How to discuss valuation with investors, Predictions for 2024, Tactical advice for founders - Tactician #0029

05/01/2024

HOW TO DISCUSS VALUATION WITH INVESTORS

The Venture Crew Newsletter, provides guidance to entrepreneurs on how to discuss valuation with investors in “How to Talk About Valuation Numbers When Investor Ask?”

• Handling the Valuation Expectation Question:

  • "In most cases don’t name an actual price."

  • "Your job is to 'anchor' by giving the VC a general range without saying it."

  • "Turn the tables on the VC by politely saying, 'Given you must have a sense of our general valuation, how do you feel the market is pricing rounds like ours these days?'"

• When to Name a Valuation Expectation:

  • "There are some types of rounds where just naming price might be a better option."

  • "Strategics (ie industry investors vs. VCs) often prefer having a price for better evaluation."

  • "Many investors situations where you're raising from many sources, and having a price target can help you get momentum."

• Turning VC Meetings into Opportunities for Feedback:

  • "Each VC meeting can be a great opportunity for you to get feedback on how investors are seeing market valuations."

  • "Your goal in forming questions is to get signaling back from the VC."

PREDICTIONS FOR 2024

Harry Stebbings, Founder at  20VC interviews Jason Lemkin, Founder at SaaStr, on developments in venture capital and technology in 2023 and gather predictions for 2024 in “20VC: Predictions for 2024 [...] with Jason Lemkin @ SaaStr”

• Importance of Personal Investment and Urgency:

  • Lemkin emphasizes the need for founders to be deeply invested and urgent about their ventures.

  • Quote: "You need the first-time founder crazy level of urgency in a repeat founder and when you have that it's magical but you have to smell it across the the zoom […] that urgency it just has to wreak."

• The Graph Years:

  • Emphasizing the difficulty of building social graphs in the future.

  • Quote: "The last few decades will become known as “The Graph Years,” as it becomes increasingly difficult to build any NEW social or professional graph in a privacy-centric, increasingly personalized, regulated world."

• Importance of AI and Personalization in Products:

  • He stresses the significance of integrating AI and personalization in product development.

  • Quote: "AI will threaten subjectivity in purchase decisions, and with it the sway of brand and marketing... Perhaps the stakes are even more pronounced in the enterprise, where a procurement process tainted by human emotions, laziness, and previous relationships is the persistent fear of any CFO."

TACTICAL ADVICE FOR FOUNDERS

First Round Capital compiles 30 diverse pieces of advice to equip entrepreneurs with practical insights for their business in “The 30 Best Pieces of Advice for Entrepreneurs in 2023”

• Managing Opinions as a Founder:"As a founder, you’ve built the company in your own vision... But foisting your opinions on others can do immense damage to your workplace culture... Before you give an opinion, ask yourself, ‘Am I right or do I just have an opinion? If I am right, what’s the cost of being right?’ You might discover what you have to say is better off left unsaid. Anytime you’re telling someone what to do you’re not actually solving the bug. You’re doing a really bad patch."

• Making High-Stakes Decisions:"As a product leader at a growing company, the decisions you make only become more high-stakes as the organization scales... One useful framework for minding this balance is to think through decisions using the one-way vs. two-way door model: Two-way doors are decisions that are easy to reverse. Teams should feel comfortable walking through this decision knowing that making any changes or updates will be easy to revert. One-way doors are decisions with long-term repercussions that are much harder to reverse. Once product leaders identify an upcoming decision as a one-way door, encourage giving yourself enough time to work through what the biggest risks are ahead of time, so you can be more judicious."

• Injecting Gratification into Startup Life:"Founders have a remarkable ability to delay gratification... But eventually, that seemingly endless well of self-assurance and motivation will run dry... ‘It’s hard to push towards something in perpetuity if you don’t pause and feel proud of what you’ve accomplished thus far,’ says Anhalt. And this heads-down mindset that can slowly infect the rest of the team. ‘Founders who don’t believe they themselves deserve recognition for small wins will be less likely to recognize their team. They’re less likely to say good job, or celebrate milestones, like raising a Series A,’ says Anhalt. A mistake founders often make is assuming that because they need less validation along the way, no one on the team needs gratification either."

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