Protecting Valuation

I just read an excellent interview by ExecutiveBiz’s JD Kathuria with Ted Leonsis, vice chairman emeritus of AOL and owner of the Washington Capitals.

Titled “6 Tips for Companies to Weather the Financial Crisis,” Leonsis provides sage advice on how to align business strategy, sales projections and cash conservation to ensure the ongoing viability of an emerging growth company. As someone who managed a business during the dot com collapse in 2001, much of Leonsis’ advice is right in line with my past experiences.

A point where I disagree though is on Leonsis’ counsel to entrepreneurs in the middle of fundraising to “take the money and don’t worry about the valuation.” That’s spoken like a true angel investor.

Yes…it’s a challenging market and companies need to be realistic about corporate valuation. Yet, that doesn’t mean to simply roll over to the first investor or VC who is willing to write a check. Investors represent the interests of their limited partners, not those of the entrepreneur. Their objective is to buy the largest percentage of the company at the lowest possible valuation.

At Strategic Communications Group (Strategic), a fair amount of our integrated public relations and social media work is designed to enhance a client’s corporate and product positioning to contribute to valuation. It’s a great example of how some entrepreneurs are taking proactive steps to protect their ownership.