Should valuation expectations track current market conditions rather than a company's own historical progress or fixed benchmarks?

Deven Parekh · Oct 11, 2023

Companies that raised at inflated valuations will need to significantly reduce the valuation used for employee option and equity incentives going forward

Investors hold preferred stock with downside protection that employees don't have, and these companies aren't worth much without a motivated team, so incentives must be realigned

Scope: with investor support

11:07 20VC Roundtable: Are IPOs Back? Is Growth Dead? What Does it Take to Raise a Growth Round Today? How Do VCs Solve The Liquidity Challenge? Will We See a Massive Resetting of Valuations? AI Hype Growth Rounds?

Woody Marshall · Oct 11, 2023

Private companies that reset their valuation and 409A downward are doing the smart thing, even though the press frames it as failure

Companies that hold on to inflated valuations make suboptimal long-term decisions and end up with unmotivated employees; ultimate valuation is determined only by company performance

Scope: public companies have no choice — the stock simply reprices

12:22 20VC Roundtable: Are IPOs Back? Is Growth Dead? What Does it Take to Raise a Growth Round Today? How Do VCs Solve The Liquidity Challenge? Will We See a Massive Resetting of Valuations? AI Hype Growth Rounds?

Woody Marshall · Oct 11, 2023

Late-stage investors should not be stressed about a company like Klaviyo trading below its last private round

It isn't a surprise given where public markets have gone since Q4 2021

32:51 20VC Roundtable: Are IPOs Back? Is Growth Dead? What Does it Take to Raise a Growth Round Today? How Do VCs Solve The Liquidity Challenge? Will We See a Massive Resetting of Valuations? AI Hype Growth Rounds?

Ed Sim · Jan 10, 2024

Boards and founders must have the honest viability conversation now rather than in three or four years, and if the answer is a round at one-fifth the last price, taking it now is likely the best move

If you already know you'll only be worth a fraction of the last valuation, resetting to a healthy 10-12x multiple early beats waiting; most boards are simply not having this conversation

Scope: assuming the underlying business can eventually be good

11:01 20VC: Did Figma Kill M&A Markets in 2024, The Three Biggest Mistakes Made in Growth Investing, The Three Requirements Companies Need to Go Public in 2024 with Ed Sim and Jamin Ball

David Frankel · Oct 14, 2024

Seed is not dead, but investors must pay the market clearing price; insisting on a $4M pre-money is totally anachronistic.

Pricing adjusts as the herd moves, and you have to mark to market.

Scope: excludes AI deals, where prices like $100M pre are out of reach

6:14 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective

Harry Stebbings · Oct 14, 2024

Founders are failing to adjust their price expectations to the changed market, reasoning from their own progress to a doubled valuation

They can't internalize that conditions external to their own execution have changed

24:11 Founders wrongly anchor price expectations to their own progress instead of market conditions