Why a Seed VC Should Care More About Ownership Than Valuation on Each New Investment, But Understand the Fund Impact of Paying Too Much Too Often
My friends at Weekend Fund recently put out a round-up newsletter of some investor responses to the question “ Do Valuations Matter? “ It’s all worth reading but I’ll excerpt my thoughts here since it’s a discussion Satya and I have often with new VCs.
How Hunter Walk @ Homebrew approaches valuations
Homebrew is an evergreen fund investing primarily in pre-seed, seed and Series A rounds.
Like NEA, Homebrew takes an ownership-driven approach to investing. They view valuation as an important guardrail in evaluating an investment opportunity. Hunter also breaks down their framework for evaluating an investment opportunity when achieving their target ownership exceeds their maximum check size, and the “opportunity cost” of doing so resulting in less diversification.
More from Hunter:
“In our historically concentrated approach to seed stage investing, hitting our ownership target mattered more than valuation *but* valuation was an incredibly important guardrail in evaluating an opportunity, for it has great impact on the company and our portfolio management overall.
