Startup valuation
The valuation determines how many shares you give up for how much capital. For young startups it is less a calculation than a negotiation – but it is not a gut feeling.
Pre-money and post-money
The pre-money valuation is the value before the investment, the post-money valuation the value after it (pre-money plus the capital invested). The ratio determines the share the investor receives.
Valuation methods
Established methods include the discounted cash flow method, comparison with similar companies (multiples) and, for early stages, simplified approaches such as the venture capital method. For young startups, market comparison and negotiation dominate.
Value realistically
A valuation that is too high makes later rounds harder and can lead to a down round. One that is too low costs you shares unnecessarily. The aim is a valuation you can justify and that leaves room for the future.
Frequently asked questions
How is a startup without profits valued?
Through market comparisons, potential and negotiation rather than current profits. Team, market and traction play the biggest role.
What does pre-money valuation mean?
The company's value before the investment. Adding the capital invested gives the post-money valuation, from which the investor's share is calculated.
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