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Valuing early stage companies – Talia Goldberg

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I have heard VCs answer that question ambiguously by proclaiming that “valuing early stage startups is more art than science.” In my opinion, that is akin to admitting that you put your finger in the air and conjure up a valuation based on the way the wind is blowing. At the series A stage, rarely does valuation reflect the fundamental worth of a business. This has been glaringly obvious as of late. Many startups that commanded nose-bleed valuations last year have quickly been rendered almost worthless. Even without these extreme examples, most series A stage companies have <$3m of revenue, no cash flow, and a short operating history. Using traditional financial valuation methods, most startups with that profile would be disappointed to learn they are worth at most single digit millions. So what is your startup worth? Below are a few common valuation frameworks. I often use more than one method, but my favorite by far is the Scenario Analysis. Common early stage valuation frameworks:

When presenting a term sheet, I am often asked, “how did you come up with this valuation?” I have heard VCs answer that question ambiguously by proclaiming that “valuing early stage startups is more art than science.” In my opinion, that is akin to admitting that you put your finger in the air and conjure up a valuation based on the way the wind is blowing. At the series A stage, rarely does valuation reflect the fundamental worth of a business. This has been glaringly obvious as of late. Many startups that commanded nose-bleed valuations last year have quickly been ren

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Valuing early stage companies – Talia Goldberg

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