There're various financial instruments enabling this very well. Simple question and Dave is totally right while Fred still lives in the past and ignores the basics of dealmaking.
The first and those who were quick in decision making should pay less than those who join later the same round. To join a full party is always a safer bet than being the first guest, so simple.
Investor's reputation/brand/name and their network are other key drivers to the prices.
There's one exception: when VCs know each other very well and brought themselves into the round/deal then their good relationship (and potential other deals running besides) will usually prevent different prices.
i may be living in the past, but rounds/syndicates are held together by the glue of price and terms. when you don't have that, there is no round. just a bunch of investors, like you have in the public markets. you might want the private markets to behave like the public markets. but be careful what you wish for.
The way I look at it, all investors in the same round should pay the same value, but that's not neccesarily in just dollars. If one firm has a lot of added value and another is dumb money, why should they get the same price?
If you look at it another way, if they are the same firms offering the same deals (at different prices) but instead of joining together in a round, they are competing, surely you would recognise the added value. Why not in a joint round?
Huh? Investors are putting a price on your company based on your fundamentals. Just like all companies have differing fundamentals, so do investors. Is it not fair to put a price on their money based on their fundamentals.
My opinion is that yes they should, because there is also non-monetary factor in what they bring in which is different (while all bucks are equal). This is not so pronounced with the VCs but try thinking about angels, i would accept way lower valuation on any product/company i will start from PG than from the wealthy guy next door who has no idea about what i will be doing.
you can put those investors on your advisory board and give them some options, explicitly recognizing them as valuable. this makes your round a lot less complicated and also allows you to be more concrete that you expect certain investors to give you value back
Working at a start up where multiple investors came into the same round at different valuations; so yes, they should, it makes sense as different people bring different things to the table.
Investor converting into the round at a discount is really an investor in the previous round,
So both Dave and Fred are right
The round should have one price for everyone to make it clean and simple
But earlier investors converting should be thought of as earlier round participants
A heavy duty well connected investor who is actively making connections and opening doors should get a better price than a bank whose involvement begins and ends with a term sheet.
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[ 2.5 ms ] story [ 46.3 ms ] threadThere're various financial instruments enabling this very well. Simple question and Dave is totally right while Fred still lives in the past and ignores the basics of dealmaking.
The first and those who were quick in decision making should pay less than those who join later the same round. To join a full party is always a safer bet than being the first guest, so simple.
Investor's reputation/brand/name and their network are other key drivers to the prices.
There's one exception: when VCs know each other very well and brought themselves into the round/deal then their good relationship (and potential other deals running besides) will usually prevent different prices.
If you look at it another way, if they are the same firms offering the same deals (at different prices) but instead of joining together in a round, they are competing, surely you would recognise the added value. Why not in a joint round?
When a lot of dumb money shows up in the startup/vc market at the beginning of next year, you'll probably see this happen.