Are you at the point where you are wondering how to value a startup without revenue?

While the paper value of your company might not be the big end goal, the main focus on a daily basis, or even the most important negotiating point, it can play a big role in many ways throughout the lifecycle of your startup. 

Few startups start out with revenues. Many take years to build up significant revenue. Some never seem to breakeven. So, what role does value play for your venture? How will others value your company? What can you do to boost revenues and value quicker?

Why Valuation Is So Important For Startups

Experienced founders will tell you not to get hung up on valuation. Even when it comes to fundraising and exiting. It can be a factor, but it isn’t the most important one.

However, the value put on your business during fundraising rounds can impact how much of your company you are giving up for the amount of new capital coming in. In an M&A deal or other exit, the value will directly impact how much you walk away with. Just don’t forget that the terms of these deals can be more impactful than the top-line dollar amounts.

Part of the process of understanding how to value a startup without revenue starts with keeping in mind that these valuations can influence your ability and the terms of being able to acquire other businesses too. That can be crucial to your overall growth and profitability.

While it may seem superficial, valuation also has a very real impact on your appeal and credibility as a company too. This can make a big difference when it comes to hiring, recruiting advisors, getting press, drawing other investors, and even who wants to become a customer and how much they are willing to pay for your product or services. 

When it comes to fundraising, keep in mind that you need to master the story which is what raising money is all about and for that, you need a pitch deck. This is being able to capture the essence of the business in 15 to 20 slides. For a winning deck, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.

Traditional Business Valuation

Traditional businesses, or traditionally, businesses have been valued based on EBITDA

That is Earnings, Before Interest, Taxes, Depreciation, and Amortization and factored. 

This formula values a business based on its income. Just like you might apply to buy a rental property or dividend-paying stock. 

Of course, the big challenge in the startup world is that many early-stage startups have no revenues. Even very mature startups may still be reporting quarterly and annual losses. 

Ways To Value A Pre-Revenue Startup

There are several common methods of tackling how to value a startup without revenue:

  1. Berkus method
  2. Scorecard method
  3. Venture capital method
  4. First Chicago method
  5. Risk factor summation

The Berkus Method

The Berkus Method assumes a startup will have $20M in revenue by year five. It assigns a value of up to $500k for five line items. This gives a new pre-revenue startup up to $2.5M in value, and almost a 10x return for investors.

Values are assigned to these factors and summed up:

  • Business idea
  • Having a prototype
  • Strength of the management team
  • Strategic relationships
  • Having rolled out a product or starting sales

The Scorecard Method

This valuation method uses comparable companies at the same stage, in the same industry and same region as a base point. Simply put, theoretically, if your startup was identical to another which was just valued at $10M, then yours should be worth $10M too. The Scorecard Method then adjusts the value of the subject startup based upon the following factors.

  • Strength of management
  • Size of opportunity
  • Product/tech
  • Competitive environment
  • Marketing and sales
  • Need for additional capital
  • Miscellaneous factors

Venture Capital Method

This is probably the most important method when it comes down to how to value a startup without revenue. This method begins by projecting future revenues (i.e. five years from now), assigning trading multiple to estimated net profits based upon industry benchmarks, and then backing out the desired return for an investor.

First Chicago Method

This valuation method bases the future value of a startup on its projected cash flow. It is effectively a Discounted Cash Flow model. It also moderates these projections balancing worst case, base case, and best case financial projections. 

Risk Factor Summation

This method of valuation looks at 12 risk factors and adds or subtracts monetary value on a five-point scale from very high risk to very low risk for each one. 

These risk factors are:

  1. Potential exit
  2. Reputation
  3. International
  4. Litigation
  5. Technology
  6. Competition
  7. Funding
  8. Sales and marketing
  9. Manufacturing
  10. Legislation
  11. Stage of business
  12. Management

I go over the different methods on how to value a startup without revenue in detail on the video below which you may enjoy.

How To Build Value Faster

As part of understanding how to value a startup without revenue, note that if you are disappointed with where the value of your startup may fall given these methods, what can you do about it?

Present it better

When it comes to fundraising and potential M&A deals there is definitely an art to presenting. While most of these methods call for throwing out your financial models, that data science can certainly be used to justify a high value and plant the seed of the idea of how big your company could be soon.

Start Selling

If you feel at a disadvantage due to not having any revenues or proof of concept through sales, then focus on getting out there and selling. It will say a ton about your value, and really help you to get your own numbers and projections right too.

Get Your MVP Or Prototype Done Today

This will not only de-risk your company for investors, but will put you on the fast track to sales and real revenues too. Start small. 


Hiring better executives, advisors, and key team leaders can help in every area. As well as reducing perceived risk and increasing appeal and value to investors and acquirers, while boosting your sales capabilities. 

Position Your Startup In The Right Market

What other successful and highly valued startups can you point to that justify a higher valuation for your own? You might have seen them as competition before, but they can actually help you in this way.

Hopefully, this post provides some guidance on how to value a startup without revenue. In addition below is a good framework for Saas startups on how to identify the type of range they will be placed depending on revenue ranges. We cover this in detail on our Inner Circle, which is the fundraising training where we help with everything from A to Z concerning fundraising. 

Saas startup valuations


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