There is one trick question that investors almost always ask, and it’s guaranteed to make founders uneasy: “What are your expectations surrounding valuation?”
For most founders, it’s the perennial Goldilocks scenario. Throwing out a number that’s too high might push investors away, while an amount that’s too low might trigger the question, “Why so low? What’s wrong with this business?” and leave shareholder value on the table.
And if it’s just right, most investor’s knee-jerk response goes something like this: “Let’s see how much I can work this founder down to a better price.”
Founders are at a distinct disadvantage in the valuation game. By design, investors play this game far better than most founders ever will — a VC might do multiple deals in a quarter, but a founder might approach markets only once every couple of years.
So, instead of having to throw out specific numbers that will inevitably be challenged, here’s a solution:
Don’t Throw Out A Number.
The most confident (and valuable) founder’s response to the infamous valuation question starts with: “We’re letting the market price this round.”
