[shykes]

> If committed investors raise the valuation of a startup, would it make sense for a startup to offer a slightly-sweetened valuation for the first investor to commit?

That is exactly what I did when raising seed money for dotCloud. It works great.

Our very first angel (Ash Patel from Morado Ventures) was not the first to express interest, but he was the first to actually sign a check. For that he got a better deal, as well as our lasting gratitude and permanent advertisement as "dotCloud's first angel". Everyone else in the round got identically unsweetened (but fair and attractive) terms. I was and continue to be very transparent about the arrangement, because it's very obviously fair, and doesn't make anyone feel like an idiot.

When we had the opportunity to further escalate the cost of the round, we didn't, because that didn't seem obviously fair and I didn't feel confident I could look an investor in the eye and tell him that it was. We may have left a little gravvy on the table, but in return we saved time, spared ourselves distracting drama, earned trust capital with our investors, and retained the ability to take the moral high ground in any future negotiations.

I don't claim that this is the best method. Certainly not every founder who successfully raised money did it this way. But it worked for me.