Sunk costs not my problem
Submitted by jpark (not verified) on Sun, 05/28/2006 - 18:09
What is the company worth TODAY.
Not, what did it cost to get here? Not, how much time did you spend? Nor the amount of capital raised to date.
Sunk costs is a very simple concept. Ignore what was spent to get to this decision point, and see, is it economically viable to proceed. If not, then stop.
Just because $10 mil was raised and spent by the company to get to where it is today doesn’t mean the company is worth $10 mil. Current investors are more sophisticated than that.
The valuation could be more than $10 mil, it could be much less than $10 mil. For the first round of financing, and the last round of financing, we are supposed to ignore sunk costs, and find the right valuation for a company.
Not, what did it cost to get here? Not, how much time did you spend? Nor the amount of capital raised to date.
Sunk costs is a very simple concept. Ignore what was spent to get to this decision point, and see, is it economically viable to proceed. If not, then stop.
Just because $10 mil was raised and spent by the company to get to where it is today doesn’t mean the company is worth $10 mil. Current investors are more sophisticated than that.
The valuation could be more than $10 mil, it could be much less than $10 mil. For the first round of financing, and the last round of financing, we are supposed to ignore sunk costs, and find the right valuation for a company.
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