No matter which side of an early-stage financing you find yourself on, pre-money valuation is certainly an important be the single most important business term to negotiate. I also find it is the term that lends itself to positional bargaining with the greatest frequency, primarily due to the imperfect information both sides are working with. Thanks to the folks over at Bill Payne and Associates some limited data on the pre-revenue company investment market are available. The data are based on survey responses from an Angels and Entrepreneurs workshop.
Notably, the pre-money valuations tend to sit between $1.5 and $2.5 million and, of the 35 groups responding, nearly as many perceived the trends in pre-money valuations as increasing as those perceiving valuations as remaining flat or decreasing. This shows what appears to be a relatively stable market.
Another noticeable trend is that the valuations were higher in the hotbeds of start-up activity, namely Silicon Valley, Boston and New York City. This is the second year that Payne has done this survey, so here’s hoping for another in 2012.
Thanks to Judy Robinett, an angel investor who attended the Pipeline Fellowship session in Goodwin’s Boston office in December for the tip.
This post on Company Financings was authored by Ryan Sansom.