Q: Does valuation play into how likely anyone would want to acquire the business from the founders?
There is no question “too high” of a valuation can discourage an acquisition. Acquirers will generally assume they have to pay more than the last round price to buy you, and often 2x-3x more:
- Plaid at $5b was 2x the last round price.
- Credit Karma at $7b was ~2x the last round price.
- Salesforce just bought Vlocity for $1.2b, a smidge more than the last round price of $1b.
So yes, your valuation really becomes your floor price in many ways for an acquistion — in both bad ways (hard to get acquired for less than last round price) and good ways (a floor for negotiation, like Plaid, etc.).
So whatever you do, don’t raise a round at a higher price than you are willing to sell for!
But the bigger issue really is raising too much money.
As long as you sell for 2x-3x the amount you’ve raised, you can probably sort of work it out. If you sell for 10x the amount you’ve raised, you can definitely work it. If you have to, one way or another, you can sort of reprice the last round if it was too high, so long as there is enough money on the table.
By contrast if you sell for < 1x of what you raise, really no one makes any money.
Assume for each $1 you raise, you need to sell for about 10x that to make everyone happy.
A bit more here: https://www.saastr.com/the-10x-rule-what-raising-1-of-venture-capital-really-means/