Setting valuation for a startup is kind of like trying to figure out the odds on the Super Bowl before the game is played. It’s challenging. But here, the winners and losers don’t go home after the game is over, the bet is off and the nachos are gone. Investors and entrepreneurs will be working together for years—and years, and years.
Of course you want the maximum valuation for your company, but it’s important to take a long-term perspective. It might seem like you won if the deal is overpriced and you gave up less of your company, but in reality that comes with the price of an investor with a board seat who is steaming about overpaying for an overvalued deal. That’s a steep long-term cost. One entrepreneur recently told me about an aggressive board member who beats on him because the board member believes he overpaid…….