Paper wealth and real wealth
Why paper value overstates founder wealth
A last-round valuation or a rule-of-thumb multiple tells you what the business might be worth to a buyer. It does not tell you what you can spend. Until a transaction happens, your equity cannot pay a mortgage, fund a new venture or diversify your risk.
Reducing concentration without losing upside
A full sale is not the only option. Minority secondary sales, recapitalisations with private equity and majority sales with rollover equity all turn part of your stake into cash while you keep exposure to future growth. Compare structures in the deal structure comparison.
Frequently asked questions
- How should a founder value their own business equity?
- Multiply a realistic enterprise value by your fully diluted ownership, then apply an illiquidity haircut of 20% to 40%. Private shares cannot be sold on demand, so they are worth less than their paper value until a buyer pays for them.
- What is a risky level of wealth concentration?
- Wealth advisers generally flag concentration above 50% to 60% in a single asset. Many founders hold 80% or more in their company, which is the main reason to consider a partial or full liquidity event.