• Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint
Share this Page URL
Help

Chapter 7. Practical Aspects of Raising ... > Valuing the Company for the Purpose ...

Valuing the Company for the Purpose of Raising Capital/Determining According to Which Value Capital Will be Raised

Whereas the amount of money required can, at least in theory, be calculated with reasonable accuracy based on the expense forecast, valuing the company for the purpose of capital raising is far more complicated and is one of the main issues faced by entrepreneurs, especially in the company's early phases. Entrepreneurs are usually not equipped with all the tools and knowledge possessed by investors (Chapter 9 reviews common methods of valuating startups).

Some entrepreneurs opt for the fastest financing, even if it is not based on the highest possible valuation, if they estimate that time is a crucial factor acting against them and the likelihood of success of their business. Other entrepreneurs, according to their character, choose to seek the highest possible price in each round, in consideration of the cost of diluting their holdings. Every startup and team of entrepreneurs take into account different parameters in making this decision. When deciding upon the timing of the financing in relation to the value, they are guided by considerations such as the identity of the investors, the degree to which the entrepreneurs are dependent on outside financing at each stage, and their assessment of the dilutions they expect to face in the future.


PREVIEW

                                                                          

Not a subscriber?

Start A Free Trial


  
  • Creative Edge
  • Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint