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Most investors have a well-defined range at which they invest at a given stage. As an example, a majority of investors that are focused on Pre-seed do not invest at valuations greater than $12-15m. During qualification, founders need to evaluate their valuation expectations against the 50th and 75th percentile of valuation ranges for a given investor to ensure a strong-fit.

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Understanding Valuation Preferences

Venture investors tend to have unique views on valuation ranges that they view as acceptable at a given stage. Generally speaking, most investors fall somewhere on the spectrum between two extremes:
  • Optimising for Moonshots: For many VCs, the strategy is to invest in Companies that have a real shot at becoming multi-billion dollar companies, and finding a way to get 10%+ ownership at the entry point. Such funds tend to be less price sensitive and are often driven primarily by whether or not they believe the Company can return the fund.
  • Optimising for Entry Prices: For many VCs, the strategy is to invest in Companies that they believe are likely to deliver 10x+ returns based on a low entry price. Such funds tend to be extremely sensitive to the entry price and are easily discouraged by high valuation expectations.
Most VCs tend to fall somewhere on the spectrum between the above two extremes.

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Analysing Valuation Ranges

For founders that are raising at below the 50th percentile for their specific stage, investors that have the lowest median valuations might be the best targets. For founders raising close to or above the 75th percentile for their specific stage, investors that have the highest median or 75th percentile valuations might be great prospective partners. These investors have historically not been super price sensitive and might show the most openness to investing at high valuations. Ultimately, assessing valuation ranges should be viewed as a qualifier or a dis-qualifier, and should not be the basis for targeting a given investor.
Valuation ranges need to be evaluated at a specific stage. Investors tend to have very different median or 75th percentile valuation ranges for each stage.