One way to think about it is what investors are expecting:
- Angel investors generally are expecting you raise “more” money, usually substantially more than the angel round. They generally have less expectations of what the share price will be in the first real round, though. But they do want the price to go up.
- Seed investors will be looking for the Series A round to be at 3x the price they paid or higher to account for risk.
- Series A, B and C investors will be looking for the next round to be at 2x the price they paid or higher to account for risk.
If each subsequent round doesn’t at least have those step ups in valuation, then the prudent thing to do as an investor is wait. Wait to invest until the next round.
So you can sort of build a Cap Table of Expectations this way.
- Angels at $0.40
- Seed at $0.70
- Series A at $2.10
- Series B at $4.20
- Series C at $8.40
- IPO at $16.80 or higher
If you come up short of that, it may still work out. But the bets made along the way won’t have panned out the way investors hoped.
Even this sequence of share price increases isn’t that great for your investors relative to the risks. All investors are really hoping for at least 10x.