www.Pomeroy.com – “3000 corporations, government entities, and mid-market clients rely on Pomeroy IT Solutions every day” – was acquired by Platinum Equity for approximately $65 million. That approximately translates into $21.5K per customer.
www.CreditKarma.com – “…the latest credit score-focused funding recipient, San Francisco-based , announced that it raised $2.5 million in a Series A investment round to build up its advertising-supported business.” Read more…
Not much has been raised previously—at most a few hundred thousands and ideally nothing.
The product has not been (fully) built.
The size of the round is at least $3M but preferably larger.
You are talking to professional VCs with funds > $100M.
a company that needs several million dollars today to build a business is not worth much at all without the dollars
the value of your company is going to be reverse-engineered from the cap table
two things to notice about this process
First, at no point did it require justifying the value of the startup.
Second, the margin for negotiation is somewhat limited as (a) the option pool size should be budget-driven and (b) most investors, rightly or wrongly, are pretty set on the percentage ownership they require.
if you really want to get your VCs to take a lower percentage, you’ll have to work a lot harder to generate interest from multiple firms
Some investors, typically VCs with larger funds, won’t care much about giving you an extra few hundred thousand or even more than a million if you have good reasons for asking for it.