Valuation is less important when investing in a portfolio of 10 or more early-stage startups. While it matters for later stage or fewer investments, in early stage the primary concern is whether the investment recovers any capital, not small differences in valuation multiples. Two examples are provided where even paying 50-100% higher than the bid valuation would still yield great returns in a successful startup acquisition. The downside is the same in either case - losing all capital if the startup fails.

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

8. Angels “bid” is $2M pre-money

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

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

17. De-motivating / disenfranchising founders

18. Valuation isn’t the only economic term in an investment round

20. … and all things in life are negotiable 14 CONFIDENTIAL - DO NOT DISTRIBUTE