If you know the return on investment for venture investors, you can plan your own rounds of financing.
Each year of progress the risk drops and value rises. So does the price per share for each round, year after year (if all goes well).
For LinkedIn investors did very well. I've done the digging and here is what I found:
|IPO Multiple of Invested Cash|
|Lead Investor||IPO Wealth|
|Sequoia Capital||Series A||$757,813,905|
|Goldman Sacs||Series D Follow-on||$39,232,800|
|McGraw Hill||Series D Follow-on||$19,616,400|
|SVB Financial Group||Series D Follow-on||$3,166,425|
Sequoia Capital did very well, earning 158 times their investment in Round A.
Note each subsequent round has a new lead investor. They set the new (higher) price per share.
And note the follow-on investors. They help continue increasing the price per share.
|Series A||2003 November|
|Series B||2005 May 8|
|Series C||2007 January 29|
|Series D||2008 June 17|
|D Follow-on||2008 October 23|
Overall, this is how venture investors work. They subsequently sold shares year after year from their own shares to outsiders. That not only gave them a small ROI before IPO (a "liquidity event"), but it also lets them have an increase in the price per share. A hedge fund, Tiger Global Management was used for this.
BOTTOM LINE: Use real IPO data to find out real VC pricing per round. Use that to plan and negotiate your own venture financing. It is a skill mastered by serial entrepreneurs. It will increase your unfair advantage.
I wish you The Best on your Adventure!