Complete Definition
Startup valuation is the process of determining how much a startup is worth. Unlike public companies with market-determined prices, startup valuations are negotiated based on various factors and methodologies.
Valuation Terminology
Pre-Money Valuation
Company value before new investment
Post-Money Valuation
Company value after new investment Post-Money = Pre-Money + New Investment
Dilution
Percentage of ownership given up Dilution = Investment Amount / Post-Money Valuation
Valuation Methods
Comparable Transactions
Similar companies' valuations and multiples
Revenue Multiples
Common for later stages Valuation = Revenue × Multiple (5-20x for SaaS)
Scorecard Method
Compare to average valuations, adjust for factors
Berkus Method
Assign values to key elements (team, product, etc.)
VC Method
Work backward from expected exit
Factors Affecting Valuation
- Team strength and track record - Market size and growth - Traction and metrics - Competition and differentiation - Business model and unit economics - Investor demand - Overall market conditions
Valuation Benchmarks (2024)
- Pre-seed: $2-6M pre-money - Seed: $5-15M pre-money - Series A: $15-50M pre-money