"Valuation" is a word frequently tossed around when talking about startup companies, and, if you've seen more than 10 minutes of the show, you know it's a number that often trips up the sharks. (Remember when they scoffed at a $25 million valuation?) Surprisingly, it's not a measure of how much the company will eventually be worth, or even what it's worth today, especially since there's so much unrealized potential in the types of early-stage companies mostly featured on Shark Tank. Instead, it's used to figure out how much ownership an investor should receive in exchange for cash to help that company grow.
For The Sleep Styler, Greiner gave Brown $75,000 in exchange for a 25% ownership stake. That means that before including her investment, Greiner determined the company was worth $300,000 -- 75k divided by .25. But how Greiner came to that number, and what it means in a practical sense, is altogether different. (Don't worry, there's no more math in this article.)