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Questions and Answers
What does the pre-money valuation represent?
What does the pre-money valuation represent?
- The percentage of the company sold to the investor
- The price per share at which the stock is sold
- The value of the company before the investment (correct)
- The value of the company after the investment
How is the post-money valuation calculated?
How is the post-money valuation calculated?
- By multiplying the pre-money valuation by the contemplated aggregate investment amount
- By adding the pre-money valuation to the contemplated aggregate investment amount (correct)
- By subtracting the pre-money valuation from the contemplated aggregate investment amount
- By dividing the pre-money valuation by the contemplated aggregate investment amount
In the context of venture capital, what does 'dilution' refer to?
In the context of venture capital, what does 'dilution' refer to?
- The increase in the percentage ownership of existing shareholders due to new shares being issued
- The process of reducing the number of outstanding shares in the market
- The increase in the company's value after receiving a new investment
- The decrease in the percentage ownership of existing shareholders due to new shares being issued (correct)
How does a $5 million investment at a pre-money valuation of $20 million compare to a $5 million investment at a post-money valuation of $20 million?
How does a $5 million investment at a pre-money valuation of $20 million compare to a $5 million investment at a post-money valuation of $20 million?
What is the significance of agreeing on a valuation with a VC in terms of ownership?
What is the significance of agreeing on a valuation with a VC in terms of ownership?
Why should entrepreneurs be cautious when interpreting VC offers related to valuation?
Why should entrepreneurs be cautious when interpreting VC offers related to valuation?
How can entrepreneurs address ambiguity about price in a negotiation with a VC?
How can entrepreneurs address ambiguity about price in a negotiation with a VC?
What does the agreed-upon valuation determine in the context of the negotiation?
What does the agreed-upon valuation determine in the context of the negotiation?
How is the price per share of stock often expressed in modern term sheets?
How is the price per share of stock often expressed in modern term sheets?
What does the fully diluted post-money valuation represent?
What does the fully diluted post-money valuation represent?
What is the purpose of reserving shares of Common Stock before the closing during a financing?
What is the purpose of reserving shares of Common Stock before the closing during a financing?
How does defining the amount of financing back into the price differ from traditional representation?
How does defining the amount of financing back into the price differ from traditional representation?
The term sheet language usually spells this out in ______.
The term sheet language usually spells this out in ______.
By addressing the ambiguity up front, you demonstrate that you have knowledge about the basic ______.
By addressing the ambiguity up front, you demonstrate that you have knowledge about the basic ______.
The agreed-upon valuation will determine the price per share an investor ______.
The agreed-upon valuation will determine the price per share an investor ______.
The Original Purchase Price represents a fully diluted pre-money valuation of $______ ______ and a fully diluted post-money valuation of $______ million.
The Original Purchase Price represents a fully diluted pre-money valuation of $______ ______ and a fully diluted post-money valuation of $______ million.
A somewhat different way that price can be represented is by defining the amount of the financing, which ______ into the price.
A somewhat different way that price can be represented is by defining the amount of the financing, which ______ into the price.
Pre-Money Valuation: $______________ The price per share of stock, also known as the purchase price, will often be expressed in ______ terms.
Pre-Money Valuation: $______________ The price per share of stock, also known as the purchase price, will often be expressed in ______ terms.
As long as the valuation and option pool are agreed to, then the dilution is determined and the price per share is largely irrelevant as they are a ______ number.
As long as the valuation and option pool are agreed to, then the dilution is determined and the price per share is largely irrelevant as they are a ______ number.
The best entrepreneurs we’ve dealt with are presumptive and say something like “I assume you mean $20 million ______.”
The best entrepreneurs we’ve dealt with are presumptive and say something like “I assume you mean $20 million ______.”
The way price is represented in a term sheet follows: Price: $______ per share (the Original Purchase Price). The Original Purchase Price represents a fully diluted pre-money valuation of $______ million and a fully diluted post-money valuation of $______ ______.
The way price is represented in a term sheet follows: Price: $______ per share (the Original Purchase Price). The Original Purchase Price represents a fully diluted pre-money valuation of $______ million and a fully diluted post-money valuation of $______ ______.
Modern term sheets will address valuation very simply and say: Pre-Money Valuation: $______________ The price per share of stock, also known as the purchase price, will often be expressed in ______ terms.
Modern term sheets will address valuation very simply and say: Pre-Money Valuation: $______________ The price per share of stock, also known as the purchase price, will often be expressed in ______ terms.
The pre-money valuation is what the investor is valuing the company at ______, prior to the investment.
The pre-money valuation is what the investor is valuing the company at ______, prior to the investment.
The post-money valuation is simply the pre-money valuation plus the contemplated aggregate investment amount. In other words, if you raise $2 million at a $6 million pre-money valuation, your post-money valuation is $8 million. Therefore, the post-money valuation is ______.
The post-money valuation is simply the pre-money valuation plus the contemplated aggregate investment amount. In other words, if you raise $2 million at a $6 million pre-money valuation, your post-money valuation is $8 million. Therefore, the post-money valuation is ______.
Since the investor invested $2 million and the company is now worth $8 million post-financing, the investor just bought ______ of your company.
Since the investor invested $2 million and the company is now worth $8 million post-financing, the investor just bought ______ of your company.
When a VC says, “I’ll invest $5 million at a valuation of $20 million,” the VC usually means the post-money valuation, meaning the pre-money the VC is offering you is ______.
When a VC says, “I’ll invest $5 million at a valuation of $20 million,” the VC usually means the post-money valuation, meaning the pre-money the VC is offering you is ______.
At the same time, an entrepreneur might hear a $5 million investment at a pre-money valuation of $20 million, which would buy only ______ of the $25 million post-money company.
At the same time, an entrepreneur might hear a $5 million investment at a pre-money valuation of $20 million, which would buy only ______ of the $25 million post-money company.
The valuation that you and your VC agree upon will determine how much of your company you are selling and, consequently, how much dilution you will take in the financing. The valuation also will determine the price per share at which you sell your stock. There are two different ways to discuss valuation: pre-money and post- money. The pre-money valuation is what the investor is valuing the company at today, prior to the investment. The post-money valuation is simply the pre-money valuation plus the contemplated aggregate investment amount. In other words, if you raise $2 million at a $6 million pre-money valuation, your post-money valuation is $8 million. Therefore, it is ______.
The valuation that you and your VC agree upon will determine how much of your company you are selling and, consequently, how much dilution you will take in the financing. The valuation also will determine the price per share at which you sell your stock. There are two different ways to discuss valuation: pre-money and post- money. The pre-money valuation is what the investor is valuing the company at today, prior to the investment. The post-money valuation is simply the pre-money valuation plus the contemplated aggregate investment amount. In other words, if you raise $2 million at a $6 million pre-money valuation, your post-money valuation is $8 million. Therefore, it is ______.
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