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Venture Capital
Valuations What's the Single Best Way to Maximize Valuation? The answer should be obvious. Show that you have traction. Traction is defined as sales to bona fide paying customers. Nothing gives an entrepreneur better leverage in negotiations with investors than an upwardly trending sales graph over a period of six to twelve months. Absolutely nothing. Forget nonsense about business plans, elevator pitches, powerpoint presentations, and patents. Traction is the ultimate validation of your claims. That's what The Smart Startup Guide is all about: teaching entrepreneurs how to achieve traction before the funding comes in. What's the second best way to maximize valuation for a startup if it doesn't have traction? The answer is to create simultaneous interest from multiple investors. In effect, you strive to create an auction type environment for maximum benefit to yourself The third--and by far the weakest--method is to rely on number-crunching tactics such as spreadsheets showing DCF (Discounted Cashflow Analysis) to support your desired valuation. No one in their right minds will take this approach seriously. It's akin to trying to do division where the denominator is zero. But hey, it's worth a shot if you can't use either of the first two methods for valuation maximization. |
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