| Hi. It’s difficult to answer this question objectively, however I will offer my approach as an investor (please don’t shoot me for trying to answer the question). Priorities and weights:
1. (.25) Team (commitment, experience and expertise) 2. (.25) Market (size, accessibility, approach) 3. (.15) Product status (a. Concept b. Lab prototype c. Demonstrable prototype (alpha) d. Testable proto-product (beta) e. Market-ready (MVP) 4. (.15) Traction (a. No users b. 10-100 users/customers and/or award(s) c. 100-1000 users/customers d. More than 1000 users/customers 5. (.1) Revenue (a. No revenue b. Grant, SBIR or other c. Product revenue < $100k d. Product revenue $100k - $250k e. Product revenue > $250k 6. (.1) Gut instinct A = a multiple on revenue (depends on industry) 0-12 months: $0 to $2.5 million. ($2.5MM * weight) 12-18 months: $0 to ~$3.5MM (A + $2.5MM * weight) 18-24 months: $0 to ~$5MM (A + $3.5MM * weight) 24-36 months: $0 to ~$10MM (A + $5MM * weight) This is just my rough approach, and it’s not always appropriate. Based on some experience and where I invest, I would say it probably applies for most of the US other than Sili Valley or other Western US startup hubs where investors are more “optimistic.” |
How useful are market comparables? In particular, for pre-series A with at least 1 financing (grant/pre-seed/seed) round. Generally, it seems this cohort is still working out 1,2 and 3, and have little to no 4 or 5.
My guess is that your method results in a valuation close to a reasonably weighted market comparable.