One question I know investors sometimes ask founders is “what are your valuation expectations for this round?” It’s a tricky question to answer because you kind of can’t win either way.

If you say something that is around market, you are somewhat negotiating against yourself.  Why anchor yourself low when the market drives the price and you might be able to position yourself for a better deal?

If you say something too high, it may scare some investors away prematurely. All investors will pass at some price, but it’s more likely that an investor will stretch on price once they are emotionally bought-in on an investment vs. up front in the beginning.  Throwing out a price that is too high too early can also signal that you have unrealistic expectations.

If you don’t answer the question you risk seeming evasive or unable to answer questions directly.

What I’d probably say is something like:

“I’ve talked to a number of founders and I think rounds like these are being price between X and Y post-money (I’d make the range pretty wide).  Obviously, I think our business is more attractive than the average, but we’ll see what the market dictates.  I’d also tell you that I expect a fair deal, but that I am also not trying to raise at the absolute highest price because I think bringing on the right partner is more important.”

I actually think all of that is true.

When I am asked about how I am thinking about valuation, I say something similar.  “Our range of valuations for companies at this stage is between $X to $Y (or I say what our median is).  We aren’t cheap, but also know that the best investors tend to care about price, and so it behooves both of us (me and the founder) to price a round fairly to build the best possible syndicate for the round.”  I try not to throw out hypothetical valuations unless I am actually making an offer to a company. I tend to dislike the games and uncertainty that creates. Usually when I say a price, I do so in writing to show that I’m serious and have thought about it. But that’s just my personal style.