Why Does Startup Pricing Vary by Location?

Entrepreneurs seem genuinely surprised to find that investors in Peoria or Little Rock are not willing to invest in startup companies at Silicon Valley prices. After all, they just read in TechCrunch that investors funded a company similar to theirs at an $8 million pre-money valuation!

The valuation of startup companies shouldn’t be impacted by location, should they? Guess again! A newly-constructed 3500 square foot home with a pool near New York City is priced well above a similar home in Fargo, right? Well, the same differentials are true for startup companies. In fact, the issues that influence residential real estate pricing are quite analogous to those which determine the price investors will pay for ownership in startup companies.

We know that investors will invest in hot startups run by celebrity serial entrepreneurs at much higher pricing than for similar startups with first-time entrepreneurs. And, we’ve heard that life science startups are often priced well-above software startups. But, what other factors impact startup valuation?

By: Bill Payne, Frontier Angels http://www.billpayne.com

Full Story: http://www.angelcapitalassociation.org/blog/why-does-startup-pricing-vary-by-location/