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:
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:
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|
|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 author of The #1 Guide to Startup Valuation. How to value your startup in 12 easy steps. For founders. For seed rounds and Series A. For equity and convertible debt.