Most valuation disagreements come down to the forecast. The founder sees the coming years of growth, while the investor weighs the risk of delivering it.
Valuation gaps can be resolved with structure, and Fortpark Group uses four tools regularly.
Tranched investment.
Tranching lets both sides agree a higher headline valuation, with later instalments released as the company hits agreed milestones. It suits plans with measurable steps, such as regulatory approvals or product launches.
Liquidation preferences.
A preference returns the investor's capital before other shareholders on a sale, which can justify a higher valuation. Simple one-times non-participating terms are the market norm in most European rounds.
Convertible instruments.
Convertible loans and advance subscription agreements defer the valuation question to the next priced round. They suit early companies that need capital before the evidence supports a firm price.
Ratchets.
Founder equity increases if results exceed agreed targets, rewarding teams for delivering the forecast they presented.
Each tool brings trade-offs. Heavy preferences can leave founders with little to gain in a modest exit, and tranches can distract teams from the wider plan.
In our experience the best structures are those both sides can explain to their own boards in one sentence.