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Business Valuation

What are some methods to calculate pre-revenue valuation?

We have potential investors sniffing around asking if we would consider selling equity. Up until we have funded the MVP " in house" and were planning to seek investment much later.

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Assaf Ben-David

Mentor, Entrepreneur, Lawyer, Public Speaker

Hi,
First of all, well done for creating the MVP - this is often not an easy task.
Regarding the valuation, the real answer (that not many people are willing to say), is this: you go outside, raise your thump towards the sky, imagine a nice number, and that's the valuation.
Seriously, there is no "official" accounting method to evaluate a startup that is not already selling, and even then the sales don't necessarily indicate the value of the company.
In any event, some of the below are good indicators of value:
1. Do you have a patent?
2. Have you already developed the technology? Is it working?
3. Do you have sales or traction?
4. How much is it costing you per sale/signup/download versus how much are you making (going to make) from each of these users?
5. How long has the team been together? If you're offering a technological solution, is the CTO a member of the team, or an external company?
6. Are there any similar companies providing similar services? If so, check how much money these companies have raised so far, or research there sales/results so far (I am happy to teach you how to do so - almost all the information is available online).
7. If the potential investor has made investments in the past, check how much he/she invested each time?
8. Do your research on the market and potential.
You then take all the above, and reach the value of the company, based on which you are asking the investment for.
I've successfully helped over 300 entrepreneurs, and I'd be happy to help you if you need. I would need more details about the company, industry and team to give you an estimated evaluation.
Good luck

Answered over 5 years ago

Royan Shaw

Business, Marketing, Finance & Web Tech

I think I'm equipped to answer this question but I need an overview of your business, the industry and the intended marketing segments and demographics. I will also need to know what percentage of market share do you anticipate to capture within the first phase of the product life cycle.

Could you provide me with that backdrop and I will be able to provide you with a well thought out recommendation?

Answered over 5 years ago

David Favor

Fractional CTO

There are so many ways for raising capital, might be best to just keep all your equity + continue self funding.

Hint: Best way is to generate massive income.

As for Methods, you can use any existing method or make up your own.

Generally, the more income you're generating, the better terms you'll get from external investments.

Answered about 5 years ago