Valuation Witchcraft — Where Do Seed Valuations Come From?

Given all the talk recently about rising seed valuations and AngelGate, I wanted to do a sequel to my old post on how VC’s Value Early Stage Companies. The valuation dynamics are even more puzzling at the seed stage, where there is even less to value. Rather than provide a very structured formula for seed stage pricing, I just want to offer some principles of seed stage pricing to help entrepreneurs navigate this process better.

Principle One: Early stage company valuations are a negotiation exercise. It’s not a quantitative analysis of intrinsic value. The best way to create pricing power as an entrepreneur is to create competition for your equity. Cases in point? Foursquare, Quora, etc.

To read the full, original article click on this link: Valuation Witchcraft — Where Do Seed Valuations Come From?

Author: Rob Go