ABSTRACT
This chapter explains pre- and post-money valuation. It covers financing rounds and deal terms, followed by going public and succession planning. Post-money valuation is the value of the company after the sale of new shares. Strategic buyers are either competitors or companies in a related industry who are interested in entering the market, acquiring proprietary technology, or gaining economies of scale. Early investors share the gain with the entrepreneur if the market value increases in the next round. The minimum information on a typical term sheet includes the amount of the investment, the percentage ownership calculation, and an-ti-dilution provisions. The advantages of being a public company include easy access to capital markets to raise money for future growth, liquidity for outstanding shares, lower cost of capital, and increased prestige and visibility. Increased prestige and visibility may also help sales and employee recruitment. Entrepreneurs can diversify their wealth without selling the entire company.
