The Secret Sauce to Startup Valuation

A few insights of the Venture Transactions Multiples — France 2016 Edition. Download the full report for free

Arthur Porré
Avolta Partners


“How much is my startup worth?”

How many times did I hear this question? Clients, prospects and almost every entrepreneur I meet, I keep on hearing the same question over and over again.

What makes it so damn complicated to value correctly a startup?

  1. There is no public data on startup valuation. The only thing startups and investors communicate on is the amount of money raised, which has barely nothing to do with valuation. Rumours, fantasies, unicorns, that’s all what’s left for entrepreneurs.
  2. Venture Capitalists own some great data. Data collected from hundreds of startups they see. Data from the previous deals they made. And obviously data from their global expertise and good understanding of the market.

This information asymmetry leads to great misunderstanding between entrepreneurs and Venture Capitalists when it comes to making a deal and defining a fair value. The gap between the 2 sides is often huge.

According to basic economic theories, information asymmetry is one of the key factors making a market inefficient (or even die). We don’t want that for European Venture Capital. We want our startups to conquer the world.

That is one of the reasons why we decided to dig up the roots of startup valuation and publish our Venture Transaction Multiples — France Edition 2016. This is the first public guide published on that subject and we hope it will help entrepreneurs.

First things first, here is our synthetic definition of startup valuation:

Based on our experience when it comes to making deals and discussing valuation, our main observation is that a = 80% and b = 20%, which means quantitative drivers (basically Sales in Venture Capital) on which we can apply a specific (sector x business model) EV/Sales multiple — account for 80% of the valuation. On the other hand, non-quantitative drivers — the team, the product, the competition, the equity story, etc. — account for 20%.

Appart from Venture Capital, everyone in M&A and Private Equity makes valuation considerations based on Transaction Multiples (as well as Discounted Cash Flow, but that makes no sense in Venture because future cash flows are hardly positive).

497 deals for €1.8bn in total in France in 2015

In our Venture Transaction Multiples guide, we take methodology very seriously:

  1. We screened all the fundraisings in Venture in France in 2015: 497 deals for €1.8bn in total
  2. From these 500, we selected only the 286 Tech deals > €1m — Seed rounds are too irrational to be conclusive
  3. We mapped those 497 deals into 9 Sectors (AdTech, FinTech, Digital Media, IoT, eCommerce, Business Services, Consumer Services, CleanTech and MedTech/BioTech) and 7 Business Models (Subscription, Commission, Performance, eCommerce, Hardware, Audience and Research)
  4. Then, we searched for data in legal documents (basically, the ratio new shares issued/total shares and the amount of cash invested in the company) in order to calculate their valuation (EV) at the time of the deal
  5. We searched for their Sales in their annual accounts.
  6. Eventually, we were able to determine 171 EV/Sales Transaction Multiples
EV/Sales transaction multiples by sectors and by business models

A few key insights of our analysis (more in the complete report — download on

  • 6.38x EV/Sales: the global median of 2015 fundraisings
  • 28%: the median dilution of 2015 fundraisings
  • 53 months: median time to raise a Series A (from the inception of the company)
  • 26 months more to reach Series B
The long journey of an entrepreneur
  • 20% bullshit gap: the difference between amount announced in the press and Equity really raised (median)
  • With Avg. Sales = €2m x Avg. Deal size = €6m, there might be a bubble in FinTech right now.
  • R²=0,66: EV/ARR is a more accurate metric than EV/Sales (R²=0,46) when it comes to SaaS business model. Based on linear regression vs. Growth Rate
EV/Sales vs. EV/ARR
  • And a last one for the road: the critical size to start thinking to raise a Series A with a SaaS Business Model seems to be €50k of MRR
Amount raised vs. MRR

I hope this small contribution will help foster the European Venture Capital ecosystem. We’ll publish the Venture Transaction Multiples for other countries in Europe very soon.

For more detailed information, your can download the full Venture Transaction Multiples — France 2016 Edition for free

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Thanks to my team @Avolta Partners. You’re simply the best. Love you.