An earlier blog showed statistics on businesses getting funded. Clearly entrepreneurs need investors, and cash is definitely king – stronger than ever post GFC, and especially so in Asia where the equity gap is huge.
Inevitably, entrepreneurs will have a higher valuation of their business than an investor. I suspect that this is the main driver for 3 out of 5 deals falling down at the negotiating table. When faced with a difference over valuation, most entrepreneurs will first haggle as if they are in a Turkish bazaar, before resorting to cold war brinksmanship in Ari Gold style.
This creates a hostile environment, and gives investors the opportunity to walk away. Hardly the way you want to start a long term relationship. A better option is to understand how the investor is valuing your business, and start tweaking the assumptions. There are also plenty of methods of setting the valuation based on a future milestone. In most negotiations, there is a win-win solution hidden somewhere. If you want to get funded, it is up to you to find it.
