Valuation is the term that gets reported, discussed and remembered. It is also the term that most often obscures the economics of a transaction.
Liquidation preference, participation, anti-dilution mechanics, consent rights, board composition and information rights together determine what a given valuation actually means. A higher headline number carrying heavier structure can be worth materially less to founders and employees under most realistic outcomes.
A higher headline number with heavier structure can be worth materially less to the people who built the business.
Structure also shapes behaviour after completion. Consent thresholds determine which decisions require agreement; board composition determines how quickly disagreement is resolved; reporting obligations determine how much management time is spent looking backwards.
The useful exercise is to model outcomes rather than compare headlines: what each party receives across a realistic range of exits, and what the company can and cannot do without approval.
That work is unglamorous and it is where a substantial part of the value in any capital process is either preserved or lost.
This commentary is provided for general information and reflects the views of Wrotham Partners at the time of writing. It does not constitute investment, legal or financial advice.