How startup valuation works

How startup valuation works Early Stage Growth / scaling Stage Exit Stage

Early stage “Valuation” does not show the true value of the company It shows how much the company investor gets for her money Founders with success in the past tend to get higher valuations (they give up less of the company in early stage than first-timers)

Early stage Valuation depends on how much money you need You need ENOUGH money to Run 3 experiments and Have at least 6 months of runway Investors want to see growth within 18 months

Early stage Valuation depends on who you take money from Average valuation $2.6M $1.5M $1M $400k Average investment $640k $300k $100k $20k Dilution 20% 16% 9% 5%

Scaling stage Investors find similar companies to determine their value to revenues ratio – then use it to calculate value of your company Revenueoc/valuationoc ~ Revenueyou/valuation? Take revenues this month, year, next year Calculate best, worst, and base cases Triangulate 3 cases Project when startup will exit Discount earnings by time value of money