“There is no such thing as a bad investment, just bad prices.” The breakdown of how much your company is worth boils down to 2 factors: risk & competitiveness.
RISK: How many points of failure/uncertainty does my business have between now and 18 months from now? If the company has to prove out several hypotheses it will likely be worthless. Conversely, if the company has launched and has proven unit economics, much of the risk has been mitigated; execution and competition in the market become the bigger factors.
DEAL COMPETITIVENESS: When an entrepreneur has multiple options, that competition can bring more cash into the round and better terms. Most VCs focus on owning 20%.
HOW TO VALUE YOUR STARTUP!
You are what the market says you are. If investors are telling you that your startup is worth $1 million, then that’s what it’s worth.
How Will Investors Value your Pre-revenue Company?
1. Founding Team
2. Traction & expected near-term revenue
3. Growth and engagement
4. Market Size
6. Market Forces
7. Quality of existing investors
What is “market” for Pre seed-Series A right now?Today’s seed is what used to be Series A.
1. PRE-SEED (is the new seed): ~$500K used for building a team and initial product/prototype.
- a. Avg valuation $2-5m
- b. Avg company age: 1-year
- c. Avg Round Size: $500k
2. SEED: Product-market fit and early rev a. Avg valuation: $5.5m b. Avg company age: 2.5yrs c. Avg round size 1.5m
3. SERIES A: ~$6M-$15M used to scale customer acquisition and rev
- Avg valuation: $16m
- Avg company age: 4yrs
- Avg Round Size: $6m
ASK ANY QUESTIONS BELOW! No space to talk about the DCF model or comparables!