When we're pitched startup investments, founders often come in with an ask for their valuation. Often times that amount is reasonable. Many times, it’s what we consider way too high.
The explanation I make to the founders when we give feedback goes like this: "While I admire your confidence, this proposed valuation means your exit will have to be impossibly large for us to have any chance at a decent return."
I’m saying the founder is trying to make a deal that is great for them but offers no way to work for us. We’re better off not investing at all than paying an impossible price.
My grandfather used to say, “Deals get done when they work for both sides.”
It’s true in sales, investing and partnerships.
So, ask yourself: what’s in it for the other side? If you can’t answer that, ask!