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💹 Company Valuation

Updated at 2018-09-05 23:17

Before stating your valuation, define how much money you need. How much do you need to survive 18 months while active developing and marketing the product? How many people will you hire? Office expenses? Marketing? Travel and conferences? When you know how much you need for 18 months, you can calculate valuation you want. This is how the game is played.

Example SaaS valuations by stage:

  • pre-product 0.5 - 1 million valuation
  • initial traction 1 - 2 million valuation
  • after that, your valuation is monthly revenue multiplied by 90
  • e.g. 30k MRR x 90 = 2.7 million valuation
  • this also means that to get 10 million valuation requires 110k MRR.

Product traction justifies higher valuation. If you can convince that you have increasing traction, you can claim a large valuation.

  • Founders should have over 90% after pre-seed rounds e.g. angels.
  • Founders should have over 75% after seed round.
  • Founders should have over 50% after series A.

Some industries and trends also inherently have higher valuation. If some trend is on e.g. AI or blockchain, you might get by with lower traction.

Always start a new company, never use an existing company. Many public funds and loans only apply to new companies e.g. EU innovation fund.