I know this is a thought exercise, but those are some very weird numbers there.
If these ever existed as two legitimate offers, we're looking at a 5M cap vs a 50M cap.
Who is offering these numbers? Diligence has to be able to 'back into' the cap with traction or revenue. If the 5M cap feels "real", then the 50M cap is hiding something. Extreme red flags should be going up (outsized voting, extreme terms, weird clawbacks, etc). If the 50M cap is more real for the business, then the 5M cap is a joke and generally should be ignored unless there's a very specific reason to take it (but what could that be?).
Either way, a 10x evaluation difference is so off base something does not make sense.
Depends on how much money you need / how much sensible things you have to spend it on.
If you think you can do something tangible with the 10 million right now sure, if it results in a lot of PR people, over-expensive office space and a bloated workforce then the money can be a resource curse. Doesn't exactly seem to be a popular attitude these days but I've always been a fan of seeing how far you can go with as little as possible. Keeps the bs out.
You need to work out what your valuation is now and what it is predicted to be when you take your next round of investment. If you take the 10M for 20% and then sell the next 20% for less than 10M you are telling your investors that the investment has devalued.
You would think that you want to claw as much money from their hands but that comes back on you if you don't think you can grow or maintain the value your company is currently at.
$10M from someone who built their wealth via blood diamonds is very different from $1M from a well-connected VC that can help your business in a tangible way
If you’re giving a sizeable chunk of your company to an investor you better do your due diligence.
Whether it’s contacting founders who previously received money from the VC, or plain old web research. It’s really dumb to take money from someone who can make life difficult for you down the road
A lot of companies could really use a reality check as to their true valuation, and understand that the market cap shouldn't be sky high, but there's plenty of room to play with in the space that they have.
