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What they mean
This is an indirect way of asking what your valuation is and are you crazy or not? The entry price and the terms matter for investors to generate an ROI.
Information is power. If you say a lower number than the investor was expecting then, this is super news for them.
If you pull out a crazy number, then this could actually be a conversation killer, so you have to be careful.
If you give numbers, never give a specific number, instead give a range, and add that you’re feeling out what the appetite is in the market. If you have the data, it can also be good to refer to benchmarks so that you show that you know where the market stands.
It’s best to demure and say you have fair expectations and the market will set the price.
What you need to say
“These are in line with the market. Talking to some of my friends who have raised recently at series a, they have all secured a raise in a pretty normal range and at standard terms, meaning no 3X participating preferred liquidation preferences, haha.
Of course, terms matter for us, not just the valuation. We don’t want to have too high a valuation that we can’t grow into and cause problems at our next round.
Given our traction and benchmarks, we think a range between $9 and $12 million is market.
For our lead, we expect to give them standard information rights, a board seat, as well as a standard liquidation preference. It’s too early to start getting into other nitty-gritty.
Would these be in the ballpark of what you are expecting?”