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Lee Hower - June 2010
Lee Hower - June 2010
Lee Hower - June 2010
Lee Hower - June 2010
Lee Hower - June 2010
Lee Hower - June 2010
Lee Hower - June 2010
Lee Hower - June 2010
Lee Hower - June 2010
Lee Hower - June 2010
Lee Hower - June 2010
Lee Hower - June 2010
Lee Hower - June 2010
Lee Hower - June 2010
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Lee Hower - June 2010

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  • 1. When Valuation Doesn’t MatterLee HowerBoston Angel Boot Camp (June 2010)
  • 2. VALUATION ALWAYS MATTERS IF…
    Investing in mid-late stage startups
    2
    CONFIDENTIAL - DO NOT DISTRIBUTE
  • 3. VALUATION ALWAYS MATTERS IF…
    Investing in very small number of startups (n<5)
    3
    CONFIDENTIAL - DO NOT DISTRIBUTE
  • 4. So when does it NOT matter?
    4
    CONFIDENTIAL - DO NOT DISTRIBUTE
  • 5. If investing in portfolio (n>10) of seed / early stage startups
    5
    CONFIDENTIAL - DO NOT DISTRIBUTE
  • 6. … doesn’t matter as much as most people think
    6
    CONFIDENTIAL - DO NOT DISTRIBUTE
  • 7. 7
    CONFIDENTIAL - DO NOT DISTRIBUTE
    EXAMPLE 1: CAPITAL EFFICIENT WIN
    • Acme Corp seeks $1M round from angel investors
    • 8. Angels “bid” is $2M pre-money
    • 9. Acme Corp founders’ “ask” is $4M pre-money
  • 8
    CONFIDENTIAL - DO NOT DISTRIBUTE
    EXAMPLE 1: CAPITAL EFFICIENT WIN
    • Acme Corp closes $1M angel round
    • 10. Gets acquired for $50M w/o raising additional capital
    • 11. If angels paid $2M pre  >16x return
    • 12. If angels paid $3M pre  >12x return
    • 13. If angels paid $4M pre  10x return
  • 9
    CONFIDENTIAL - DO NOT DISTRIBUTE
    EXAMPLE 1: CAPITAL EFFICIENT WIN
    Even if angels paid 50-100% higher valuation they still have a great return
  • 14. 10
    CONFIDENTIAL - DO NOT DISTRIBUTE
    EXAMPLE 2: DOWNSIDE
    Worst case scenario… lose all your invested capital
  • 15. 11
    CONFIDENTIAL - DO NOT DISTRIBUTE
    EXAMPLE 2: DOWNSIDE
    Recovering $0.80 vs $0.50 on $1.00 doesn’t yield successful portfolio
  • 16. 12
    CONFIDENTIAL - DO NOT DISTRIBUTE
    CAVEATS, EXCEPTIONS, DISCLAIMERS
    • Creating valuation “overhang” for future rounds
    • 17. De-motivating / disenfranchising founders
    • 18. Valuation isn’t the only economic term in an investment round
    • 19. Indiscipline about valuation serves no one
  • Ultimately there is no “right” answer for valuing an early-stage startup
    13
    CONFIDENTIAL - DO NOT DISTRIBUTE
  • 20. … and all things in life are negotiable
    14
    CONFIDENTIAL - DO NOT DISTRIBUTE

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