A few weeks ago, EYnovation™ gathered with a group of startups at the EY Wavespace for an In The Spotlight session on startup valuation.
Why is a valuation so important for a startup?
First of all, to be well-prepared for negotiations with investors. The valuation of your company is one of the most important aspects during negotiations with investors.
In the case of valuating your startup too low, you might be giving up too big of a share of your company in the beginning, as your shares will further dilute in future investment rounds. You will need a substantial amount to stay motivated to lead the company in the future.
If you have a too high valuation, the expectations will be big as well. Not meeting these ambitious targets and KPI’s can lead to the need of having to raise capital at a lower valuation. At this stage, it will be much harder to convince investors to believe in your “growth story” and complicates subsequent investment rounds. During negotiations of the investment terms, it’s crucial you understand the impact of every aspect brought to the table. Having a good and experienced lawyer by your side is no frivolous luxury.
During this specific In The Spotlight session, 3 experienced speakers shared their learnings on startup valuation. Peter Staveloz (in the picture above), CEO & Founder of iReachm, raised over 1.5 million euros. His first valuation was based on the amount of time he and his co-founder already invested in the company, multiplied by an hourly rate. Hans Constandt (in the picture below), CEO & Founder of Scale-up of the Year Ontoforce, raised 7.8 million euros so far and is preparing his next big investment round. Hans stressed on the fact that you have to focus on creating value as a startup and not lose yourself in the valuation. Also, it’s important to establish a relationship with the investor and to stay top of mind by communicating your achievements on a regular basis. Nathalie de Ceulaer (in the picture above), CFO at Fortino Capital & Founder of Qristalfin, gave insight into what usually attracts investors: big market, high growth, recurring revenues, high customer retention, high gross margins and increasing margins.
In The Spotlight
Our “In The Spotlight” format usually invites 3 experienced speakers that are well established in the Belgian startup ecosystem to share their experiences with other entrepreneurs regarding a certain topic, for example funding, finding (and keeping) the right talent, valuation, scaling internationally, etc. After the testimonials, the audience can ask questions to the speakers, after which we have an open discussion. The evening ends with network drinks & bites.
“Startups often underestimate the importance of learning from more experienced entrepreneurs. They focus on their business and get trapped into the same mistakes other young entrepreneurs make in their journey. This is why it’s so important to create these formats where we can share experiences and advice with one another with personal stories.”, explains Glenn Gezels (in the picture below) from EYnovation™.
For more information, feel free to contact Jelle at [email protected].