Comments on: Want to Know How VC’s Calculate Valuation Differently from Founders?

By: Curious investor

Curious investor — Mon, 09 Aug 2010 22:47:08 +0000

Quick Question:
For the option pool, are there stipulations on who those options go to? i.e. can the board issue those future options to the current management team?

By: Trent

Trent — Mon, 02 Aug 2010 06:33:26 +0000

You should write a (book or 2) and go into teaching, at least as an 'adjunct'…

By: Bhagya4

Bhagya4 — Sat, 31 Jul 2010 19:22:27 +0000

Good one Mark. What a treasure of good advice for entrepreneurs!

By: Susan Morgan

Susan Morgan — Fri, 30 Jul 2010 21:23:42 +0000

There is a great tool for computing the complete waterfall analysis of distributions (including options, warrants, management/bonus plan carve-outs …), for ANY and ALL values of merger or acquisition sales. Go to http://www.equilytics.com, and download the “Sample Spreadsheet” there for an example of the MergeComp Analysis.

By: LV

LV — Fri, 30 Jul 2010 18:21:11 +0000

Here is a link to an article that they posted that follows your post. http://vcexperts.com/vce/news/buzz/archive_view...
We currently use the company analysis tool that modeled this, and it is amazing.

By: Finance tutor

Finance tutor — Fri, 30 Jul 2010 17:15:00 +0000

Thank you for joining Brad and Fred. Reading your blogs is a true education. I tutor business school students and tell them to start reading here know whats going on in the real start up world!

By: Piyushp

Piyushp — Tue, 27 Jul 2010 23:41:15 +0000

Great post, Mark. You are a real hero who is providing valuable information to people. It's not that this information is not available anywhere but providing in way which people can read in 5 minutes and understand easily is rare to find.
If an investment firm is asking for more than 1x liquidation preference, I will prefer to put a clause where they cannot make more than 20x returns. Higher the liquidation preference, lower the maximum return. I guess this is very reasonable. If you are looking for limited risk you deserve limited returns as well.

By: justfunded

justfunded — Tue, 27 Jul 2010 21:59:29 +0000

Thanks, just going throught the same process and your account matches our experience.

By: Jerome Camblain

Jerome Camblain — Tue, 27 Jul 2010 01:26:26 +0000

Mark, I have a question that might be trivial about the second sheet of your spreadsheet (incl options).
If options are added in order for the VC to calculate the option dilution before investing, shouldn't the cash paid at the exercise time by the option holders (the strike price) be included (on top of the negotiated entreprise value) in the valuation to a) reflect the true value of the exercise and b) reduce the dilution for the founders by including both sides (dilution compensated by extra cash) of the option equation?

By: kris

kris — Tue, 27 Jul 2010 00:55:23 +0000

Thanks.