Valuation Ranges

During the qualification phase, 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 valuations they view as favourable. Generally speaking, most investors fall somewhere on the spectrum between two extremes:

• Targeting 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.

• Targeting Great Exits: For many VCs, the strategy is to invest in Companies that they believe are likely to deliver 10x+ returns. 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 at their stage might be excellent targets. These investors are ones that have historically been deploying capital into companies that had a low entry point. And if your Company fits that criteria, then such investors could be great 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 in a specific stage.

Ultimately, assessing valuation ranges should be viewed as a qualifier or a dis-qualifier, and should not be the sole basis for targeting a given investor.