Valuation Workshop – The Art of Negotiation Between Investors and Founders

By: Emily Angold, ACA Marketing Manager

As an entrepreneur and seasoned angel investor, Bill Payne understands the critical importance of education to make well-informed decisions that determine the success or failure of a startup.   After assisting in founding four angel groups - the Frontier Angel Fund (2006), Vegas Valley Angels (2003), Tech Coast Angels (San Diego - 2000), and Aztec Venture Network (1999) – it was clear to Bill that angels needed comprehensive education, no matter where they were in their investing journey.  After seeing the need, Bill headed an effort within ACA’s Education and Smart Practices to develop seven new online and in-person workshops for new and experienced angel investors known as ACA Angel University.

Bill sat down with ACA to discuss the importance of negotiating the current valuation of seed-stage startups at the time of investment and how ACA Angel University’s Valuation Workshop is essential to investing success.

Q. In your opinion, what are the most important takeaways from ACA Angel University’s Valuation Workshop?

A. I think there are several important takeaways that are significant for all angels, no matter how experienced you are or if you are brand new to angel investing:

Valuation directly impacts returns.  The higher the valuation at investment time the lower your equity stake (and return) will be upon exit. There is no definitive valuation method.  It is important that angels use multiple methodologies.

Valuation is not only about the strength of the target company.  It is also about the national economy, the business vertical and the geographic location. The bottom line is that valuation is a negotiated settlement between investors and founders.

Q. Why is it important for all angels to consider taking this workshop?

A. Even though this workshop is in our “basics” track, angels who are not familiar with multiple valuation methods for startups will both benefit and appreciate learning about several possible valuation methodologies.

Q. Is it more critical for an angel to take this workshop now in midst of COVID-19 impact? 

A. Any national or worldwide catastrophe that impacts the US economy will impact the valuation of angel-funded companies.  Why?  Because angels invest their own money.  When we angels are nervous about the value of our primary asset base, we are less likely to invest in high-risk asset classes, such as startup companies.  Under these conditions, we normally see the valuations of startups decrease because the supply of angel funding decreases.          

Learn more about valuation issues and how to incorporate multiple valuation methodologies to optimize returns during ACA Angel University’s Valuation Workshop on February 9, 2021! 

Get to Know Bill Payne:

Bill Payne is an active angel investor, board member, and educator for entrepreneurs and angel investors. He assisted in founding four angel groups: the Frontier Angel Fund (2006), Vegas Valley Angels (2003), Tech Coast Angels (San Diego - 2000), and Aztec Venture Network (1999). Over the past four decades, Bill Payne has successfully founded or invested in over 100 start-up companies.

In 1971, Bill founded Solid State Dielectrics, Inc., an advanced materials supplier to the electronic components industry.  He sold the company to E. I. DuPont in 1982.

From 1995 to 2007, in his role as an Entrepreneur in Residence with the Kauffman Foundation (Kansas City), he worked on educational programs for entrepreneurs and their investors, including the development of the Power of Angel Investing seminar series.  In 2003 he was engaged in the formation and startup of the Angel Capital Association (ACA).  Bill was awarded ACA’s prestigious 2009 Hans Severiens Memorial Award for Outstanding Contribution to Angel Investing. 

In one of his ten visits to New Zealand, Bill served as the 2010 BNZ University of Auckland Entrepreneur-in-Residence from February through June 2010.  In November 2010, Bill was named an Arch Angel of New Zealand for “remarkable contributions to angel investing.”

In recent years, Bill headed an effort within ACA’s Education and Smart Practices Committee to develop seven new online and in-person workshops for new and experienced angel investors.   In the past two decades, he has delivered over 150 workshops for angels and entrepreneurs in ten countries.

Bill graduated with BS and MS degrees in Ceramic Engineering from the University of Illinois, where he has served on the Dean’s Board of Visitors of the College of Engineering. Bill has 120 years of cumulative Board service for private companies and not-for-profit organizations. He and his wife Ann are residents of Whitefish, Montana and Henderson, Nevada.