How do we value your #startup?  Part 2 by Arpit Agarwal, @arpiit

In the previous post we talked about how VCs perceive valuation and how to broadly deal with it. It was aimed to dispel some misconceptions most first-time entrepreneurs may have about this very important aspect of our business. This posts builds on that and another and gives you actual numbers to play with. Before you go on, it maybe a good idea to take a look at the way I define stages of a startup.

Round sizes and dilution benchmarks in India

Now that you know the only two thing that matters to a VC is the stake she’s getting and the amount she’s investing, it is best that you play accordingly. If you’re seen as obsessed too much about valuation, you’re likely to be considered a hard-nosed founder. So be smart and play for ‘lower dilution’ instead. In case you argue that these are one and the same thing, think again 🙂
The table below presents a broad structure of startup funding in India today. This is what is considered ‘average’ in our industry. Please note that all these numbers are only representative in nature and deals frequently happen on both sides of these extremes. Also, like any well-functioning market, these prices represent only a momentary equilibrium and this changes over time:
© Blume Ventures, 2018 — Please don’t republish without permission. Write to
What are the Terms and Conditions?
  1. At any stage of investment, the investor is making a forward judgement on the exit outcome. Hence, it is common for investors to bake the exit scenario in the way you are being valued. For example, if a Series A investor, who’d typically expect a startup to exit at $500M, may value a startup which may exit at only $250M (in their minds) much more harshly than a startup which could easily build a $1B or more as an outcome.
  2. All the rules of the market —namely, demand and supply — still apply. It is not uncommon for serial/exited entrepreneurs to raise money at 5–10x valuation than first-time entrepreneurs.
  3. Valuation remains the last step. Hence, if you don’t pass any of the filters a VC has in their model, your willingness to price yourself very attractively doesn’t count.

How can you use this information?

First, it is always a great idea to know what’s the playbook on the other side. At the same time, smart people would know that such discrete classifications can’t be taken for granted. Second, whenever you have term-sheet on offer, you should know that valuation is largely formulaic for a VC, hence pay immense attention to the terms that come along with it. That’s the detail most first-time entrepreneurs struggle with!
Finally, as most experienced entrepreneurs will tell you,

forget valuation and focus on creating things of value.

If there’s value, valuation cannot be far behind. And creating anything of value is incredibly hard in any economy, doubly so in India. Once you are past your curiosity about valuation, you’d notice that life after raising VC money becomes much harder. In fact, the more you raise (by corollary, the higher your valuation) the more complicated it will get!

What’s more?

Hope these two posts satisfy a lot of your curiosities. As you can imagine, the art of valuing a startup is much deeper than what we covered here. Do post your responses and ask me if I skipped a step in my explanation.

The article was first published in the Arpit’s Medium Blog here,  and has been republished here with the Author’s permission.

Arpit Agarwal

Arpit has been involved with promotion of startups and ecosystem since 2006 when he co-founded Headstart Network, today India’s largest early stage entrepreneurs’ network with over 20 city chapters.

Arpit has been with Blume for last four years as a Principal, responsible for scouting science-led and hardware businesses, apart from managing a portfolio of about 15 companies, which include companies in a variety of sectors ranging from used goods market to IOT to Healthcare to Enterprise services.

He’s based in Delhi, in an MBA from IIT Bombay and holds a BTech from NIT Trichy

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