Startup Funding Espresso – How To Prepare for a Valuation Negotiation

How To Prepare for a Valuation Negotiation

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Valuation is a negotiation, not a formula.

Before negotiating valuation with the investor, prepare for the discussion.

Consider these points of preparation:

Know the current market and what other companies are selling for.

This is known as comps or comparables.  

Have two to three examples of other company exits.

Know what other startups are proposing for their valuation.

Investors will have seen numerous valuations prior to yours, so it's best to know how you will compare.

Decide on your floor valuation below which you will not go.

This helps set the decision to walk away when the time comes.

Determine your ideal valuation.

This is not necessarily the highest valuation but rather the one that fits your overall valuation trajectory for the startup.

It's best to map out your valuation from launch to exit so you know where you are trying to go.

Finally, prepare to negotiate in good faith with all investors.  

Avoid the games and work to identify and articulate the values in the business.

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let's go startup something today.

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