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.
As an entrepreneur one can do best to do the following :
- 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 😉
- 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.
- 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
- 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.
- Keep things transparent : Keep the accounts books and finances of company ultra clean. There is nothing as desirable as financial integrity