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Founders: Protect your equity. VCs have a playbook for valuation that most founders don’t see. Here's a side-by-side look at how they calculate deals differently from you: 𝐕𝐚𝐥𝐮𝐚𝐭𝐢𝐨𝐧 𝐂𝐚𝐥𝐜𝐮𝐥𝐚𝐭𝐢𝐨𝐧 Founder: $3M pre-money → $4M post-money, ownership at 75%. VC: Adjusts for 20% pre-funding option pool, "true" pre-money is $2.4M, ownership at 60%. 𝐎𝐩𝐭𝐢𝐨𝐧 𝐏𝐨𝐨𝐥 Founder: Assumes minimal dilution, unaware of VC's pre-funding requirement. VC: Requires a 15–20% option pool pre-funding, lowering founder equity. 𝐋𝐢𝐪𝐮𝐢𝐝𝐚𝐭𝐢𝐨𝐧 𝐏𝐫𝐞𝐟𝐞𝐫𝐞𝐧𝐜𝐞𝐬 Founder: Expects investors to get their money back first in a sale. VC: Adds 2x–3x participating preferred, reducing founder payout on smaller exits. 𝐏𝐫𝐞𝐟𝐞𝐫𝐫𝐞𝐝 𝐒𝐭𝐨𝐜𝐤 𝐓𝐞𝐫𝐦𝐬 Founder: May misunderstand or overlook participating preferred terms. VC: Uses these terms to protect downside and boost returns on smaller exits. 𝐍𝐞𝐠𝐨𝐭𝐢𝐚𝐭𝐢𝐨𝐧 𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐲 Founder: Accepts terms quickly due to urgency or lack of knowledge. VC: Structures terms to maximize returns while appearing founder-friendly. 𝐏𝐫𝐞-𝐌𝐨𝐧𝐞𝐲 𝐯𝐬. 𝐏𝐨𝐬𝐭-𝐌𝐨𝐧𝐞𝐲 Founder: Sees valuation as pre-money + capital raised. VC: Adjusts pre-money valuation after factoring in option pool. 𝐕𝐚𝐥𝐮𝐚𝐭𝐢𝐨𝐧 𝐀𝐧𝐜𝐡𝐨𝐫𝐢𝐧𝐠 Founder: Focuses on high headline valuation to minimize dilution. VC: Frames discussions around ownership percentages and post-money equity. 𝐑𝐞𝐯𝐞𝐧𝐮𝐞 𝐌𝐮𝐥𝐭𝐢𝐩𝐥𝐞𝐬 Founder: Uses optimistic projections or market comparables. VC: Applies conservative revenue multiples based on sector benchmarks. 𝐅𝐮𝐭𝐮𝐫𝐞 𝐃𝐢𝐥𝐮𝐭𝐢𝐨𝐧 𝐂𝐨𝐧𝐬𝐢𝐝𝐞𝐫𝐚𝐭𝐢𝐨𝐧𝐬 Founder: Overlooks dilution from future funding rounds. VC: Models dilution across rounds to maintain target ownership. 𝐂𝐚𝐩 𝐓𝐚𝐛𝐥𝐞 𝐈𝐦𝐩𝐥𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬 Founder: Doesn’t assess long-term cap table dynamics beyond the current round. VC: Models impact on employee options, pro rata rights, and founder equity. Learn the math. Master the terms. Protect your stake. credits: Ivelina Dineva/linkedin