Loading...
Answers
MenuHow to value your tech startup, specially when you dont have any users(pre-launch)?
This question has no further details.
Answers
It depends on a few factors. I would say that it's the investors that value your company, not you. Until there's a (first) funding event, valuation is a theoretical thing.
A bit like real estate, your home is worth what the offer comes at.
That said, it depends on the potential of the idea, the size of the market, how far you're into the product development, the team you have assembled, and what the investor thinks it's worth. If all else fails, pick a number between $1-7 million.
Your valuation is whatever someone is willing to pay you for your company. Instagram was bought for ~$1Bn, therefore, it was worth ~$1Bn, whatever anyone else says.
As others have said, your investors define your valuation, and anyone looking to acquire you, even more so. A lot of companies look at revenue, users, and technology IP, but with more companies starved for talent, you should also take your human capital into consideration. An acqui-hire ain't always a bad way to go.
I have invested in 2 pre-launch companies in the past 6 months and evaluated more than 100 companies raising funds pre-launch in the past 3 months.
In today's world, the minimum bar you should set is a $1,000,000 pre-money valuation. The reason being is that if you accept money for less than that, given today's surplus of early-stage funding, it's a negative signal to future investors.
Today's ceiling for a sophisticated investor valuing a pre-launch startup is $5m and that's with exceptional founders or great founding teams.
So now you have a range by which to navigate within. Further context that will be helpful to you is for you to determine how much you really need to raise to demonstrate traction. It will be much harder for you to raise further funding if you have launched but failed to get substantial validation from your users. So you want to ensure that you can execute the plan you think will work, and ideally have additional funding for some contingency plans. In total, you should never give up more than 1/3 of the company in a pre Series A funding round. Doing so will mess up your cap table later on, and significantly reduce incentives for you and your team. So then, you get a much easier calculation.
Generally, good investors are fairly insensitive to a valuation under $3m.
Happy to talk to you about your funding plans.
Related Questions
-
What is a better title for a startup head....Founder or CEO? Are there any pros/cons to certain titles?
The previous answers given here are great, but I've copied a trick from legendary investor Monish Pabrai that I've used in previous startups that seems to work wonders -- especially if your company does direct B2B sales. Many Founders/ CEOs are hung up on having the Founder/ CEO/ President title. As others have mentioned, those titles have become somewhat devalued in today's world -- especially if you are in a sales meeting with a large organization. Many purchasing agents at large organizations are bombarded by Founders/ CEOs/ Presidents visiting them all day. This conveys the image that a) your company is relatively small (the CEO of GM never personally sells you a car) and b) you are probably the most knowledgeable person in the organization about your product, but once you land the account the client company will mostly be dealing with newly hired second level staff. Monish recommends that Founder/ CEOs hand out a business card that has the title "Head of Sales" or "VP of Sales". By working in the Head of Sales role, and by your ability to speak knowledgeably about the product, you will convey the message that a) every person in the organization is very knowledgeable about the ins and outs of the product (even the sales guys) and b) you will personally be available to answer the client's questions over the long run. I've used this effectively many times myself.VR
-
What is a good/average conversion rate % for an e-commerce (marketplace model) for customers who add to cart through to purchase order.
There is quite a bit of information available online about eCommerce conversions rates. According to a ton of sources, average visitor-to-sale conversion rates vary from 1-3%. This does not mean the Furniture conversions will be the same. The bigger problem is that visitor-to-sale conversions are not a good data point to use to measure or tune your eCommerce business. All business have some unique friction factors that will affect your final conversion rate. It's very important to understand each of these factors and how to overcome them. The best way to measure and optimize is to take a conversion funnel approach. Once you have defined your funnel you can optimize each conversion rate to better the total effect. For example: Top of the funnel: - All web site visitors, 100,000 / month First conversion: View a product page, 50% of all visitors Second Conversion: Add to Cart, 10% of people who view products Final Conversion: Complete Checkout, 80% of people who put items in a cart In this example we see that only 10% of people who actually view products put them in to a cart, but 80% of those people purchase. If you can figure out why visitors are not adding items to their cart and fix the issue to increase the conversion rate, revenue should increase significantly because of the high checkout rate. You can use free tools like Google Analytics to give you a wealth of information about your site visitor and their behavior or there are some great paid tools as well.DM
-
What are digital products or services you wish existed and why? How would they help you and/or your business?
As the owner of a web development firm, I am always inventing our own digital products and services. Any service that is web-based and accessible to mobile devices work as long as they solve a business need. The digital products I wish would exist are: 1. Home building services including videos by experienced builders 2. Mail and package weighing digital services 3. More security services for document transfer services. BruceBC
-
A tech startup fully outsourced. What problems would be in this situation?
The ideal way would be to hire the engineer while the project is still under development. You and the engineer should follow up with the outsourced partner in the process. This will give hold to the engineer and later more staff can be trained in upgrading or follow on versions of the product/service.SM
-
I finally found my billion-dollar startup idea. Now what?
The idea is a very small fraction of what it takes to earn the first million. Certainly billion. What actually matters is your ability to *execute*. Entrepreneurship means "having the talent of translating opportunities into money". Or, as Alexis Ohanian of Reddit said, "entrepreneur is just French for 'has ideas, does them'." As much as it may seem that transitioning off your 9-to-5 is the biggest hurdle, it's not. If you can't "get out of the gate" then you're also not ready to deal with the real challenges of business, like "competition that has 1,000x your funding" or "suppliers that jerk you around" or "customers who steal your intellectual property". It's easy to have a "billion dollar idea". I'd like to mine gold off of asteroids; I'm sure that would be worth billions. I'd also like to invest in Arctic real estate that will become coastal vacation property after fifty more years of warming. And, of course, to make a new social network that everyone loves. But saying these things is very very different from accomplishing them. Prove your concept by first taking a small step, such as making the first dollar. (Maybe try Noah Kagan's course at http://www.appsumo.com/how-make-your-first-dollar-open/). If you can't figure out a way to "make it go" without a giant investment, then you're kidding yourself about your ability to execute the business. If you *can* figure out a way to get a toehold, then by all means do it now! Happy to advise further, feel free to contact me for a call.AS
the startups.com platform
Copyright © 2025 Startups.com. All rights reserved.