Valuation vs. Ownership
When I speak to most founders and investors about financings, we focus on valuation. And when we think of valuation, the other side of the coin is dilution. For any fixed invested amount, the higher the valuation, the lower the dilution. Investors and founders can get fixated on this tradeoff of valuation vs. dilution.
A better way to think about this tradeoff is ownership vs. value add. Obviously valuation and ownership have their own relationship - they’re basically the same thing or two sides of the same coing (for any fixed investment, the higher the valuation, the lower the ownership). But if you shift the framework slightly and view the exchange or tradeoff as “ownership” vs. “value add”, then that can dramatically shift the conversation between the founder and future investors. Instead of focusing on the end result, (i.e., valuation/dilution), it’s better to ask questions like,...
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