VCs are aggresively pushing company values down in the second quarter of this year. This was true almost 45% of he time investments were made compared to values of the company’s previous road.
That valuation is used to determine how many shares VCs get from the company in return for their money. The lower the value, the more ownership VCs get, and the less is left for entrepreneurs. This value is negotiated between the VCs and entrepreneurs at the time of the deal.
It is the blood sport that makes up Silicon Valley.
This is such a tricky situation, the desperate entreprenuer in a situation where he requires the cash to go, agrees to whatever the VCs have to say. This is the same in all fields in times of recession. Advantage the money man.
