What is a fair valuation?
A fair valuation balances company ownership with potential execution value. When the entrepreneurs and employees own too little of the company, there is no longer an incentive to work hard.
Understand that a good investor group will never want to cut down good entrepreneurs or an employee force to less than 1/3 of company ownership. In this day and age, the employees are the ones who will make the company execute. Without them, the investors are left with a piece of paper, and a whole lot of unusable raw materials. Investors are looking to own part of a huge pie, not the majority of a small pie, and certainly not a failure.
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