[iamelgringo]

[disclaimer]Mind you, I'm on the outside looking in. I really haven't started the startup funding shuffle yet, but I've read compulsively. And, this is what I've gleaned. YMMV.[/disclaimer]

First, a few important questions.

Do you have revenue? How many users? How fast have your been growing? Proprietary patentable technology, or a user focused tool built on open source? I'd say that how many people are on the team, and how long you've been coding is rather unimportant. What is most important is what you have in hand.

What is a startup worth? Ultimately what the market is willing to pay for it. So, it's worth whatever you're willing to sell a stake of it for, and whatever the angel is willing to buy a stake for. It all depends where the investors and the market are at in the greed <--> fear continuum. Right now, I get the impression that we're towards the end of the greed spectrum, and we'll be swinging back to fear soon. I know that's not very helpful, but ultimately it's all voodoo and people's best guesses. But, there are a few guidelines.

It helps to have a base case. Take for example YC funded companies:

Y Combinator offers $5,000 n + $5,000 where n is the number of founders for a 5-20% stake in a startup. That's usually for a group of founders with an idea, a prototype or maybe a little bit of code and a few users. That means that 0-6 months ago, had you been funded by YC, here's what your company would have been worth:

$5,000 x 2 founders + $5,000 = $15,000 for a 5-20% stake in your company. If $15,000 is worth 5-20% of your company, that means that your company was worth $75,000 to $300,000. Here's the formula:

startup value = investment/stake

or in the above YC case:

value = $15000/5% = $75000 at the low end

or

value = $15000/20% = $300,000 at the high end

Does this make sense? Someone please correct me if I'm wrong, but this is pretty much how I understand it's done.

If you have more traction than a typical YC group, i.e. more users, unique technology, revenue streams, strong code base, etc... Then, you're probably worth more than the $75,000 - $300,000 valuation. If you have more traction, you're probably looking at a 300,000 - 1,000,000 valuation. If you have less or as much traction, you're looking at the YC range.

Anybody else have any thoughts on the matter?

[mattmaroon]

Y C can command lower valuations (though I don't think they really take advantage of it) than most other investors due to their incredible value add, which may actually be the highest in the industry. There are probably zero investors who are going to put as little as $100k into a company that come anywhere close. So out of the gate I'd require a higher valuation from other investors.

[brett]

I think you mean:

value = $15000/20% = $75000 at the low end

or

value = $15000/5% = $300,000 at the high end

[iamelgringo]

:) Yeah. I was tired when I wrote the post. Thanks.

[hacker64]

I'd say I'm at stage similar to what an 'average' YC startup would've been at after about 3 to 5 months. Not hugely populr, and not at a deadend either. It's a consumer, social, Web site. We don't have a lot of users yet, and we don't have revenue, but the concept seems to be a good one, and I think that's how the investor heard of us and approached us.