How Did You Reach Your Valuation?

This is a question that everyone will be asked in a funding pitch. If yours doesn’t stack up it is the surest way to get rejected.

I have heard some unbelievable valuations in my time and today we will look at what happens if you cannot justify your valuation.

Let’s start here…

Unfortunately, this Adam started his pitch in a hole, and just kept digging.

He could not back up his valuation with any substance and his pitch disintegrated from that point. His lack of compromise compounded the situation and it was a downhill spiral from there.

But Adam is not alone: this problem is a common one.

This pitch doesn’t just have a ridiculous valuation, it has an entrepreneur who has given away 90% of his equity to get to a position where he has no money, no patent and no sales. 

Getting too much money too early will often result in this, but in this case it’s even more apparent. In agreeing the initial deal he turned his business idea into a job. 

I have to give him credit: his initial pitch to get £2M for this idea was a spectacular achievement, though the 90% equity lost meant that if he ever needed more money it was going to be a near impossible task.

In both of the above videos the entrepreneur’s body language takes a turn for the worse when questioned about the valuation: because not even they truly believe it. They would almost certainly not invest in a similar opportunity if they were not pitching it.

If you can’t back up your valuation you are likely going to waste a lot of time and irritate a lot of potential investors.

To prepare yourself: see if you can talk your friends/family into investing at your current valuation: because if they won’t do it and you won’t ask them (probably because you know it seems unrealistic), you are almost definitely not going to get funded anywhere else.

However, there is always hope, so let’s end with something completely different…

 

If you are unsure whether your valuation stacks up, have a chat with me and you can find out for yourself: And no more investors need ever know that you may not have been quite on the mark in your initial assessment.

 

Photo by Michal Matlon on Unsplash