This adaptation of Goethe´s famous quote “What you can do, or dream you can, begin it; boldness has genius, power, and magic in it” is highly applicable to the start-up and venture investing world. When starting something new and trying to make a significant dent in the world, boldness is a highly valuable asset to assert, perhaps even a prerequisite to great success.
High-tech companies in particular have a limited time window in which they must develop a product, enter a market, and achieve a strong, protectable position. Hitting this window requires attracting the right employees, customers, and capital; and it certainly requires boldness to execute it all in the right way.
Boldness means thinking big and believing that one can change the world. It is the world-changing outlier successes that largely determine results in the log-rule business of start-ups and venture investing. Thus, we at bm‑t, like many venture investors, appreciate boldness in the companies in which we invest; and we are willing to pay a premium for an ambitious mindset.
If boldness is not a metric you have seen before for determining valuations, let us explain. Venture investors are prepared to grant higher valuations to companies because they are more ambitious, ceteris paribus. If a company is raising 1 Mio. EUR and VCs value it at 4 Mio. EUR pre-money, that same company will be valued higher on a pre-money basis if it wants to raise 5 Mio. EUR, assuming that it has a well-founded plan for putting the larger amount of capital to use in order to progress faster, thus greatly increasing its chances of being a breakthrough success.
Essentially what venture investors are signaling with this thinking is that increasing the chance to have an outstanding winner is more important than the increased risk of losing the additional invested capital. Expressed another way, the risks of not being bold and missing important windows of opportunity by not scaling fast enough to attract the next level of talent, customers, capital, etc. are much greater to a venture investor than the risk of losing invested capital without having had a legitimate chance at success.
Are we advocating recklessly spending extra capital on bold, untargeted megaphone-marketing or empty promotion? Absolutely not. What we are advocating is for young companies to not think “how can we find a little opening in the market to squeeze our unique technology into”, but rather “how can our breakthrough technology completely revolutionize a market”. This type of transformational thinking is essential to achieving big wins.
Having audacious goals and putting significant capital at risk to reach those goals increases scrutiny on a start-up. When handled appropriately, this increased external interest in the company is an asset and should improve alignment between all parties working toward the start-up´s success. Thus, founders should not be reluctant to share the full impact and potential of their vision with the world, especially with investors. There is a high likelihood the boldness will resonate and bring more energy, commitment, capital, and value(ation) to your vision.
Your bm|t Team