In case you missed it, we’ve got other short and easy to digest articles for you focusing on how to value your startup, how to supercharge your value, and discovering the difference between price, and value. Let us – and our good friends at Equidam – continue to cover all you need to know about valuations, including why you really shouldn’t negotiate on price…Let’s go 👇

Don’t negotiate just on price, it’s nothing but a number 

Negotiation. The age-old practice of two parties coming to an agreement, where both are ‘happy enough’ with the outcome. But, before you give up on those ambitions and hopes for your startup’s future just to get the funding, we’re here to say – stop! While price is an easier metric to compare against other startups and benchmark against industry trends, trying to negotiate purely on a figure leads to a back-and-forth lacking in substance. You might well point to similar companies’ valuations to justify your price, and investors might counter with lower comparables to argue for less, but this game of table tennis chat won’t really get you anywhere. 

Value is much more meaningful, and will align you with better (more suitable) investors. We don’t want you to negotiate/change your stance on core values, instead make sure you don’t compromise them, which is likely to happen if you purely focus on the price. We’ve seen it before – price wars inevitably mean the founder and investor match isn’t quite right – and further down the line the investor will want more, and the founder will have to start giving up their core values to make it work. Tough cycle to get trapped in! A negotiation centred around value is far more constructive, focusing on the fundamentals of the business rather than market benchmark. So how is it done?

Aligning values before price discussions

We’re big fans of starting conversations early on about the company’s growth drivers and risk factors, rather than diving into a figure straight away. If both parties agree on what reasonable growth looks like, what risks exist, and how they’ll be mitigated, then the valuation is a natural by-product of that discussion. Read Equidam’s article here for a much deeper look at describing why you shouldn’t fixate on price, and how navigating these conversations about future value requires clarity and mutual understanding. Utilising a tool like Equidam can also help to make sure there is a transparent approach to valuation, and avoids abstract pricing negotiations by focusing attention on the drivers of value and key assumptions. Check out Equidam’s valuation report which serves as a blueprint for solid and useful negotiations, they are genuine experts in the area so have a read. 

Defending your position

Keeping all this in mind, we know investors will challenge your valuation (it’s part of their job). So stay strong! Defending your valuation isn’t about being stubborn, it’s about being prepared.

Get yourself ready by following these steps: 

• Know your numbers inside and out, and be ready to justify your valuation with real data (check out or cap raising guide, here) 
• Anticipate investor objections, have strong, confident responses ready
• Be flexible on terms, not just price, there are ways to sweeten a deal without lowering valuation 
• Run a competitive process as more interest = better leverage 
• Know your limits and if the deal isn’t right, walk away 

Remember, if you go into investor negotiations with clarity and confidence, you’ll come out with the best possible deal – without compromising what matters to you the most.

What’s next?

Get the right result for you and your startup by beginning conversations explaining your values – not just talking about price. Chat through your growth potential, risks, and competitive advantages, so that you and your potential investors can fully see and understand how the future might look. Remember that valuation is a natural result of these discussions – it’s more than just a number, it’s a reflection of the shared vision for the company’s future. And as always, we’re here to help at all stages of the journey, so check out more on our valuations support here, and get in touch with any questions – we’d love to help.