The Heretic x GYSHIDO Logo

By PASCAL FINETTE

The Heretic x GYSHIDO: Raw, unfiltered dispatches for entrepreneurs and change makers navigating the unknown. Where radical thinking meets relentless execution. No BS—just the insights and methods to actually get your s#!% done.

June 12, 2016

How Much Is Your Startup Worth (The $1M Question)

One of the most vexing problems for anyone raising equity-based funding (typically Series Seed and onward) is the question of valuation. I get this question all the time from the founders I work with: “We are going to raise money from investors; how shall we value our company?”

Your typical startup doesn’t have any hard numbers to go by — you are pre-revenue and pre-profit. Mature businesses are typically valued at a multiple of their revenue; with the multiple depending on your industry.

For startups that doesn’t work. Sometimes you can look at comparable funding rounds — company X looks a lot like you and raised $Y million on a $Z million valuation.

Truth be told — determining your valuation is insanely easy and requires quite literally only 4th grade math:

How big of a check do you want — divided by — the ownership percentage — equals — the value of company.

(Michael Dearing from Harrison Metal brought this to my attention.)

It’s truly as simple as that. If you’re raising $3M and you want to give up 30% of your total equity for that investment, your valuation is $7M pre / $10M post money (if you’re unclear about the distinction of pre and post money valuations, read this article).

Simple as that.

With all this being said — good luck with your fundraise!

back…


1299 Posts and Counting.
Don't miss the next post. Sign up now!

Copyright © Pascal Finette | Privacy Policy | Contact