Failsafe Ways to Increase Your Startup Valuation

Failsafe Ways to Increase Your Startup Valuation

Ahh startup valuations. It’s a topic that causes lots of angst, raises tons of questions, and definitely gets the emotions blazing. But let’s take a step back. Why are valuations even important? Besides determining things such as the amount of equity you give up for funding and how much value you are able to extract from your company in the long-term, valuations are important for demonstrating how attractive your business is to investors and in showing how you compare with your industry peers.

EGFS Founder and CEO David Ehrenberg and Molly Otter, Chief Investment Officer for Lighter Capital, led a session on How to Increase Your Startup Valuation. Below are some of the key takeaways:

There are 3 main types of valuation:

For more details on each of these, read David’s recent piece on the different types of valuations.

Components of Valuation

VCs are looking to make home runs with their investments. Out of ten investments a VC makes:

Because of that, VCs place a lot of value on the size of the opportunity.

Here’s another tip: very few VCs are visionaries. Most VCs are “fast followers” who move in herds. That means when it comes to your valuation timing, whether your sector is in or out of favor, really matters.

The whole concept of dilution—the more you raise, the more equity you give up—means you want to have as high a valuation as possible, but—you need to balance it with your future funding plans so that you don’t arrive at a price that can’t be supported by the market. For good intel on valuation statistics and information, check TechCrunch and Strictly VC.

Do you have questions or advice to share on startup valuations? Share them in the comments section below or contact Early Growth Financial Services for a free 30-minute financial consultation.

David Ehrenberg is the founder and CEO of Early Growth Financial Services, a financial services firm providing a complete suite of financial and accounting services to companies at every stage of the development process. He’s a financial expert and startup mentor, whose passion is helping businesses focus on what they do best. Follow David @EarlyGrowthFS.

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