how startup valuation works. early stage growth / scaling stage exit stage 2
TRANSCRIPT
4
Early stage
• “Valuation” does not show the true value of the company
• It shows how much the company investor gets for her money
• Founders with success in the past tend to get higher valuations (they give up less of the company in early stage than first-timers)
5
Early stage
• Valuation depends on how much money you need
• You need ENOUGH money to– Run 3 experiments and– Have at least 6 months of runway
• Investors want to see growth within 18 months
6
Early stage
• Valuation depends on who you take money from
Average valuation
$2.6M $1.5M $1M $400k
Average investment
$640k $300k $100k $20k
Dilution 20% 16% 9% 5%
8
Scaling stage
1. Investors find similar companies to determine their value to revenues ratio – then use it to calculate value of your company– Revenueoc/valuationoc ~ Revenueyou/valuation?
2. Take revenues this month, year, next year3. Calculate best, worst, and base cases4. Triangulate 3 cases5. Project when startup will exit6. Discount earnings by time value of money