That seems an unlikely assumption. $30M of series B in May 2016 would have been at around $200M valuation. Given the risks that is a disappointing return.
It's worse than that, their series B valuation was closer to $300M.
Great for the founders, hopefully great for the team, solid for early investors. Disappointing for latest investors, but shit happens - and the best investors understand the long-term value of graciously allowing the founders to follow their heart, even at the cost of a short-term disappointment.
They want for the deal because, in spite of doing well on the community side, they did not go as well on the business side. Enterprise Linux and Enterprise Kubernetes are very crowded and difficult markets. Being popular with startups is a big advantage in many ways, but it doesn't pay the bills.
This is important. A startup has to get beyond upstart.
Despite being a ‘buyer’ it was virtually impossible to get traditional enterprise risk management processes to bet the farm on an upstart OS + platform.
Now a vendor that enterprise starts to trust can offer this and everyone wins. It’s just what the doctor ordered for the K8s roadmap at RedHat.
I got the number the same way journalists get any funding number: by talking to some of the many people involved in the deal. Funding terms are notoriously hard to keep secret in Silicon Valley, because everybody talks.
OK, so you didn't consult some resource online and see what the series B or whatever round was and use a formula based on what the raise was to derive the valuation?
I see people throw these "valuation based on the last round" and I'm always interested at how they arrive at these numbers. Is there no rule of thumb then?
There are definitely rules of thumb but there is a lot of margin of error. You can triangulate based on different variables.
One variable is how much VC firms at a given stage typically need to own (below a certain ownership in the company, even a fantastic outcome will not cover the cost of the many failed investments that are characteristic of high-risk ventures). So that puts an upper bound on reasonable valuation for a given investment amount.
Then there is a similar variable for team dilution. Founders will only give away so much of their company before losing the feeling of ownership that is a big part of the motivation of entrepreneurs. So that puts a lower bound on reasonable valuation.
Then there is the trajectory of the company. How far are they from being IPO-ready? How many more rounds to get there? And if they don't get there, what are realistic acquisition prospects? If any similar company has been sold, what was the price?
None of this is an exact science. Sometimes people do unreasonable things, because they don't have a choice, or because they don't know any better. And many well-informed analysts also have biases or conflicts which twist their estimates.
Since you mention online resources - in my experience almost everything you read in professional ad-supported publications is biased, wrong, or blatantly one-sided.
your valuation is correct from what I remember being told by friends.
It's a reasonable return for early employees, but way under $10 a share as they had over 26 mil shares before series b. Assuming 20% dilution in series b, and no other dilution, looking at closer to $7.5 a share in total. Then you get into the VC liquidation preference which would lower value of the employee shares further. Of course if your strike price is 50 cents a share, you still made money, just not what you might have hoped for.
