Most founders, including me, have at some point during their entrepreneurial journey been guilty of over-valuing their equity. I’m proposing that founders are better off if they just stick to this rule – “I will value my equity at its market price, and if that value is zero during the early days, so be it. I’ll start from zero and let the market evolve the price.” (The market may even surprise you!)
In early stage startups, given the minuscule probability of success, you’re better off sharing equity with a credible person who comes forward and believes your equity has value, cause very few will do so. If you’ve never sold equity to any credible entity, then the first one to offer something for it is actually setting a price and giving it a value. The next time someone comes along, you get to start at non-zero which is no small feat!
In the past month, as part of GSF, I have met some early-stage founders who believed their equity had a high price, far beyond an accelerator’s value, yet their product was not validated by a single customer. Not to highlight the GSF Accelerator in particular, but there is a lot on the table here – credible leadership, dedicated time with industry mentors, seed capital, an investor showcase, business workshops, and PR coverage. Most importantly, you’re getting a group of people besides yourself who want to make sure you succeed. For many founders, even parents don’t qualify as well-wishers because they’re secretly hoping you get back to your senses and take that socially palatable job.
Any credible accelerator which follows standard practices (and there are many such accelerators) is worth the time and the equity, even if you just consider the hourly price of the people involved. More importantly, an accelerator is not a place where you focus on equity. It is a place where you tap smart people and build new stuff. Stuff that creates exciting possibilities.
In the first week of the Accelerator here in Bangalore, I’ve seen GSF incubatees evolve not just on business metrics but also on dimensions such as empathy and humility. They now understand how hard it is to succeed, and they appreciate the efforts of those who are working towards their success.
About the Author:
Anjali Gupta has founded startups in E-commerce, Translation, and Language technologies. She has been featured by DEMO, Entrepreneur, CNBC, and India Today. She has an MBA from Wharton, and has earlier worked at Amazon.com and Netegrity. Anjali loves exploring ideas that create new markets or tap consumer behavior. She lives in Bangalore, and can be reached via her blog anjaligupta.com or on twitter: @anjaligupta.