Congrats, or I’m so Sorry for You?

UK fintech startup TaxScouts just announced that they raised £1.2 million from SpeedInvest, amongst others. 🙄

What this actually means, from TaxScouts’ perspective, is that they sold an equity stake in their company to SpeedInvest for £1.2 million. 

These announcements are really unhelpful because they are completely silent on the equity stake sold.

Should I congratulate TaxScouts with this deal? Or tell them that I’m so sorry for them?

Let’s say congrats if a deal is priced in line with comparable transactions in the market. Then neither the startup or the investor got screwed. Then both the startup and the investor did a good, market-standard deal.

Based on comparables from Dealroom.co, TaxScouts should have sold 20% of their shares for £1.2 million, or at a post-money valuation of £1.2 million / 20% = £6.0 million.

If they did then congrats! That’s nicely in line with market prices.

If TaxScouts sold a bigger or smaller equity stake for £1.2 million then so sorry! Someone, or actually in the long term both TaxScouts and SpeedInvest, did a bad deal.

Post-money valuation = price / equity stake sold

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