As a counterpoint: at the moment of financing, existing shareholders also think the latest round is a positive deal for themselves. That implies they value their remaining, post-dilution (and less-preferenced) shares even higher than the reported top-line 'valuation'.
And indeed, a main reason for the liquidation preference is to provide the later investors a guarantee/signal that the insiders' intent isn't just to soon settle for less that the 'valuation' – winning themselves a gain at the expense of the latest investor.
So, sure, when later money adds "$100MM at a $3B valuation", those 3.3%-ownership investors might not truly value the entire company at exactly 30X their stake. But, the other 96.7% owners do value the company at even more than $3B, or they wouldn't have granted the downside-protection and done the deal.
So reporting the top-line valuation, as a market-negotiated fair value, weighted by revealed preferences, still makes a lot of sense. Professionals and insiders found it a reasonable meeting-point... and the downside-protection (which implies the investors' number is really lower) is exactly offset by the upside-expectation (which implies the insiders' number is really higher).
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As a counterpoint: at the moment of financing, existing shareholders also think the latest round is a positive deal for themselves. That implies they value their remaining, post-dilution (and less-preferenced) shares even higher than the reported top-line 'valuation'.
And indeed, a main reason for the liquidation preference is to provide the later investors a guarantee/signal that the insiders' intent isn't just to soon settle for less that the 'valuation' – winning themselves a gain at the expense of the latest investor.
So, sure, when later money adds "$100MM at a $3B valuation", those 3.3%-ownership investors might not truly value the entire company at exactly 30X their stake. But, the other 96.7% owners do value the company at even more than $3B, or they wouldn't have granted the downside-protection and done the deal.
So reporting the top-line valuation, as a market-negotiated fair value, weighted by revealed preferences, still makes a lot of sense. Professionals and insiders found it a reasonable meeting-point... and the downside-protection (which implies the investors' number is really lower) is exactly offset by the upside-expectation (which implies the insiders' number is really higher).