Full Definition
Valuation is the process of determining the current worth of a company. For startups, valuation is critical during fundraising because it determines how much equity investors receive for their capital.
Startup Valuation Methods
- Comparable Companies: Benchmarking against similar companies' valuations
- Revenue Multiples: Valuation as a multiple of annual revenue (e.g., 10x ARR for SaaS)
- DCF (Discounted Cash Flow): Present value of projected future cash flows
- Scorecard Method: Adjusting average angel deal valuations based on team, market, and product
- Berkus Method: Assigning value to specific risk factors for pre-revenue startups
Typical Startup Valuations by Stage
- Pre-seed: $1M - $5M
- Seed: $3M - $20M
- Series A: $15M - $60M
- Series B: $50M - $200M
- Series C+: $200M+
Typical Startup Valuations by Stage
Real-World Example
A SaaS startup with $2M ARR and 100% year-over-year growth is valued at $30M (15x revenue multiple) in its Series A.
Frequently Asked Questions
How do you value a startup with no revenue?
What is a typical revenue multiple for SaaS startups?
What determines a startup's valuation?
Related Terms
The value of a company before receiving new investment in a funding round.
The value of a company immediately after receiving new investment in a funding round.
A valuation method that values a company as a multiple of its annual revenue.
A spreadsheet showing the equity ownership, dilution, and value of shares in a company.
A non-binding document outlining the key terms and conditions of a proposed investment deal.
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