{"id":4906,"date":"2025-02-11T17:46:26","date_gmt":"2025-02-11T16:46:26","guid":{"rendered":"https:\/\/maraz.es\/?p=4906"},"modified":"2026-07-22T18:03:18","modified_gmt":"2026-07-22T16:03:18","slug":"how-to-value-a-startup-methods","status":"publish","type":"post","link":"https:\/\/maraz.es\/en\/how-to-value-a-startup-methods\/","title":{"rendered":"How to value a startup: methods, examples and common pitfalls"},"content":{"rendered":"

How to value a startup:<\/strong><\/h2>\n

Valuing a startup is one of the most complex exercises in corporate finance. Unlike an established company \u2014 where a normalised EBITDA and a market multiple provide a reliable reference \u2014 a startup’s value resides almost entirely in the future:<\/strong> in a market that may not yet exist, in a team that has yet to prove its ability to execute at scale, and in a business model whose monetisation may still be years away.<\/p>\n

Valuing a startup \u2014 or any company whose cash generation is not positive, or where it is positive but fails to reflect its true growth potential \u2014 is a formidable challenge for investors, entrepreneurs and valuation specialists alike.<\/strong><\/p>\n

Pre-revenue companies, which have yet to generate a single unit of revenue from their business model, are already raising capital in multiple financing rounds. In this environment, the valuation of the asset being invested in often matters as much as the selection of the asset itself: investing in an overvalued company dramatically reduces the probability of generating positive returns, even if the underlying business performs well.<\/p>\n

The most reliable approach \u2014 though inevitably subjective \u2014 is to project future cash flows based on the company’s track record and the management team’s realistic assumptions, and discount them to the present using a rate that reflects the required return of both shareholders and financial creditors. The challenge, of course, is that most startups have no track record and no positive cash flows to project from.<\/p>\n

The question then becomes: how do we value a company that has never been profitable but whose management team is projecting exponential growth?<\/strong><\/p>\n

There is no single correct method for valuing a startup. What does exist is a set of complementary methodologies that, combined and calibrated to the specific stage of the company, allow for a reasonable valuation range \u2014 one that serves as a credible basis for negotiating with investors without sacrificing value unnecessarily.<\/p>\n

A startup valuation is not an objective calculation \u2014 it is an informed negotiation. The goal is not to arrive at a precise number, but to build a robust argument that justifies the range the founder is defending to the investor.<\/em><\/p>\n

Which method to use at each stage<\/strong><\/h2>\n

Before selecting a valuation method, it is essential to understand the startup’s current stage \u2014 the appropriate approach varies significantly depending on where the company is in its development. Applying a DCF to a pre-revenue company makes no sense, nor does using the Scorecard Method as the primary approach for a Series B with consolidated metrics.<\/strong><\/p>\n\n\n\n\n\n\n\n\n
Stage<\/strong><\/td>\nCharacteristics<\/strong><\/td>\nRecommended method(s)<\/strong><\/td>\nIndicative pre-money range<\/strong><\/td>\n<\/tr>\n<\/thead>\n
Pre-seed \/ Idea<\/strong><\/td>\nNo product, no customers \u2014 team and hypothesis only<\/td>\nBerkus + Scorecard<\/td>\n\u20ac100K \u2013 \u20ac500K<\/td>\n<\/tr>\n
Seed<\/strong><\/td>\nMVP or prototype, first customers, nascent ARR<\/td>\nScorecard + ARR multiples<\/td>\n\u20ac500K \u2013 \u20ac3M<\/td>\n<\/tr>\n
Series A<\/strong><\/td>\nValidated model, positive ARR, accelerating growth<\/td>\nVC Method + ARR multiples + First Chicago<\/td>\n\u20ac3M \u2013 \u20ac15M<\/td>\n<\/tr>\n
Series B and beyond<\/strong><\/td>\nScaling, geographic expansion, path to profitability<\/td>\nVC Method + DCF + Multiples<\/td>\n\u20ac15M \u2013 \u20ac100M+<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

These ranges are indicative and vary considerably by sector. A B2B SaaS startup with NRR above 110% and ARR growth of 100% per annum can justify valuations well above these thresholds even at early stages.<\/p>\n

1. The Berkus Method \u2014 for pre-revenue startups<\/strong><\/h2>\n

The Berkus Method is the standard approach for valuing startups that have not yet generated revenue. Its logic is straightforward: each milestone achieved by the startup reduces investor risk, and that reduced risk carries an assignable economic value. The method evaluates five factors, each with a maximum value of \u20ac500,000, establishing a pre-money ceiling of \u20ac2.5M:<\/strong><\/p>\n