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.
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