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.

5 Reasons Startups Need Revenue As Well As Users

Startup Professionals Musings

Some analysts argue that revenue drives growth, while others say user growth drives revenue. Google reached $1B in revenue within five years of incorporation, and now has a market capitalization of over $400B. Long-term stability requires revenue growth and profit.

Trending Sources

10 Rules of Thumb for Startup Investment Valuation

Gust

Once you have a potential investor excited about your team, your product, and your company, the investor will inevitably ask “What is your company’s valuation?” How much is NewCo worth to investors at this point (pre-money valuation)? Image via eHow.com.

Revenue Recognition’s Effect On M&A

YoungUpstarts

There has been a lot of chatter regarding changes in revenue recognition criteria lately, but the effects it will have on the evaluation of companies planning an exit is just beginning to emerge. Recognize revenue when performance obligations are met (good(s) or service(s) have been provided).

Startup Valuation: How Much Is Your Company Worth?

Seed Stage Capital

skip to main | skip to sidebar 19 January 2010 Startup Valuation: How Much Is Your Company Worth? One of the most common issues that concern entrepreneurs is how to address the "Valuation Question." How do we best approach the question of valuation?

Should Entrepreneurs Grow Revenue Or User Count?

Startup Professionals Musings

Some analysts argue that revenue drives growth, while others say user growth drives revenue. Both have worked.Google reached $1 billion in revenue within five years of incorporation, and now has a market capitalization of over $400 billion.

Recurring Revenue is Magic

Seeing Both Sides

As a result, the full revenue for each deal was recognized in that quarter as soon as the software was shipped. This allowed our revenue to skyrocket from $1.8 But the downside to our business model was that we did not have hardly any recurring revenue. . Valuation.

2012 Valuation Survey of Angel Groups

Gust

This summer I conducted our third annual survey of the pre-money valuation of pre-revenue companies recently funded by angel groups in North America. Access to our 2010 and 2011 surveys can be found at 2011 Valuation Survey of North American Angel Investor Groups. For the first time, we asked for data from specific business sectors, as follows: All pre-revenue deals. Pre-revenue life Science, biotech and medical device deals. Pre-revenue energy and clean tech.

Non Recurring Revenue Businesses

Rob Go

I’ve been thinking a little about non-recurring revenue businesses. I’m coming to the belief that these are under-appreciated categories of investment, especially since the gospel of recurring revenue, subscription commerce, and SaaS has been preached in recent years.

A Bubble for Seed Stage Valuation

Angel Investing News

When entrepreneurs raise equity capital for startup companies, the investors’ percentage of ownership is determined by the negotiated valuation for the company at the time of investment. For example, if the negotiated pre-money valuation is $1.5 And, as you might expect, when the company grows and meets important milestones (granted patent, first revenues, etc.), the valuation of the company increases. What is the message regarding startup valuation?

What Startups Need To Know About Business Valuation

YoungUpstarts

With the daily demands of running a business along with the financial pressures and challenges inherent in early-stage companies, a business valuation may not be the first thing an entrepreneur thinks of when he awakes each morning. When does a startup company need a business valuation?

How we determine valuations for marketplaces

Version One Ventures

I often get asked about how to determine the valuation for a marketplace startup that is starting to scale. Our rule of thumb is that marketplaces at scale are valued at roughly 1x annualized GMV (typically about 6-8x annual revenue).

2011 Valuation Survey of North American Angel Groups

Angel Investing News

During the summer of 2010, I developed a workshop, A New ACEF Valuation Workshop for Angels and Entrepreneurs. To provide some reference points, I surveyed thirteen angels groups in North American to determine their recent experience in negotiating the pre-money valuation of pre-revenue companies. See the 2010 data reported here: Current Pre-money Valuations of Pre-revenue Companies. 2011 Angel Group Valuation Survey. Valuation.

Valuation Methods 101

Gust

This is the first of a six part series on different methods used by angel investors to arrive at pre-money startup valuations. Detailed descriptions will be published over the next few weeks: The Scorecard Method: 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. The Cayenne Valuation Calculator.

How To Compute The Valuation of Your Startup

FairSoftware's Blog

Startup valuation is a misunderstood and complex topic. But that’s not the right approach to understand how valuation works for your startup. How fast has your revenue been growing so far? It’s the #1 argument for a high valuation.

Demystifying Small Business Valuation

Inc Startups

A successful small business sale begins with a solid grasp of business valuation. Left unchecked, the valuation process can quickly devolve into a pricing routine that is rooted in personal attachments and other subjective inputs rather than solid data based on marketplace realities.

Snapchat and that old no revenues debate

Fred Destin

Not because of the reported $4 billion offer but because of the explosion of age-old arguments about how scandalous it is for a company with no revenues to be valued that highly. Here''s a selection: "why do investors think a silly app with no clear revenue model is worth so much money?"

Revenue exceptionalism vs margin exceptionalism

Chris Dixon

Three years ago, Fred Wilson wrote a great blog post called When Talking About Business Models, Remember that Profits Equal Revenues Minus Costs. The profound part is that high growth, early-stage tech companies often have a choice about how to become exceptionally valuable businesses: they can focus on growing revenues at the expense of margins, or margins at the expense of revenues. For example, do you invest heavily in sales and marketing to grow your revenue faster?

2011 Valuation Survey of North American Angel Groups

Gust

During the summer of 2010, I developed a workshop, A New ACEF Valuation Workshop for Angels and Entrepreneurs. To provide some reference points, I surveyed thirteen angels groups in North American to determine their recent experience in negotiating the pre-money valuation of pre-revenue companies. See the 2010 data reported here: Current Pre-money Valuations of Pre-revenue Companies. 2011 Angel Group Valuation Survey. Valuation.

8 things to consider when determining your startup valuation

The Next Web

Setting a valuation for an early-stage startup looking to raise money is tough. Should you rethink your magic number if you still have no revenue? There’s no one right answer or formula to rely on, yet plenty of advice — some of which can lead you in the wrong direction.

Startups With Real Revenue Can Get Venture Capital

Startup Professionals Musings

Your friends and family are really the only answer until you have a significant revenue stream. Use friends, family, and angels, if possible, to get a product, revenue, and customers first before the VC connection. To make this work, you will need an initial valuation of at least $5M.

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.”

Why Facebook Clearly Belongs in the 10X Revenue Club

abovethecrowd.com

Attached are my thoughts on the Facebook S-1 along with some quick stabs at valuation. Brief disclosure, Benchmark Capital has a minority position in Facebook as a result of the acquisition of FriendFeed, a company that was incubated in our offices. I thought it would be useful to look at Facebook using the scorecard from our [.]. Facebook Internet IPO Uncategorized Venture Capital Web/Tech

Startup Valuations – Again….

ithacaVC

I have written about startup valuations previously. This morning I was reading one of my favorite daily compilations of articles (called Innovation Daily, subscribe here ) and came across another great short article on startup valuations called “ Seed Rounds: How to Pick a Valuation “ Joseph Walla, who I don’t know, wrote it. There’s a reason it’s so difficult to figure out – valuations have little basis in reality for early stage companies.

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

The Equity Kicker

the ecommerce companies or software companies that we invest in) and you have a $1m revenue run rate and 20%+ month-on month growth you will generally be in good shape. Companies with greater revenues and stronger growth are able to raise bigger rounds at higher valuations. Companies with higher quality revenues (quality encompasses predictability and margin) will get away with a little less, or will get a higher value Series As when they hit this milestone.

Deals Gone WIld (aka "What Drives Massive Startup Valuations?")

Seed Stage Capital

skip to main | skip to sidebar 11 January 2011 Deals Gone WIld (aka "What Drives Massive Startup Valuations?") You can view that post (and the valuation table) here. What drives the sky-high valuations and manias we occasionally see around a deal?

Join The Unicorn Club Of Billion-Dollar Companies

Startup Professionals Musings

The fact is that valuations are largely set by top venture capital investors and financial firms, and they all have their own proprietary formulas for assigning value. If your new venture is still in the idea or development stages, don’t even think about a high valuation.

The Trap of Relative Value

Feld Thoughts

He’d gotten a random note asking about his valuation when we invested relative to another financing that was just announced. The other company, which was much smaller at the point of investment, got an 11x ARR valuation. My response to the specific situation was: Valuations have increased on a relative basis. Each of these examples got me thinking about the relative valuation trap. Or it’s easy to feel smug because you got a higher valuation than someone.

Stock 90

Investors Beware: Today’s $100M+ Late-stage Private Rounds Are Very Different from an IPO

abovethecrowd.com

As a result, a “late-stage” financing is no longer reserved for high-revenue, pre-profitability companies getting ready for an IPO; it is simply any large round of financing done at a high price. You must subtract it from your top-line revenue.

IPO 62

Dharmesh Shah – Valuation, Competition, Porter’s Five Forces and Culture

Business of Software Blog

Valuation. Valuation vs. Value. Valuation: What someone is willing to pay for the company at a given time. The valuation equation -> Valuation = Revenue x Multiplier. Valuation is based on revenue?!

Can Twitter Justify Its $11 Billion Valuation?

Inc Startups

A lot of entrepreneurs are probably watching the excitement over the approaching initial public offering of Twitter and wondering if they can get a similar valuation for their companies. It does have fast-growing revenue: According to its filings with the U.S.

Convertible Debt: Worst Form Of Seed Financing — Except For All The Others

Gust

Turn the question on its head: How could it make sense to lend money to a brand new, seed-stage company with no revenue, no products, and no collateral? (You Advising investors, I would advocate for traditional convertible notes (with a valuation cap) over this new structure.

Facebook, Twitter, & startup valuations - The best properties always look too expensive

Don Dodge on The Next Big Thing

The experts thought Microsoft was crazy when they invested $240M in Facebook at a $15B valuation. Digital Sky Technologies invested $200M in Facebook in May of 2010 at a $10B valuation. Just 7 months later Goldman Sachs is investing $500M at a $50B valuation. Techmeme has stories every day of startups with rich valuations, or later round financings with multi-billion dollar valuations. Market valuations are asymmetric.

Valuations 101: The Dave Berkus Method

Gust

We recently started a series of posts on establishing the pre-money valuation of pre-revenue startup companies for purposes of investment by seed and startup investors. Dave’s valuation model first appeared in a book published by Harvard’s Howard Stevenson in the middle nineties. Add to Pre-money Valuation. Note that the numbers are the maximum for each class (not absolutes) so a valuation can be $800K (or less) as easily as $2.5

After 20 years: Updating the Berkus Method of valuation

Berkonomics

There is a universal truth: fewer than one in a thousand start-ups meet or exceed their projected revenues in the periods planned. So how do you use financial projections as valuation metrics when you know the odds of those being accurate predictors of the future are so very unreliable?

10 Ways to Size Your Company’s Value for Funding

Startup Professionals Musings

Once you have a potential investor excited about your team, your product, and your company, the investor will inevitably ask “What is your company’s valuation?” How much is NewCo worth to investors at this point (pre-money valuation)?

Bad Notes on VC

Gust

Revenue multiple? Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. If you’re wildly successful early on or if they help you achieve a great valuation they actually pay a significant price for their eventual stock even though they took much more risk than a future investor and backed you early. People seem concerned about valuation. Why don’t they set a valuation then? This week. On the phone ….

What Has No Revenue, But a $700 Million Valuation? Yes, It's Hyperloop

Inc Startups

The Los Angeles-based startup just closed an $85 million funding round. The Future

How to value your SaaS company

Seth Levine's VC Adventure

So no surprise that when River Cities Capital released an overview of SaaS operating and valuation benchmarks, I hung on every juicy detail. The valuation metrics show this clearly. Companies in the study that scored 40% of greater had TTM revenue multiples of 6.4x

IPO 31

The Profit Imperative

Seth Levine's VC Adventure

Valuations are Down. In the public markets public SaaS valuations (EV/Revenue) are down 33% since January and 66% since their high in January 2014. Venture Economics bubble bubble bursting current market conditions startup valuations valuations