3 Ways Angel Investors Value Pre-Revenue Startups
It’s always an interesting discussion when valuing early-stage startups without existing revenue. Fundamentally, valuing a startup is very different than valuing an established company. Quantitative analysis and financial projections don’t always predict the future success of the early stage startup which is why some angel investors put greater value in the entrepreneur and management team. No matter the region, product or industry, investors must reduce risk as much as possible.
There is no one way to determine the pre-money valuation (the startup’s value before receiving outside investment) so it’s wise to gain insights on valuation methodologies from other entrepreneurs and angel investors. Being aware of every method could only help you leverage and negotiate your own valuation with investors. Below are three pre-money valuation methodologies that are often used by angel investors:
Scorecard Valuation Method
The Scorecard Valuation, also known as the Bill Payne valuation method, is one of the most preferred methodologies used by angels. This method compares the startup (raising angel investment) to other funded startups modifying the average valuation based on factors such as region, market, and stage.
