When talking about the valuation of the company, entrepreneurs always suffer a lot, on the one hand, there is a serious asymmetry between experience and knowledge, almost all entrepreneurs are raising funds for the first time, but for investors, their daily work is to invest; On the other hand, many entrepreneurs always feel that they are asking for money, and they are ashamed to talk about the valuation of their company, and they don't know how to talk about it.
In fact, in addition to the project itself, financing negotiations are more like a psychological battle. My suggestion is that entrepreneurs should treat financing as a business cooperation with strategic partners, suffer some losses themselves, and let the partners' income exceed expectations, and the cooperation is naturally easy to achieve, and the cooperation is naturally pleasant. Therefore, there are three tricks to financing, and it is naturally easy to master it.
Financing should be lower. The valuation of the company is a dilution of shares for entrepreneurs, and the lower the valuation, the more shares will have to be paid to get the same investment. The lower the valuation, the lower the risk. In fact, investors know that the important thing is not the return multiple, but not to make mistakes. For good companies, they don't care much about valuations, and when they are particularly concerned about valuations, it's often when they're not sure if the company will be successful.
The size of the financing should be smaller. Don't fantasize about getting all the funds you need for your business at once, it's unrealistic, and even if you achieve the company's valuation, you'll suffer a big loss. To correctly recognize the difficulty of financing, it is impossible to eat a big fat man in one bite, and do not expect someone to give you enough funds at one time. Financing needs to be financed round by round, get a sum of money, push the plan forward to a milestone, and then raise a sum of money to achieve the next milestone, which is the right way.
Raise funds early. Financing requires a process, generally speaking, a round of financing from the beginning of the money to the money into the account, how can it take four or five months, do not wait until the ammunition is exhausted before financing, otherwise the slightest mistake will affect the operation.
Only with the hole cards in your hand can you establish yourself in an undefeated situation. The more you raise money when you are very rich, the more willing the investor will be to give you money, because he will feel that you are not financing because you have no money, but to develop the company better, so that the investor feels safer. When the ammunition is exhausted and then the financing is exhausted, there is no confidence in negotiations.