In seed rounds, startups are generally price takers, not price makers. Here’s why:
1. Limited Traction and Metrics: At the seed stage, startups often lack significant revenue, user growth, or other key performance indicators. This makes it difficult to justify a specific valuation based on traditional metrics.
2. Investor Dominance: Investors typically set the terms of the valuation based on market conditions, risk appetite, and comparable deals. Founders often have limited leverage unless the startup has a particularly strong team, unique technology, or early signs of traction.
3. Market Conditions: Valuations at the seed stage are heavily influenced by broader market trends (e.g., the funding climate, investor sentiment, and sector popularity). Startups compete with others for funding, making them more likely to accept terms offered by investors.
However, a startup can have some influence (become price makers) if:
• The founding team has a proven track record.
• There’s significant interest from multiple investors (competitive fundraising).
• The product or technology is highly differentiated or in high demand.