Those pesky emotions..

When it comes to valuing an investment, it can be reasonably easy to look at numbers. Depending on who you are and what is important to you, you can find what you are looking for or not looking for in investment in no time. Now let’s talk about those other driving factors that might not make as much sense. Can your interest drive you to want to invest in a project even if the numbers aren’t the best? Can the person behind the project/business help swing your decision?

Of course! We are humans, and we use our emotions to pick and choose how we add value to something. Again, I know this is not precisely what the book was speaking on when they wrote the section on value, but I like to look at the not-so-obvious options. In Winning Angels, they talk about the feel-good factor. This is that special place that both the investor and entrepreneur feel good at. Now, let’s add emotions to that. If an angel is extremely passionate or interested in a particular project, that happy spot might be a lot different than something that they are less interested in.

I know that I am meticulous in who I approach to invest in my projects in my line of work. I have found that if the investor has added value to the project, they are more likely to open their wallets. Again, not precisely what the section was speaking on, but I think it’s essential. I can have the most promising numbers, but if the angel doesn’t believe in the project, it might not be the best fit for the angel or entrepreneur.

(2011). Angel Investors’ and Entrepreneurs’ Intentions to Exit Their Ventures: A Conflict Perspective. Entrepreneurship Theory and Practice36(4),.

2 thoughts on “Those pesky emotions..

  1. Hi Jae,

    I think these are all great points. The authors themselves stated that valuation was often less important than the people they are working with. In fact, as this book is 20 years old now I wonder how many of the hard facts in this section are outdated. I think you are right in focusing on the human element of the process here. Even as entrepreneurs it is often more important to pick the right team rather than the right price point on people. If something costs more, but you get more out of it then the numbers don’t matter as much. Add the emotion and passion into the mix and it would be very hard to apply the rules in the book to modern startup investing.

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  2. Hi Jae,

    Glad you brought up the emotional aspect of valuing. After reviewing the wide-ranging valuation from the example in the book, it opened my eyes to how much emotion can go into it. If I recall correctly, the example had one organization value range from $3m to $70m. You would think there would be a hardened science behind valuations by now. Best, Ed

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