How to respond when a VC asks about your startup’s valuation

Welcome to TechCrunch+ Friday

I have nothing against the investor class, but sitting in a room with several VCs while I try to sell them on my billion-dollar idea sounds very stressful.

When an investor inevitably asks founders about their valuation expectations, it is a trick question of the highest order. If the response is too high, it’s a red flag, whereas a lowball figure will undervalue the company.

“We’re letting the market price this round” is a confident reply, but it’s only appropriate if you’ve already gathered substantial data points from other investors — and can fire back with a few questions of your own, says Evan Fisher, founder of Unicorn Capital.

“If that’s all you say, you’re in trouble because it can also be interpreted as ‘we don’t have a clue’ or ‘we’ll take what we’re given,'” said Fisher.

Instead of going in cold, he advises founders to pre-pitch investors for their next round and use takeaways from those conversations to shape current valuations.

In the article, Fisher includes sample questions “you will want to ask every VC you speak with,” along with other tips that will help “when they pop the valuation question.”

A pitch is a business meeting, but on some level, it’s also a game where investors hold all the cards and always win. To level the playing field, founders need to think one move ahead.

Thanks for reading,

Walter Thompson
Editorial Manager, TechCrunch+
@yourprotagonist

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