http://brecksblog.disqus.com/enMon, 06 Apr 2009 00:17:32 -0000http://www.breckyunits.com/web-startups/2009/04/05/a-good-angel/#comment-7893809<p>Breck, picking your investors carefully is great advice. And it sounds as though you may have indeed found a gem. One thing to be aware of, however: the most important point is not that valuation be low (to attract investors) or high (to retain equity for the founder). Instead, it's like Goldilocks and the Three Bears: valuation needs to be Just Right.</p><p>If it's too low, as your investor pointed out, you will soon be diluted to the point that you may not have the appropriate incentive to keep working 24/7 on your dream. On the other hand (and, in my experience, a more typical problem by a factor of 10) if you set the valuation too high (even if you have a friendly angel willing to do it at that number), you are setting yourself up for a disaster in the following round.</p><p>Because if the market conditions (or company experience) at that point is not perfectly aligned for an up-round, either you won't be able to raise funds, or else both you and your investor will get seriously hosed.</p><p>Bottom line: make SURE as best you can (by checking the market and talking to other experienced investors) to get your valuation Just Right!</p>davidsroseMon, 06 Apr 2009 00:17:32 -0000