1 min read.
From TEN Capital CEO, Hall Martin:
I recently saw a pitch deck from a seed-stage startup that had a small amount of revenue. The deck claimed a valuation of $50M because a similar company exited at that valuation.
I asked his valuation and he claimed $50M because “that’s what my company will be worth.”
I reminded him that the example company that exited with a $50M valuation had $15M in revenue at the time of exit.
He said, “I’ll have that too.”
I often see entrepreneurs calculating valuations for today’s’ fundraise using tomorrow’s revenue.
Today’s revenue determines today’s valuation.
Your business tomorrow determines your valuation tomorrow. Investors match investments with the current state of the business.
As you increase sales, team, product, and IP, your valuation goes up. The takeaway here is raising only as much as you need to get to the next level. Otherwise, you’ll be raising more funding on a lower valuation which means you’re giving up more equity than necessary.
Read more: https://tencapital.group/education/
Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group