Raising Venture Capital - What's It Worth?

When raising money for a startup, the most difficult question to answer is "What's your company Aa worth?"   I've seen complicated spreadsheets, anecdotal evidence and the most popular - the egos and hubris of the founders.     But valuing a company is much like selling a house, the answer is simple, your company is worth whatever someone is willing to pay for it at the time. 

Not very helpful.

However if we think about real estate, there is a better way to get at the answer.   When you sell your house, the first thing you do is see how much houses are selling in your neighborhood.  In fact whenever you finance a house you get a report of comps (comparable) of houses which sold recently with corrections made based on a variety of factors.

You can do the same thing for your company.  The trick is finding valuations on companies like yours. 

A few weeks ago a VC friend of mine directed me to a site which does just that.  Venture Returns is a web site devoted to figuring out valuations.   Not only do this have some nifty tools to help you do this, they also have a very nice listing of companies in every catagory.   If you're still stuck, you can request comps in a very specific market and within a short period of time, they will give you a list.  Highly recommended.

Marketeer In Residence

Entrepreneurs in Resident (EIR) are popular with many Venture Capital firms.  These people have run companies before and they provide support for the VC's portfolio start up companies.    Lately I've been working with many seed stage startup companies and they all sorely lack good marketing talent.  Usually you get a brilliant engineer and someone who can sell and / or raise money.   Marketing is on the road map for later.

So what happens to these new startups?   They spend about $1M going to market, find out they didn't quite get it right, and then spend another $1M getting it right.

Wouldn't it be more prudent to get it right the first time?   And that requires marketing.  Experienced marketing.   So I'm proposing every VC should have an MIR.  The result?  Less investment, more success.  Faster time to market.