funding, valuationAll day on TechCrunch and other media outlets, companies brag via PR about their funding round and subsequent valuation.
Other companies don’t tell anyone, not even their employees!
Same venture capitalists, same board members, same industries, no published valuation!
What factors go into this?
I can think of multiple reasons and others could apply…
Sometimes the person who says nothing at the dinner table speaks loudest and if you are a company that has just won an investment, sometimes you can say everything by saying nothing because you have peeked peoples curiosity.
As an old manager friend of mine once asked when I made a suggestion: “Who would benefit from the information?”. If the company would benefit, it will be shouted from the tree tops. If the benefits are less clear, then specific details are not necessary, other than announcing that someone somewhere figured they were worth something. When you are specific, you set expectations and sometimes you do not want to do that.
Investment can also be a kin to salary. Some love to boast, some prefer to be more discreet. Some folk will say their salary is x but not include the fact they get health insurance, travel insurance and a company car. Others will say their salary includes the extras. Others will just say it is a good/bad/generous/acceptable salary and not quote you figures. The same reasons roughly apply - sometimes it is advantageous to promote oneself and say you are earning vast amounts of money - other times its safer not to attract the wrong sort of attention by being boastful.
Also - an investment could be bundled with conditions. Valuing a company a billion bucks might not include a cash investment - it might for example include services given for ‘free’ for a period of time.
Example: I recall a well known US telecom group who made a foray into the UK internet market in the late 1990s. I worked for a large well known US computer services company based in London and they made a multi million dollar investment in the UK project. The investment was an exchange of hardware and services - no cash and in exchange, the computer services company got X% of the UK telecom company. How do you value this investment? Do you use the list price of the hardware and software services?
Then there is the possibility to agree that investor X pays 100million bucks into company Y. The investment will be worth 10% of company Y if sales targets hit 50million within six months. If company Y fails to achieve 50million within six months then investor X gets 15% of company Y.
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