

Ask HN: How do you determine an initial valuation? - lionheart

I'm getting ready to start looking for some angel funding but I'm having trouble determinig how to value my startup for their investments.<p>Did PG have any advice on this in any of his articles?<p>Those of you who have gone through this, how did you come up with your very first valuation?
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swombat
Avoid it like the plague. Get a lawyer and issue convertible notes instead.
Valuing a seed company with half a product and no customers only ends up in
tears.

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icey
I assume you have some kind of neighborhood of your company's worth in mind,
right?

How much do you think your company will be worth in 2 to 5 years? Do you have
any data to back that up? What are the valuations of similar companies? Are
you able to grow to their size? What does your overhead look like? What sort
of cash flow do you foresee generating?

It's a bit of a black art, but you should be able to have some idea of what
you honestly think your company should be worth. If you don't have a clue
about this, then you need to wait to pursue any sort of funding until you can
figure out what your value proposition is.

Remember that when you look for funding you are offering to sell a portion of
your company at a discount in exchange for expertise and liquidity. That
discount increases along with risk. I don't know if it's a linear relation,
but the two are most definitely related.

