a lot.
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