Often I meet accountants, finance guys who are dizzy eyed when we talk about the value Tech companies create against the investments they take. I came across this article from Dharmesh Shah an MIT graduate who raised USD 50Mn for his company Hubspot.com ( URL : http://onstartups.com/tabid/3339/bid/42537/Insights-On-SaaS-From-The-3 )

The table contains the data he shared with his investors ( Sequoia, Google Ventures , Salesforce.com) . Please have a look at  the valuation of company and compare it with the funding they took( Wealth multiplication they provided ).  The finance/ angel investing community in India has blinkers on and often undervalue or ignore a huge wealth creator.

onstartups saas chart v2

As an entrepreneur one can do best to do the following :

  1. Use numerical tools/techniques to do valuation of company. Use caycon.com ( Free tool from Cayenne consulting to do primary valuation of your company ) .Or send a request , I can help 😉
  2. Greater the progress, steer the value of your company on the optimistic side. Do the valuation check every month or on every major win. Eliminating risks improves the valuations always.
  3. Trash all claims to put discounts on valuations ( The biggest discount is the opportunity to let people invest ).  Ask if they can invest in Google, facebook , twitter or hubspot ?  Dont waste time with investors who tell  you that value of startups is zero (example : Nahesh Surthy ) or  Indian Bangle Network  which tells you to take their gut feel valuation or other Chumbai  Bangles who will  ask how much skin and facebook likes you have
  4. Walk away from money  : Don’t take any money on unfair terms. Its good to suffer and penace for a few months then to lose ownership. Less money makes you more innovative and skilled.
  5. Keep things transparent : Keep the accounts books and finances of company ultra clean. There is nothing as desirable as financial integrity

2 thoughts on “5 things an entrepreneur must do to retain value of start ups

  1. True!
    Most important is to retain ‘VALUE” of your start up from all the odds. Being transparent and wise spender is most important, adding few points to add value; continues review of processes, watch out your personal relations, List the pros and cons and trust your GUT.

    Like

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