Valuations 101: Scorecard Valuation Methodology

Gust

In 2011, the valuation of pre-revenue, start-up companies is typically in the range of $1.5–$2.5 Scorecard Valuation Methodology. This method compares the target company to typical angel-funded startup ventures and adjusts the average valuation of recently funded companies in the region to establish a pre-money valuation of the target. Pre-money valuation varies with the economy and with the competitive environment for startup ventures within a region.

How Investors Think About Valuation of Pre-Revenue Startups

SoCal CTO

Because of this, I've always tried to stay up-to-speed on how early-stage investors look at valuation of companies. Bill Payne is an expert on how early-stage investors should look at valuation. He just post: Establishing the Pre-money Valuation of Pre-revenue Startups. Especially interesting is the Valuation Worksheet towards the end. A lot of my time is spent helping early-stage companies get to proof points so that they can raise capital.

Trending Sources

A Five-Minute Tutorial On How To Value Your Startup

Startup Professionals Musings

As an entrepreneur looking for professional investors, one of the quickest ways to lose credibility and get rejected is to start with a ridiculously high pre-money valuation. Equally bad is professing no valuation estimate at all, asking investors to “make me an offer.”

7 Lessons On How To Avoid A Quick Business Failure

Startup Professionals Musings

They only see and remember the recent new entrants in the billion dollar valuation club, including Uber, Airbnb, and Snapchat. Plan and budget for all the channels of marketing, including social media, digital content, video, and traditional.

E-Commerce: Funding, Terms & Valuations Pre-IPO

Recent Buzzes - VC Experts, Inc.

SaaS platforms in the social/e-commerce industry are about finding the right channels and connecting your brand to the world, topped with a sense of excitement and urgency, (the sense of excitement from getting a good deal and the sense of urgency of the deal not lasting forever Is it really what a company offers or is it the e-commerce platform that drives the sale?

Why a Company Can’t “Be More Like a Startup”

Steve Blank

If they select a business model that targets industry incumbents, they don’t have to worry about upsetting existing customers, partners or distribution channels. Existing companies also use network effects of monopolies/duopolies, distribution channel kickbacks, etc., Uber – current valuation >$70 billion – knew the day they started that their ridesharing service violated the law in most jurisdictions. This article originally appeared in the Harvard Business Review.

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Tonight We're Going To Party Like It's 1999

Launching Tech Ventures

Sunday, March 27, 2011 Tonight Were Going To Party Like Its 1999 by Tom Eisenmann Are we in a new bubble, as Steve Blank recently wrote, or do current high valuations for early- and late-stage consumer Internet companies reflect sound fundamentals, as argued by Ben Horowitz ? Valuations.

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Spectacles and $SNAP’s $20B Valuation

Austin Startup

In summary: Snap’s current business doesn’t justify a $20B valuation. How can one justify a $20B valuation for Snap? Snap has introduced a panoply of well-regarded features over the years: stories, face and location filters, memories, discovery channels, etc.

5 Shark Tank Lessons Every Startup Should Understand

Up and Running

Valuation. Watch how the sharks deal with valuation. That establishes their proposed valuation. So for example, if they want to give 10 percent of the company for $100,000, that’s a valuation of $1 million; and 30 percent for $150,000 is a valuation of $500,000.

Why it’s nice to compete against a large, profitable company

A Smart Bear: Startups and Marketing for Geeks

They have everything: money, brand, momentum, existing customers, press, product teams, distribution channels, expertise, market insight, analysts, sales offices, product features, and, by definition, a working business model.

How to Hack Growth When Growth Stalls

ConversionXL

One common growth stall occurs when companies become over reliant on particular channels, which may be losing their effectiveness. Dive into New Channels.

Revenue benchmark for Series A – $1m run-rate and 20% MoM growth

The Equity Kicker

Companies with greater revenues and stronger growth are able to raise bigger rounds at higher valuations. Similarly, companies with faster growth will get a way with lower revenues and/or be able to command higher valuations. Entrepreneurs are always asking us when we think their company will be strong enough to pull off a good Series A, which you can think of as $1-2+m Series A at $3m+ pre-money.

10 Answers That Make Your Startup Plan Investable

Startup Professionals Musings

You need to identify pricing details, sales channels, strategic partners and a customized marketing plan consistent with your industry and target segment. Justify funding requirements, use of funds and specify a current valuation estimate.

Avoid New Venture Shortcuts That Scare Away Investors

Startup Professionals Musings

Non-credible funding request or unreasonable valuation. Future unproven projections don’t set today’s valuation. Marketing programs and distribution channels are required for even the best solutions, with an appropriate and viable rollout and growth strategy.

Why Misunderstanding Startup Metrics Can Cost You Your Business

Both Sides of the Table

The reality of CAC is both the when you scale your acquisition “channel” costs usually go up plus when you find a great channel others notice it and drive up the costs as they compete with you in that channel.

Venture Outlook 2016

Both Sides of the Table

Either we’ve discovered magical beans and elixir or perhaps we’ve gotten ahead of ourselves on valuation. In 2014 3 out of 12 exits were occurred at a lower valuation than the previous round.

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The Funding Gap

Gust

A medical device company, on the other hand, may need cash resources to pay for FDA testing, designing the prototype, manufacturing the product, establishing an inventory of the devices and establishing marketing and sales channels for the products.

A growth engine without a profit engine is incomplete thinking

The Equity Kicker

In case you’ve missed it they have recently raised money at a $3.7bn valuation, they operate in 35 cities and have grown headcount from 75 to 300 over the last year. I just saw this diagram on Growthhackers in an article explaining Uber’s success.

8 Ways An Investor Pitch Differs From A Product Pitch

Startup Professionals Musings

Partnerships, distribution channels and pricing models should be included. “If This allows them to calculate burn rates, break-even points and forecast the company valuation over time.

These 10 Key Elements Make a Business Plan Fundable

Gust

Clearly define the customer, channel, and revenue model associated with this solution. Describe your market penetration strategy, sales channels, pricing, and strategic partnerships. Include a current valuation estimate.

Corporate Acquisitions of Startups: Why Do They Fail?

Steve Blank

VCs like acquisitions as much as IPOs because the acquiring companies often can rationalize paying large multiples over the current valuation of the startup. However, these nosebleed valuations make it even more important in getting the acquired company integrated correctly.

How do you know when to exit your company?

StartupCFO

Or hopefully multiple bell curves, sparked by new products and new sales channels. If your growth rates are declining your valuation multiple will also decline. Often a buyer can propel new growth by plugging your product into their large, more established channels.

Why You Should Stop Worrying About Raising VC Money for Your Tech Startup

Up and Running

You’ll get a low valuation. A business at scale may have a customer acquisition cost of $35, but this is averaged across all of their marketing channels. In the early stages of your startup, you’re likely going to focus on a few, highly optimized marketing channels.

These 10 Key Elements Make a Business Plan Fundable

Startup Professionals Musings

Clearly define the customer, channel, and revenue model associated with this solution. Describe your market penetration strategy, sales channels, pricing, and strategic partnerships. Include a current valuation estimate.

An Inside Scoop on the Funding Environment and What it Might Mean for You

Both Sides of the Table

Mark dutifully went to partner meetings, back-channel references began, firms started calling existing VCs to “test prices” and we started debating whom our best partner would be. Mutual funds had begun marking down the valuations of their private investments in high-profile deals.

Everything You Ever Wanted to Know about Marketing Communications

Steve Blank

For example, our goal could be: Create demand for our products and drive it into our sales channel. Smart CEOs treat communications as a force multiplier for sales, a tool to dramatically increase valuation and the vehicle to get acquirers lined up at the door.

ESADE Business School Commencement Speech

Steve Blank

Today’s workforce has radically different expectations, brands are losing their power, physical channels are being destroyed by virtual ones, market share is less important than market creation, and software is eating world.

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Beyond the Lemonade Stand: How to Teach High School Students Lean Startups

Steve Blank

Therefore we needed them to think and learn about two parts of a startup; 1) ideation - how to create new ideas and 2) customer development – how do they test the validity of their idea (is it the right product, customer, channel, pricing, etc.).

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Bootstrapping Is Much More Fun Than Investors

Startup Professionals Musings

Use multiple social-media channels, blogging, email and voicemail to build the same image and responsiveness as larger competitors. Adding free users or customers to increase valuation makes sense for a venture-backed startup looking to go public, but will kill bootstrapping.

A Founder's Guide to M&A

Hazard Lights

Likely valuations at this stage can range from modest acqui-hires to reasonably attractive outcomes if you are able to articulate a combined growth story that gets several acquirers excited such that you can get a little competitive bidding going in the process.

How to value your company for sale (Part 1)

A Smart Bear: Startups and Marketing for Geeks

Or a company like Zappos (who was famous, growing, and profitable) still got only a 1x sales valuation when bought by Amazon because of thin margins. There’s many possibilities, each of which will cause a different valuation of your company. To stoke an existing sales channel.

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Traction Metrics Seed Real Startup Funding And Growth

Startup Professionals Musings

Use experiments to test every element of your business model – cost, price, marketing, sales channel, customer acquisition cost, lead conversion rate, and lifetime value. Traction is the measure of how many of these have been validated, and their projection to your business valuation.

How Winning Startups Tackle Tough Growth Constraints

Startup Professionals Musings

Win-win deals with competitors are always possible, for example, to reduce costs of a common component, to penetrate new markets, set industry standards, or share a sales channel.

30 Questions Angel Investors Will Ask You

Up and Running

Do you realize you’re vastly underestimating your marketing expenses (or sales expense, or margins through channels, or headcount required for direct selling)? How did you come up with that valuation? When you pitch a startup to angel investors, you want to get questions.

How much capital should you raise?

Version One Ventures

Keep funding to a minimum until you have found a product-market fit Early rounds are particularly expensive, because company valuation is low. Once you can show traction, with scalable marketing and sales channels, you can get vastly superior valuations.

Quality over quantity on The Equity Kicker

The Equity Kicker

When I look in my traffic sources now it’s all Twitter, Facebook, Google and aggregators like Mattermark, channels where posting daily makes much less of a difference. Next up will be some thoughts on mutual funds investing in startups and their impact on valuations and the VC industry. Robert Scoble is perhaps the greatest blogger of them all, so when I started blogging in 2006 I read Naked Conversations , his guide to blogging. One of his tips was to post every day.

Innovation, Change and the Rest of Your Life

Steve Blank

When the product and channel are bits, adoption by 10’s and 100’s of millions and even billions of users can happen in years versus decades. Continuous innovation requires the imagination and courage to challenge the initial hypotheses of your current business model (channel, cost, customers, products, supply chain, etc.) Their need to get into high-profile deals has driven late-stage valuations into unicorn territory. I gave the Alumni Day talk at U.C.

10 Top Reasons For First-time Entrepreneur Failure

Startup Professionals Musings

Intellectual property is also often the largest element of early-stage company valuations for professional investors. A major resource is cash funding, but other resources, such as industry contacts and access to marketing channels may be more important for certain products.

What Jonah @Peretti, CEO of BuzzFeed, Sees in the Future of Digital Media

Both Sides of the Table

there’s a great story from Jonah in the video but you have to watch to hear it :)) But it’s undeniable that it has become a digital media powerhouse having raised around $500 million in capital with a valuation reported at $1.7 BuzzFeed.

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The difference between Facebook bulls and bears

Jason Crawford

As others have pointed out, the growth Facebook needs to justify that valuation can’t come entirely from the userbase—there literally aren’t that many people on Earth. But if you look at Facebook’s assets and think of potential revenue models they haven’t even launched yet, you can understand a much higher valuation. Imagine turning viral distribution into a paid channel, with Facebook earning a commission on social referrals.