This is an influencer post by Brad Keywell, Co-Founder & CEO at Uptake Technologies
Adam Osborne became a Silicon Valley legend when he introduced the world to the first portable personal computer in 1981. But instead of becoming the Google of the 80s, Osborne prematurely announced the next generation of his breakthrough Osborne 1, and the anticipation of what was to come destroyed the sales of his cash cow. He watched his company fall into bankruptcy just two years later.
Timing really is everything when it comes to startup strategies and setting a valuation for your company. Anchoring yourself to an arbitrary valuation number in your early days shows judgement just as poor Osborne’s. Much more important is pursuing a capital partner who believes in your vision and your ability to make it a reality. Sell your vision, not valuation. Show your passion, put your idea under a microscope and explain every cell structure. Make people believe in you first, and a fair valuation will follow. You can give investors a general idea of what you think the company is worth by telling them how much you’re trying to raise, but make it clear that you’re letting the market set the valuation. Finding a VC with whom there is good relationship will ultimately set the stage for a symbiotic, long-term relationship – and down the road that VC will add clarity to the valuation process.
But it won’t happen overnight, and it is not easy.
It’s not uncommon for a startup to have 50 to 100 meetings with potential VC investors, and it’s a waste of precious face time to spend those meetings debating a figure. The average company scores its first round of venture capital funding when it’s about 2.75 years old, according to a Harvard Business School report.
Just look at Airbnb, which was founded in 2008 – Fast Company reported that 15 top-tier investors passed on it in its early years. In October 2012, Airbnb raised about $150 million at a $2.5 billion valuation, and the company has booked more than 5 million nights in 192 countries.
Closer to home in our Lightbank portfolio are Gagan Biyani and Eren Bali, cofounders of the online education platform Udemy. VCs rejected them 30 times, often without explanation, before they raised their first $1 million. They are now one of the most disruptive forces in democratizing education, and to-date they have raised $16 million. Then there’s the heroic Tim Westergren of Pandora, who pitched more than 300 investors before getting one bite, and the legendary Jeff Bezos, who battled through 60 investor meetings in Amazon’s early days to raise chunks of $50,000 from 22 different people. If that weren’t hard enough, Jeff also had to constantly explain what the Internet was to potential investors in the mid-90s.
As a first-time startup entrepreneur, you’re untested, you’re new to the game and you’ll likely hear “No” tens or hundreds of times before you get a “Yes.” Accept that as your reality and try to learn something from each rejection – once you’ve proven you can deliver, it gets easier to raise capital for future ventures. The first steps to success are coming to grips with who you are, and then building on what you have.
So stop reading this, and start scouting out VCs who might be interested in backing your venture. Pitch them your dreams and find believers – setting a fair valuation will naturally fall in step.
Disclaimer: This is an Influencer post. The statements, opinions and data contained in these publications are solely those of the individual authors and contributors and not of iamwire and the editor(s). This article was initially published hereCategory Business