How do you calculate the worth of your company when you are looking for funding? If i sell my company outright today the value is about $200K but this does not mean that i will take on $100K investment by giving 50% of the company.. so how does one secure a million dollar in funding with a company worth $200k?
I'm going to answer the second part of your question because it's easier.
How does one secure a million dollars in funding for a company worth $200k?There is a difference between pre-money and post-money valuation.
If the company has a current valuation of $200,000 now, and it raises $1,000,000, the new, post-money valuation will be $1.2 million. That is because it is now a $200,000 company with $1,000,000 in the bank, so it is worth $1.2 million.
In this example, the investor would own 1/1.2 of the company, or 83.33%.
How you calculated that it is worth 200k$ maybe it is not?My personal opinion is that many investors do not look how much value in $$$ you own they are more interested what value you can create when they invest in you.Much more valuable assets for a start-ups are their teams,past experience,business model,cheap distribution models,...etc which are not measurable by $$$'s.You can do 200K$ in revenue per year but in real value your company can cost 0$ because in long term perspective investors will not see opportunity there and will not invest.Other case if you are not looking for an investment and doing everything on your own for that situation I think you should come to a point when they are willing to invest x$ for y% of shares (you can decline :)) and based on average offers you can just calculate how do you worth(But I am not sure if it is something valuable for you).
Do you know how he has calculated that 200$K's?How much experience this person owns in the industry where you are ?I think answer to this questions will help you to determine how realistic is that value and will you get any other offers besides that with that kind of valuation.Try to ask other ones and see if they will offer the same value.