

Ask HN: Pre-revenue valuation - throwaway9777

How do you decide what a company with traction is worth pre-rev for a low millions round?
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gettinstarted
Practically speaking, the market sets the rate. How desirable you are compared
to other deals, determines your valuation above that rate.

Let's say your company has typical proof-of-concept traction. Depending on the
specific space that could be 10-50k uniques per month.

For example, 500 startups typically makes a 50k investment at a $1 million
dollar valuation for companies they incubate. Syndicated angel / early stage
vc rounds are usually (lately) in the $3-5 million post range. However, this
is more a function of the amount raised and the % each investor needs to make
their investment model work.

I've also noticed that revenue for most early-stage companies looking to raise
funds, when revenue does exist, is usually a milestone (proves the business
model). A company that has yet to scratch the surface in their market, which
is most early-stage, doesn't get their valuations off multiples. A company w/
rev of 5k per month that gets a $3 mil pre-money "technically" has a 50x
valuation (annualized) or let's say 25x with some decent growth projections.
But, the revenue doesn't lead the pricing, it's a just truism via basic
financial formula.

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citizenkeys
Guess and use a convertible note instead of a straight investment. If the
company is worth something, the note turns into an investment. Otherwise, the
note stays a loan that needs to be re-paid.

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throwaway9777
Aren't convertible notes for small amounts before larger investment?

