December 9, 2023

My early stage startup work focused on operations, so I used Wikipedia to find a formula for calculating a company’s post-money valuation:

PMV = N x P.

  • N = the number of shares owned by the company after investment
  • P = price of the stock at which the investment was made

So, if a touring company offered 10 million shares and one investor paid $10 million for 1 million shares, this startup now has a post-money valuation of $100 million.

But to summon the Norse god of thunder: is that true?

According to Bastian Hasslinger, an investor at Picus Capital, the ongoing market correction that is sending a shock wave through the tech industry is not just the result of exaggerated expectations.

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All startups are overrated because “not all stocks are created equal,” he wrote. Different classes of investors have varying levels of negative protection, and as a result, “the model often implicitly overstates the true value of the company, even if the share price the investor pays is fair.”

Haslinger describes the current moment as a “normalizing market,” meaning that the people who have the most to lose in terms of equity are startup employees, founders and investors who haven’t bought into preferred classes.

If you are working in a startup, it is highly recommended that you read this post: it is a brief explanation that will help you to better understand the market forces that are currently driving down the valuation of your company.

And remember: all reviews are hypothetical, so keep that in mind the next time you review an offer letter.

Thank you very much for reading,

Walter Thompson
Senior Editor, TechCrunch +
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4 Climate tech investors vote away from EPA Supreme Court ruling

Image credits: Rudy Solgan / Getty Images

Last week, the US Supreme Court limited the Environmental Protection Agency’s ability to regulate greenhouse gas emissions, a decision that could hinder US clean-tech startups aiming to compete in the global market.

Reporter Tim de Chant interviewed four climate technology experts to get their feedback:

  • Peter Davidson, CEO, Aligned Climate Capital
  • Sean O’Sullivan, Managing Partner, SOSV
  • Andrew Beebe, Managing Director, Oboged Ventures
  • Riccard Vernet, General Counsel, Pale Blue Dot

Equity crowdfunding appears to be immune to market volatility, and is on track for its best year yet

Many people put coins in piggy bank, crowdfunding for stocks

Image credits: Getty Images

Investors in early-stage startups have cooled off, but equity crowdfunding continues apace, says Rebecca Zkotak.

In the first five months of 2022, crowdfunding platforms raised more than $215 million, up slightly from $200 million during the same period in 2021.

It’s not a life-changing amount for most people,” said Krishan Arora, founder and CEO of The Arora Project.

“People invest in startups they really believe in and companies they basically think they want to support.”

OpenSea’s $13 billion valuation doesn’t make sense as NFT volumes drop

In January, OpenSea closed the $300 million Series C NFT auction market that valued the company at $13.3 billion.

Given the state of the Q2 NFT market, Alex Wilhelm has attempted to triangulate the current valuation of OpenSea. Assuming its turnover is $700 million, it pegs the company’s ARR at $8.4 billion for 2022.

“What does $210 million annual operating rate revenue look like against a $13 billion valuation? Pretty terrible, frankly.”

Without asking an obvious question, your planned presentation is useless

I’ve written this before, but it’s worth repeating: Fundraising is difficult because most people don’t have any experience asking for money from strangers.

The “question” slide where the founders explain how they will spend the investors’ money is particularly challenging. To break the mental barrier, Pilgrim Jean Camps recommends starting with scales and milestones.

How much does MAU increase or CAC decrease? What are your target dates for expansion into new markets?

“The more specific your goals are, the easier it is to know if you’re headed toward them.”

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