Note: The views & opinions expressed in these essays are strictly my own, and not those of any entity I may be associated with as an employee, consultant, promoter, investor, etc.ARCHIVES
Technology Entrepreneurship in India - Teams
Technology Entrepreneurship in India - Generating Revenue
Technology Entrepreneurship in India - Raising Capital
Equities, ETFs, F&O
Oct 2011: Equity Risk Premium for India
Jun 2011: Investing in Indian equities
Technology Enterprises in India
Nov 2010: Technology investment in India - WATER
Aug 2010: Technology enterprises in India - 3 avatars
Risk Capital for MSMEs
Mar 2010: Risk mitigation for investors in MSMEs
Mar 2010: Why don't (Indian) MSMEs get risk capital?
Feb 2010: Angel investing - Will it work for Indian MSMEs?
Feb 2010: What's so special about innovative MSMEs?
Feb 2010: Where do Indian/NRI (V)HNIs invest?
Feb 2010: Funding options for innovative MSMEs in India
Jan 2010: Innovative MSMEs in India
(Last revised Mar-2012, Send comments to email@example.com)
Amongst the many painful aspects of raising risk capital is agreeing with investors on the valuation of your company. Despite various attempts at calculation (DCF, P/S multiples, market comparables, etc.), early-stage valuation is guesswork at best, and largely determined by the bargaining power (i.e. desperation) of each party involved.
Startup valuation can change quite a bit due to the various terms and conditions baked into the investment agreement. If you are unfamiliar with these terms, you must understand their impact on your company's valuation, e.g.:
How Much Is My Company Worth?
Typical equity stakes and funding amounts are a function of stage (pre-seed, seed, Series A/B, etc.). To determine valuation, match your funding needs to a stage (say Rs 1 to 1.5 crore for seed-stage), and pick the equity stake that you and the investors are OK with(say 20 - 25%). That gives a range of Rs 3 to 6 crore - admittedly broad, but nonetheless a useful starting point for discussion.
Anand Lunia's article on valuation benchmarks for angel investing provides useful data-points on typical amounts and stakes for Indian startups.
It is also useful to keep track of VC deals in India, especially those in your sector & industry. Subscribe to sites like VC Circle, PluggdIn, Venture Intelligence, etc. Invariably, you will run into 'market' data on valuation, e.g.: