Startup Funding Espresso -- Startup Valuation Roadmaps

Startup Valuation Roadmaps

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Investors setting a valuation should review the cap table to understand how future rounds will cause dilution.

A cap table tracks each shareholder and the amount of equity they own including the pre and post-money valuations.

Key factors to consider are the following:

Option pools -- what has been set up or will be set up.

Liquidation preferences -- does any other investor have a right to a liquidation preference that gives them a portion of the proceeds before other investors?

Future rounds of funding -- how many more rounds of funding will be required?

Most startups will need additional funding so some dilution is to be expected.

Map out the proposed follow-on rounds of funding to see the effects of dilution on the investors' equity position.

Consider the impact of venture capital on the cap table which can have a major impact on earlier investors.

It’s often the case the startup must raise additional capital beyond the plan, due to unforeseen circumstances so any proposal shows the best-case scenario.

By mapping the cap table from the current investment to the exit, the investor can understand their position at an exit and what return to expect.


Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.
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