Posts Tagged ‘Venture Capital’

Nice Explanation of Pre and Post Money Valuation and the Effect of Option Pools

July 18, 2009

I often find myself explaining the relationship between pre- and post money valuations and how options pools play into the calculation. Today I came across a very good blog post that explains it better than I’ve ever done. From now on, I’ll just point them to it.

What the author didn’t cover however is that entrepreneurs spend far too much time thinking about pre-money and far too little finding the right investment partner. In my opinion, it makes far more sense to take a lesser deal from a better partner. Having a great pre-money means nothing if the VC’s first move is to throw your ass out for one of their cronies (search “foundercide” to see what I mean) or if their advice is so bad as to insure your ultimate failure.