A funding round closes. The company announces that it has raised €10 million at a €30 million valuation. The founders open a bottle of champagne. The investors are happy. The number appears in the media and soon finds its way into private-market databases.
Before long, that €30 million becomes a reference point. Another founder uses it as a comparable. An investor includes it in a valuation discussion. An analyst calculates the implied revenue multiple.
But there is one question that is asked far less often:
What exactly was negotiated to get that €30 million valuation?
Over the past 12 years, working across venture investments, fundraising rounds and portfolio companies, I have seen this repeatedly: we often reduce complex decisions to the number that is easiest to observe.
In a funding round, that number is usually the valuation. But maximizing the most visible number does not necessarily optimize the transaction.
€30m is not necessarily better than €20m
Consider two otherwise similar companies.
Company A raises capital at a €20 million pre-money valuation with relatively straightforward terms.
Company B raises at €30 million. On the surface, Company B has clearly done better.
But suppose Company B’s investment includes a KPI-linked ratchet that gives the investor additional shares if certain targets are missed. There may also be anti-dilution protection, option-pool adjustments, preferential exit rights or governance provisions.
In some transactions, I have even seen investors negotiate options to acquire additional shares in the future based on a pre-agreed valuation or valuation formula.
Suddenly, the €30 million headline tells us much less about which company actually negotiated the better deal.
A €20 million valuation with relatively clean terms can potentially represent a better outcome for existing shareholders than a €30 million valuation accompanied by significant conditions or preferential rights.
That doesn’t make the €30 million valuation wrong.
It means the two valuations are not necessarily comparable.
An investor isn’t simply buying a percentage of a company. The investor is acquiring shares with a particular package of economic and contractual rights—and those rights have value.
The best valuation isn’t necessarily the best deal
For founders, a higher valuation has obvious benefits. For the same amount of capital raised, it generally means less immediate dilution.
But the effects of a financing round don’t end at closing.
A ratchet can affect future ownership. Anti-dilution provisions can reshape the economics of a future down round. Rights to acquire additional shares can transfer part of the future upside. Governance provisions can influence strategic decisions. And an aggressive valuation can make the next round more difficult if the company doesn’t grow into it.
In my experience, some of the most important consequences of a financing decision only become visible several years—and several rounds—later.
So instead of asking only:
“What is the highest valuation we can negotiate?”
I would also ask:
“Does the overall deal make sense economically and strategically—not only today, but through future rounds and ultimately at exit?”
This isn’t only a legal question
Strong legal counsel is indispensable. But a fundraising transaction sits at the intersection of law, finance and strategy.
A lawyer can explain and negotiate the legal mechanics of a ratchet, an anti-dilution provision or a right over future financing. But the economic questions are different: what level of ratchet is reasonable, how much protection should be given to the investor, and what could those terms mean for ownership, dilution and future fundraising under different scenarios?
Management still needs to make those commercial judgments while considering the transaction as a whole. And terms that look acceptable today can affect the ability to raise from another investor tomorrow.
Legal and financial advice are therefore complementary. The question isn’t only what the agreement says, but what those terms could mean economically and strategically over time.
Negotiate the deal, not just the valuation
For founders, there is a practical takeaway:
Don’t let the headline valuation dominate the fundraising negotiation.
Once an investor has decided that a company is worth serious consideration, a significant part of the negotiation often shifts from the headline valuation to the terms of the investment. Sophisticated investors spend considerable time negotiating these provisions for a reason: they matter.
Founders should approach them with the same level of attention.
A higher valuation may reduce dilution today, but the rights and obligations negotiated alongside it can influence ownership, governance, future fundraising and exit economics for years to come.
And be equally careful when using another funding round as a benchmark. It is tempting to say:
“A comparable company raised at €30 million, so why shouldn’t we?”
But in most cases, you know the headline number—not the terms that produced it.
So don’t ask only:
“What is the highest valuation we can get?”
Ask:
“Which deal gives us the right combination of valuation, terms and strategic flexibility for where we want to take the company?”
The objective should not be to win the valuation negotiation and discover the consequences of the terms later.
The headline valuation tells you what the deal looks like today. The terms can help shape what your company looks like tomorrow.