What should you price your seed round at?
Well, it depends...
I could probably write a book on venture round pricing dynamics. It would have lots of philosophy, religion, theory, fiction, and pontification.
However, since I only have time for a blog post, I'll settle for actual data.
Since January of 2010, when I led my first seed investment in Backupify, I have led or committed to 27 investments. That includes all the deals I did at First Round, with the exception of Refinery29, which was a Series A. That also includes 16 Brooklyn Bridge Ventures deals done and five agreed to term sheets. Yes, it's going to be a busy fourth quarter.
The criteria for what is a Seed and what is a Series A for these purposes is whether or not the first round of the company was within the same year that I did the investment, and it had to be less than $750k of prior money. Refinery29 fell out based on timing.
So what does the data say.
Well, if you group them all up, here's what you get:
Pre-Money Valuations (M)
You wind up with about a four-ish valuation, mostly right around four, but with some outliers that bring up the average.
But price doesn't tell the whole story. What about the round size?
Round Size (M)
So the average round that I'm participating in is about a million bucks. For those of you that have trouble doing division, not surprisingly, that puts the average dilution right around 20%, which isn't surprising.
So, if you're looking at pre-money valuations saying "But hey, my deal wasn't valued at X, WTF??" then you need to take a look at the dilution numbers.
That's the dirty little secret of pricing:
Pre-money isn't the price. Dilution is the price and you're all pretty much getting the same deal.
On the other hand, stage matters, too... and stage generally impacts the resulting pre-money. How much money you ge [...]