Let's bring the light to your case: Valuation

The 30-second summary

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Valuation tells investors two things:

• What you’re worth and what share they get for their money. There isn’t one “correct” number, but there are numbers you can explain fast and numbers that lead to long follow-ups.

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What supports your valuation depends on your stage:

• Pre-revenue valuation is about evidence: the market, why you, and whether the team can execute.
• Revenue valuation is about performance: growth, margins, efficiency, and how you compare to similar companies.

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Before you sign anything:

• Check what equity is left for the active team and ESOP after the round.

What you need to know about valuation

• When you share a valuation, you’re putting a price tag on the company today, based on what you can actually show at your stage. Investors will have their own view, but your job is to make your number feel reasonable.
• The key split is simple. If you’re pre-revenue, the story is about potential backed by proof. If you’re revenue-generating, it’s about performance and whether it can repeat.

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Your move

Don’t wait for investors to “suggest” a number. Come with one you can stand behind.

• If you’re pre-revenue, a good first step is using our startup valuation calculator and then checking whether the result matches your story.

• If you’re revenue-generating, bring the metrics that explain your growth and why it should continue.

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Steps to follow

To put this into practice, follow these steps:

1. Set your anchor: Come with a number or range you can explain, plus one short reason behind it.
2. If you’re pre-revenue: Start with a structured estimate using our valuation calculator, then back it up with proof: market, why you, and why this team can execute.
3. If you’re revenue-generating: Start from your revenue level, growth rate, growth outlook, and industry, then sanity-check against typical revenue multiples in your space.
4. Be ready for the “why” questions: Investors will ask what’s behind the number, like retention, margins, unit economics, and customer acquisition (cost and payback).
5. Choose the deal shape: If you’re using a cap, discount, or fixed valuation, make sure you understand the trade-offs (the valuation trinity explains the options clearly).
6. Do the dilution check last: Model what’s left for active founders, key people, and ESOP after the round, and use pre-money vs post-money here to make dilution precise.

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Watch out for this

□ Pre-revenue valuation with no evidence (it quickly turns into “why this number?”).

□ Revenue talk without being ready for growth, margins, and efficiency questions.

□ Picking “similar companies” without being able to explain why they’re actually comparable.

□ Agreeing to terms that leave too little equity for the active team or ESOP after the round.