In every event I get asked two questions: What is the right valuation for my company and how do I arrive there? How much money should I raise?

Many books have been written about valuation. I’ve got one in my office from my predecessor, about 750 pages thick.  I keep it for cold winter nights and the open hearth. Or when I can’t fall asleep. But there are basically three steps you could work on these two questions:

1. You know you need $10m to get to the next milestones, but you only want to surrender 30% of the company’s equity. Your pre-money valuation – the valuation before you add the money from the VCs to the pot – is ergo roughly $23m, because the VCs’ $10m of the total post-money of $33m is 30%).
2. You realize that a $23m pre-money is probably not what you would expect at no significant revenues with a so-and-so alpha product. So you should seriously think about a lower round and what you could achieve, what that means for the required follow-on rounds, and what impact that might have on scaling, hiring, partnerships, resources, …
3. You understand the dynamics of negotiations – from anchors to aspiration points to “Zone of Possible Agreement” (ZOPA) to “Best Alternative to Negotiate an Agreement” (BATNA). You also understand that a private offering satisfies a demand as well as an attitude – a demand and craving by angels and VCs and other investors as well as the risk attitude en vogue. You should read Mark Suster’s post on “Why Startups Should Raise Money at the Top End of Normal” (http://www.cloudave.com/13410/why-startups-should-raise-money-at-the-top-end-of-normal/)

There you are.