Cost Finance Post-Money Valuation 
Both Sides of the Table
SEPTEMBER 25, 2010
When I first read Paul Graham’s blog post on “High Resolution&# Financing I read it as a treatise arguing that convertible notes are better than equity. As I’m generally a believer in ‘pricing rounds’ I initially didn’t agree with the premise of the post. Photo credit: D. and not a min.
This is going to be BIG.
MARCH 28, 2021
You go back and forth on a price and you eventually settle on a post-money valuation cap of $6.5mm, meaning you have sold about 23% of your company. The first round is $3mm with a post-money valuation of $10mm, the Series A is $9mm with a post-money valuation of $30mm and so on.
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Both Sides of the Table
JUNE 5, 2015
I am reminded of this problem every time my firm does a financing where a note went before us but more specifically I was reminded by this great post by Brad Feld to talk about the pre-money vs. post-money conversion issue. It’s worth reading his post to understand the problem. It’s very simple.
Both Sides of the Table
SEPTEMBER 18, 2014
It’s like we need a finance 101 course for entrepreneurs. Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. In finance they call it “terminal value” but the truth is the price is as arbitrary at your A round as it is at your seed round. Truthfully.
Lightspeed Venture Partners
OCTOBER 7, 2012
As he said, “Great innovations solve problems or reduce costs. As Cuban pointed out, this is a “down round” Zomm is seeking $2M for 10% of the company, implying an $18M pre money valuation today. So the entrepreneur was willing to accept a valuation more than $10M lower than a previous valuation.
Berkonomics
MARCH 28, 2019
This is only a minor problem in that both forms can convert easily into ‘C’ corporations at low cost and little consequence. First: Is the price paid for shares by previous investors excessive, creating a post-money valuation too high for the actual value of the company? And what VC’s worry about.
Feld Thoughts
FEBRUARY 9, 2016
One of my favorite lines in buried in the middle: “I’ve heard enough companies say “we simply can’t cut costs or it will hurt the long-term potential of the business” to get a wry smile. Pragmatic cost cuts are always possible and often productive.” But, as you raise more money at higher valuations, this will normalize.
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