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February 11, 2011

Having started two companies and been on the boards of several more, I have some first hand insights to what work and what doesn’t for early stage companies.  While the following are my top four, there are certainly many others.  And none of these are truly unique to me.  

Similarly, there are always examples of companies who’ve done just the opposite and yet prospered immensely.  

See:  

a) Amazon losing $7 on each book and making it up in volume,

b) Twitter not needing revenue and

c) Zenga raising money when its not needed.

So without further adieu, here’s what I look for as best practices within an early stage company:

Ideas are easy, Implementations are hard

While its imperative that companies be able to pivot based on customer feedback (see bullet...

February 8, 2011

I think there are three fundamental truths regarding the valuation of early stage businesses by potential investors:

  1. The first is that a pre-money valuation is ultimately an outcome of negotiation, rather than a mathematical calculation of discounted cash flow or any other metric of potential company performance.

  2. The second is that, despite the typical non-reliance on formal calculation, investors’ views on valuation are in some way based on a perception of risks and potential return of the investment—or, put another way, of the interaction of fear and greed.  

  3. The third is that pre-money valuation is just one of many funding terms and conditions important to investors and companies, and not necessarily the most important...

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