Valuation: What You Give Up

The equity percentage for a given investment is only one factor to consider in a financing deal.

Most entrepreneurs are at an extreme disadvantage when negotiating deal terms with experienced investors.  The focus seems to be on the convenient but simplistic percentage of equity for a certain amount of capital investment.  This arrangement serves as the starting point, but many other factors must be carefully considered to fully understand the true economics of a deal.  Often, the reality of those economics is not uncovered until a distribution of proceeds occurs due to a liquidity event.