What the business is worth.
WHAT VALUATION DETERMINES
How much of the business an investor receives for their money.
HOW IT WORKS ARITHMETICALLY
The investment divided by the valuation after it gives their share.
WHAT PRE-MONEY AND POST-MONEY MEAN
Before and after the investment is added.
WHY THE DISTINCTION MATTERS
It changes the percentage substantially, and confusing them is a common and costly error.
WHAT DETERMINES VALUATION IN PRACTICE
What investors will pay Comparable transactions Evidence of traction Negotiation
WHAT DOES NOT DETERMINE IT
What you need What you believe it is worth Effort invested
WHAT TO BE REALISTIC ABOUT
Early-stage valuation is largely negotiation, not calculation.
WHAT A HIGH VALUATION COSTS
Pressure to grow into it Difficulty raising again if you do not Potential for a later round at a lower valuation
WHY THAT LAST OUTCOME IS DAMAGING
It dilutes founders severely and signals failure.
WHAT TO PREFER
A valuation you can grow into.
WHAT DILUTION MEANS
Your percentage falling as shares are issued.
WHAT TO CALCULATE
Your position after several rounds.
WHY
Founders are routinely surprised by how little remains.
WHAT MATTERS MORE THAN PERCENTAGE
The value of what you hold.
WHAT THAT MEANS
A smaller share of a larger business can be worth more.
WHAT TO TAKE ADVICE ON
Any valuation discussion.
