If you’ve been around the startup world long enough, you’ve most likely seen one or more investment deals go south after all the starts have aligned, simply because the investor and entrepreneur couldn’t agree on the valuation.
I once had a deal agreed to with a VC. We had negotiated over months and we had the contracts drawn up and approved by both sides. They then encouraged us to buy another company as part of a larger overall roll up plan, so we did. Since we needed to give the founders of the other company some of our stock, we wound up issuing new stock. This diluted our VC’s ownership percentage below their 15% minimum threshold, so at the 11th hour (literally, this happened at 11:30 pm) they told us that we would need to cut our valuation in half.
