Bahat: Startup valuation is primarily a mathematical function of VC fund size
Roy Bahat · 20VC Exclusive: Roy Bahat on Bloomberg Beta's New Fund, The Truth About Valuation That Very Few VCs Will Tell You & Why Founders of Venture Backed Startups Make The Best Angels · Oct 18, 2019 · at 20:02
Roy Bahat, head of Bloomberg Beta, explains the underlying mechanics of venture capital pricing and fund portfolio construction.
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“The way it works is your fund has a strategy and you say to yourself, do I want to invest in this company? And if I want to invest in this company, then I have a check size. And the check size is usually determined by the fund size, because again, back to our earlier exchange, you can only invest in so many companies in a given fund. And so then I have a check size and then I have an ownership target. My strategy is I want to own 10%. I want to own 25%, not us. And then you have a check size, you have an ownership target. The valuation falls out of that as the result. And so the valuation a founder is able to get is in the main, is a function of the fund size of the fund that wants to invest in them.”
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