What is the difference between B2B and venture deals?

What is the difference between B2B deals and venture deals?

There is no difference.

Venture deals are surrounded by a lot of mystique. But actually there is nothing mystical about them. They are just another B2B deal.

A typical B2B deal:

Picture1

Apple sells its iPhone 6s to Vodafone. Vodafone sells the iPhone to a consumer. The consumer pays Vodafone $649 per iPhone. Vodafone pays Apple $325 per iPhone.

A typical venture deal:

Picture2

The startup sells 250 new shares (20%) to an investor. In 5-7 years the investor sells these shares either to another investor or an industry buyer. The buyer pays the investor = # shares * price per share = 250 * $8K = $2M. The investor pays the startup = # shares * price per share = 250 * $800 = $200K. This $200K is called “investment” instead of “price”.

B2B Deal Venture Deal
 Who are you? Apple  Startup
What do you sell? iPhone 6s Share
To whom? Vodafone Investor
At what price? $325 per iPhone $800 per share

Life suddenly got a lot easier. For example, you know that in a B2B deal you should value price your product. How about value pricing your shares?

 

Thanks to Hans Westerhof and Chretien Herben.

Joachim Blazer is founder at Venture Value. Contact him at joachim@venturevalue.com.

Venture Value does startup valuations for founders who want to raise money with an investor.