Comments on: Startup fundraising math: value, not percentage http://www.econometa.com/archives/50 The economy of stuff about stuff Sat, 12 Jun 2010 21:22:21 +0000 hourly 1 http://wordpress.org/?v=3.0.1 By: Mathias http://www.econometa.com/archives/50/comment-page-1#comment-15981 Mathias Sat, 23 Aug 2008 17:10:35 +0000 http://www.econometa.com/archives/50#comment-15981 Agree, the math is simple. Absolutly agree that many entrepreneurs do see percentages before value. That "pre-money value" you discuss is so important. What I have found out with many new entrepreneurs I have met is that they seem to believe that you take a number out of thin air when putting a value on a start-up. Which is rather crazy. The value comes from either invested amount (you invest cash) or from "built up" value which means you have got customers on contracts etc. Or you have proven the concept with money being made from customers. Money that is now in the bank. Of course, you can then use the earnings before financing as a "built up value" (now with a P/E attached to it). Hence raising the "pre-money" value before financing. Agree, the math is simple. Absolutly agree that many entrepreneurs do see percentages before value. That “pre-money value” you discuss is so important.

What I have found out with many new entrepreneurs I have met is that they seem to believe that you take a number out of thin air when putting a value on a start-up. Which is rather crazy. The value comes from either invested amount (you invest cash) or from “built up” value which means you have got customers on contracts etc. Or you have proven the concept with money being made from customers. Money that is now in the bank. Of course, you can then use the earnings before financing as a “built up value” (now with a P/E attached to it). Hence raising the “pre-money” value before financing.

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