Comments on: How do we set the valuation for a seed round?

By: SCeo

SCeo — Thu, 08 May 2008 12:48:47 +0000

Great timely article. The convertible debt is something that seems very common and easy, but for many experienced angel investors, not an attractive option. I’ve gotten feedback from a few angels that said that even with the discount, it isn’t worth it and that they would rather invest in Series A.

Another comment was that with a convertible, the company and the angels are at odds. The angels want a low Series A valuation, thus they get more equity, while the founders/company want a high Series A valuation, thus give away less to the angels/series A investors.

How does one get around this? Any other interesting structures out there?

By: Randall

Randall — Mon, 21 Apr 2008 22:19:30 +0000

Nice article, thanks! The presentation did a great job of expressing the idea in a little dance number.

This could be useful for helping calculate a dollar figure:
http://www.caycon.com/valuation.php

By: David

David — Mon, 21 Apr 2008 02:14:57 +0000

The valuation information I’m still digesting. The video I’ve played 5 times in a row now. Thanks!

By: Josh

Josh — Fri, 18 Apr 2008 16:08:28 +0000

The Ewing Marion Kauffman Foundation has a great set of articles on this very topic that are worth checking out.

By: Nivi

Nivi — Fri, 18 Apr 2008 09:23:59 +0000

Hey Thomas, YC combines low valuations with low dilution and high value add. It’s a reasonable combination! =)

By: Nivi

Nivi — Fri, 18 Apr 2008 09:22:00 +0000

Good idea Dharmesh. We’ll revisit it — we need to take a fresh look at it.

We previously wrote about the pros and cons of convertible debt here: http://venturehacks.com/term-sheet-hacks#convertible-debt

By: linkblog: Apr 17 | Jackson Miller

linkblog: Apr 17 | Jackson Miller — Fri, 18 Apr 2008 07:00:41 +0000

[...] Venture Hacks — How do we set the valuation for a seed round? [...]

By: Thomas

Thomas — Fri, 18 Apr 2008 05:26:54 +0000

Glad somebody finally called out the Y Combo guys. Their touchy-feely lab bamboozles ignorant engineering types into giving away a lot of value. Funny how all of these start-up engineering types like to work directly with VCs; they get taken to the slaughterhouse every time.

By: Dharmesh Shah

Dharmesh Shah — Fri, 18 Apr 2008 05:15:00 +0000

Good stuff. The best discussion I’ve seen for seed-round valuations yet.

One thing that you didn’t get in to yet is: the value of convertible notes to defer discussions on seed valuations.

By: metarand » Hacking Your First Investment Round

metarand » Hacking Your First Investment Round — Fri, 18 Apr 2008 04:39:14 +0000

[...] guys over at Venture Hacks have some good points regarding raising that first round of investment - often called the [...]