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Valuation is a key consideration in securing venture capital funding from "summary" of Secrets of Sand Hill Road by Scott Kupor
When entrepreneurs think about raising money from venture capitalists, the first thing that usually comes to mind is the amount of money they need. However, equally important is the valuation at which the money is raised. Valuation is a critical factor because it determines the ownership stake that the entrepreneur will have to give up in return for the capital invested by the venture capitalist. Venture capitalists invest in startups with the expectation of earning a return on their investment. The higher the valuation at which the investment is made, the lower the ownership stake that the venture capitalist will receive in return. This means that if the startup succeeds and grows in value, the returns will be higher for the entrepreneur because they retained a larger percentage of ownersh...
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