Iterative – Startup Valuations, $40M for Iterative Companies, Group Office Hours
Startup Valuations
Q: I'm thinking about raising money for my startup. How do I figure out what my valuation is? I heard it should be some multiple on my revenue but that seems way too low. Any advice? This is my first time fundraising.
Good question! Valuations based on a multiple of revenue are typically used as shorthand and are more appropriate for later stage companies and rarely early stage companies. The multiple varies dramatically depending on industry, geography, stage, etc. Some venture capital firms will have their own guidelines for valuation but there's no industry standards.
Truth is, your company's valuation is whatever you can convince investors it is. There's no magic formula. If you can convince enough investors to invest at a $5M valuation then that's how much your startup is worth. Typically there's a single lead investor that sets the valuation (or agrees to your valuation) and the other investors will follow. Valuations get frothy when multiple investors want to lead and offer higher and higher valuations in hopes the founder makes them the lead. We've seen valuations increase 3x to 5x in a week as investors try to outbid each other. It's rare but it happens.
Back to the original question, our typical advice is to pick a valuation depending on (1) how much money you want to raise, (2) how much diluation you're willing to take and (3) what you think you can get. (1) and (2) are related. If you want to raise $500K, ideally your valuation should not be lower than $2M otherwise you'll be giving up more than 25% of the company in the first round. If you can't convince anyone that your company is worth $2M then either take less money or stop fundraising and work on increasing the value of your company.
(3) is hard to gauge especially if it's your first time. At Iterative, we have the benefit of seeing lots of companies at lots of different stages so we typically know when companies in the batch should push for higher valuations. My advice here is to start by calculating your valuation based on (1) and (2) similar to the above then look at your weekly growth rate and/or space. If you're growing quickly and/or in a hot space then it's more likely that you can command a higher valuation. Again lots of nuance here so tough to give advice without knowing the specifics.
If you need help figuring this out, feel free to email me (hsuken@iterative.vc) and I can help. There's a lot to cover here but hopefully this helps as a starting point.
Funding for Iterative Companies
It's been an exciting last couple of weeks for companies from our last batch (Iterative Winter 2021). Spenmo, Go Zayaan, 1Export and CoderSchool announced they have raised additional capital, $40M in total, less than 6 months after their Demo Day.
Spenmo (Iterative W21)
“We stopped branding ourselves as expense management and focused on building a payables experience because we want to be at the heart of everything a company pays out,” Kalaichelvan told Techcrunch.
Congratulations to Mohandass Kalaichelvan, Isaq Ahmed and the Spenmo team on raising $34M Series A from Insight Partners in one of the largest Series A rounds ever raised by a Singapore startup.
Go Zayaan (Iterative W21)
During the pandemic, as tourism face headwinds, Go Zayaan decided to focus on domestic tourism and boasts of achieving a 5X growth rate in the past 12 months.
Congratulations to Ridwan Hafiz and the Go Zayaan team on raising US$2.6M from Wavemaker, Airbnb and Priceline executives.
1Export (Iterative W21)
"Businesses all over the world are evolving at a rapid pace, even amidst a global crisis, thanks to technology. It’s time that businesses in the Philippines, especially micro, small, and medium enterprises, keep up with this digital transformation as well," said Mel Nava, founder and CEO of 1Export
Congratulations to Anna Melissa Nava, Daniel Antonio Remo, Angelica Nepomuceno, Dominic Milan and the 1Export team for raising US$800k in seed funding.
CoderSchool (Iterative W21)
“Coding is the future. At CoderSchool, we believe everyone in Southeast Asia deserves a chance to be part of that future,” the company co-founder and CEO Lee said.
Congratulations to Charles Lee and the CoderSchool team for raising a $2.6M pre-Series A led by Monk's Hill Ventures.
Events
Group Office Hours
We'll hosting online group office hours on 2 topics early-stage founders often struggle with. If you're in the early stages of building a company and would like some help, you should sign up.
Validation on Friday, 1 October at 4pm – Have an idea but not sure what's the best way to validate? We'll help you come up with a test that's convincing, costs almost nothing and can be done in a few weeks.
Growth on Friday 8 October at 4pm – Been working on your startup for a while but growth is slow and you're not sure what to do next? We'll help you develop a growth framework for what to try (target users, channels, etc.) and how to figure out if it's working or not.
Please sign up and select which group you're interested in. We will send out instructions once you sign up. Hope to see you there!
What We're Reading
The Cold Start Problem by Andrew Chen
A startup executive and investor draws on expertise developed at the premier venture capital firm, Andreessen Horowitz, and as an executive at Uber to address how tech’s most successful products have solved the dreaded "cold start problem”—by leveraging network effects to launch and scale toward billions of users.
Our friend Andrew Chen recently released his book on a notoriously difficult startup problemt to solve. Andrew's been writing about growth for years and I believe the person who coined the term "growth hacker". He's also the person, as Silicon Valley lore goes, that Marc Andreesen cold emailed, after reading one of his posts, and said I don't know what you're working on but I'd like to invest. I've never asked him if the story is true but now I want to.
Founding Sales: The Early Stage Go-to-Market Handbook by Pete Kazanjy
This book is the distillation of Pete’s experience at TalentBin going from a founder with a product marketing and product management background to early sales guy, early sales manager, and eventual post-acquisition sales leader at Monster Worldwide in addition to his later experience founding Modern Sales, the nation’s largest sales operations, enablement, and leadership community.
This has been my go to recommendation for B2B founders trying to learn sales. I find that doing sales for a startup or as a founder is quite different than for an established company or product. That's why Pete's take is so valuable, it comes from the perspective of being a founder and needing to do sales.
Project Hail Mary by Andy Weir
As Ryland Grace awakens from a coma, he doesn’t know who he is or where he is, but a mix of calculations, deductions, and slowly returning memories enlightens him: He’s a junior high school science teacher on a small space ship. His mission? Save Earth. As in The Martian, Weir makes science and problem solving not only cool but absolutely essential to survival, delivering an electrifying space adventure that yanks at both the gut and the heart strings.
This book was making it's way around the Iterative Slack and has now been round by a number of founders. We identify ourselves but yelling "Save Rocky!" randomly in chat. If you're looking for a bit of fun and liked the Martian, you'll probably like this.
Podcasts
Finding the Right Co-Founder
Finding the right co-founder can make or break your startup. In this episode, Brian and Hsu Ken tell the story of how they met, whether co-founders are necessary, where to find them and how you should evaluate them.
Startup Ideas We Want to Fund
Want to start a startup but don't have an idea? In this episode, Hsu Ken gives away all of the ideas he'd be working on if he wasn't working on Iterative. Everything from allowing anyone to sell anything, remaking the financial system, digitalizing everything and taking advantage of celebrity culture.
Imposter Syndrome
Does calling yourself a founder make you uncomfortable? You're not alone! In this episode, Hsu Ken from Iterative and Charles Lee from CoderSchool talk about their experiences with impostor syndrome, why it's okay and how they deal with it.
How to Master Fundraising
Thinking about fundraising but don't know where to start? In this episode, Brian Ma talks about how he's raised over $200M+ from VCs, what works, what doesn't, and how you can be successful with your next fundraise.