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The next billionaire

Stealthย โ€ขย 2h

Founders: Protect your equity. VCs have a playbook for valuation that most founders donโ€™t see. Here's a side-by-side look at how they calculate deals differently from you: ๐•๐š๐ฅ๐ฎ๐š๐ญ๐ข๐จ๐ง ๐‚๐š๐ฅ๐œ๐ฎ๐ฅ๐š๐ญ๐ข๐จ๐ง Founder: $3M pre-money โ†’ $4M post-money, ownership at 75%. VC: Adjusts for 20% pre-funding option pool, "true" pre-money is $2.4M, ownership at 60%. ๐Ž๐ฉ๐ญ๐ข๐จ๐ง ๐๐จ๐จ๐ฅ Founder: Assumes minimal dilution, unaware of VC's pre-funding requirement. VC: Requires a 15โ€“20% option pool pre-funding, lowering founder equity. ๐‹๐ข๐ช๐ฎ๐ข๐๐š๐ญ๐ข๐จ๐ง ๐๐ซ๐ž๐Ÿ๐ž๐ซ๐ž๐ง๐œ๐ž๐ฌ Founder: Expects investors to get their money back first in a sale. VC: Adds 2xโ€“3x participating preferred, reducing founder payout on smaller exits. ๐๐ซ๐ž๐Ÿ๐ž๐ซ๐ซ๐ž๐ ๐’๐ญ๐จ๐œ๐ค ๐“๐ž๐ซ๐ฆ๐ฌ Founder: May misunderstand or overlook participating preferred terms. VC: Uses these terms to protect downside and boost returns on smaller exits. ๐๐ž๐ ๐จ๐ญ๐ข๐š๐ญ๐ข๐จ๐ง ๐’๐ญ๐ซ๐š๐ญ๐ž๐ ๐ฒ Founder: Accepts terms quickly due to urgency or lack of knowledge. VC: Structures terms to maximize returns while appearing founder-friendly. ๐๐ซ๐ž-๐Œ๐จ๐ง๐ž๐ฒ ๐ฏ๐ฌ. ๐๐จ๐ฌ๐ญ-๐Œ๐จ๐ง๐ž๐ฒ Founder: Sees valuation as pre-money + capital raised. VC: Adjusts pre-money valuation after factoring in option pool. ๐•๐š๐ฅ๐ฎ๐š๐ญ๐ข๐จ๐ง ๐€๐ง๐œ๐ก๐จ๐ซ๐ข๐ง๐  Founder: Focuses on high headline valuation to minimize dilution. VC: Frames discussions around ownership percentages and post-money equity. ๐‘๐ž๐ฏ๐ž๐ง๐ฎ๐ž ๐Œ๐ฎ๐ฅ๐ญ๐ข๐ฉ๐ฅ๐ž๐ฌ Founder: Uses optimistic projections or market comparables. VC: Applies conservative revenue multiples based on sector benchmarks. ๐…๐ฎ๐ญ๐ฎ๐ซ๐ž ๐ƒ๐ข๐ฅ๐ฎ๐ญ๐ข๐จ๐ง ๐‚๐จ๐ง๐ฌ๐ข๐๐ž๐ซ๐š๐ญ๐ข๐จ๐ง๐ฌ Founder: Overlooks dilution from future funding rounds. VC: Models dilution across rounds to maintain target ownership. ๐‚๐š๐ฉ ๐“๐š๐›๐ฅ๐ž ๐ˆ๐ฆ๐ฉ๐ฅ๐ข๐œ๐š๐ญ๐ข๐จ๐ง๐ฌ Founder: Doesnโ€™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

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