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High Tech Startup Valuation Estimator

Wondering what your pre-money valuation will be if a VC ever puts a term sheet on the table? Valuing a startup is intrinsically different from valuing established companies. Because of the high level of risk and often little or no revenues, traditional quantitative valuation methods like P/E comparables or discounting free cash flows are of little use. Startup valuations are largely determined based on qualitative attributes.

We've been told by several investors that our valuation model produces reasonably good valuations. Of course, every situation is different, so your mileage may vary.

Answer the following 25 questions, and we'll calculate an approximate range for you. For each of the following questions, choose the answer that most closely describes your situation. If you don't know the answer, select the first choice.

My product or service is:

	An idea that I've been toying with for a while
	Currently under development, backed by solid market research and a business plan
	Finally a working prototype being tested by potential customers
	Now generating revenues

My industry is:

	Something that has to do with selling to the general public (retail, food, entertainment, etc.) or to the government
	A field that nobody yet recognizes as being an industry, because my product is so cutting edge
	One that was in fashion among investors a few years ago (telecommunications, Internet, B2Anything, etc.)
	One that is currently in fashion among investors (medical devices, nanotechnology, proteomics, security software, money-saving enterprise software, etc.)

My product or service will:

	Have some novelty value
	Make life a bit easier or more enjoyable for many people, but not solve any fundamental problems
	Help a lot of companies do what they do a bit better, faster, and cheaper
	Save lots of lives and/or money

Global annual revenues in the sub-sector of the market I am competing in is:

	Under $500 million
	$500 million to $1 billion
	$1-5 billion
	Over $5 billion

My market is:

	Flat or shrinking
	Growing by under 10% per year
	Growing by 10-30% per year
	Growing by more than 30% per year

My primary competitors (others who are competing for the same consumer dollar by satisfying the same consumer need) are:

	Nonexistent, since consumers are not spending money to satisfy the need that I think they have
	Large companies with big R&D and marketing budgets and existing distribution channels
	Other startups that I may or may not know about
	Substitutes (e.g., the word processor is a substitute for the typewriter, which in turn is a substitute for pen and paper - in other words, what I offer is new and doesn't have a direct competitor yet, but consumers have other ways to satisfy these needs)

My customers (or potential customers) have:

	Not been identified
	Expressed interest in what I am doing
	Helped my team develop the product specifications and have placed pre-orders
	Purchased and raved about my product, and have placed repeat orders

My sales and marketing plan is:

	If I build it, they will come
	If I build a website, optimize my keywords, and submit it to Google, they will come
	I will hire a bunch of salespeople on commission only to go sell my product
	I have an extensive, well-researched sales and marketing plan that includes a mix of proven, cost-effective sales and marketing tactics

My revenues over the past 12 months were:

	$0-$999,999
	$1,000,000 - $4,999,999
	$5,000,000 or more
	$10,000,000 or more

My revenues over the next 12 months are expected to be:

	$0-$999,999
	$1,000,000 - $4,999,999
	$5,000,000 - $9,999,999
	$10,000,000 or more

My revenues 5 years from now are expected to be:

	Under $9,999,999
	$10,000,000 to $39,999,999
	$30,000,000 - $79,999,999
	$80,000,000 or more

My strategic partnerships consist of:

	A letter of intent expected to be signed next month by this guy I met at a local networking event
	A voicemail left with the purchasing agent at a TV shopping network
	A handful of legitimate signed partnerships and more in the works
	Exclusive R&D, licensing, supply, and distribution partnership agreements signed with a dozen Fortune 500 companies

My intellectual property includes:

	All this stuff in my head
	A provisional patent application I prepared and filed myself
	Pending patents filed a couple of years ago
	Multiple issued patents in the U.S. and other major countries in Europe and Asia, comprising a total of 300 claims that broadly cover the entire value chain of my invention, along with various trademarks and service marks to protect my brand

The highest level of entrepreneurial experience achieved by anybody on my team consists of:

	Reading Entrepreneur and Business 2.0 magazines
	Running a successful small business or franchise
	Working as a co-founder or early employee in a successful high-tech startup
	Establishing, growing, and selling or IPOing a number of companies that many would recognize by name

I developed my expertise in this market by excelling at senior positions in the industry for:

	Never
	Under 2 years
	2-5 years
	Over 5 years

The number of Ph.D.s that have been working for me full time for at least three months is:

	None
	1-4
	5-9
	10 or more

The number of sales/marketing/ business development experts who understand and have extensive contacts within my industry who have been working for me full time for at least three months is:

	None
	1-4
	5-9
	10 or more

My business plan:

	Does not exist
	Suffers from quite a few of the mistakes described in "Why Business Plans Don't Get Funded"
	Looks pretty near perfect in my eyes
	Looks pretty near perfect in the eyes of the advisors, attorneys, accountants, and investors who have seen it

I have invested ______ hours of my own time into this venture.

	0 - 999
	1,000 - 1,999
	2,000 - 3,999
	4,000 or more

I have invested ______ of my own funds (from savings, credit cards, second mortgage, selling blood, etc.) into this venture.

	$0 - $24,999
	$25,000 - $99,999
	$100,000 - $249,999
	$250,000 or more

My corporate attorney is:

	My cousin Sal, who got his law degree at the local community college law school
	A small local firm that normally specializes in personal injury suits
	A small-to-medium sized local firm that works with a lot of startups
	One of the nationally recognized corporate law firms with many connections in the venture capital community

My intellectual property attorney is:

	My cousin Sal, who got his law degree at the local community college law school
	A small local firm that claims to be an intellectual property generalist
	A small-to-medium sized local firm that works with a lot of startups
	One of the nationally recognized intellectual property law firms staffed with attorneys who worked in R&D in my field before going to law school

If a Fortune 500 company decided to put their resources behind competing with my startup tomorrow, my startup would be:

	Toast
	Happy that the market is being validated by a major player, but would have to settle for a smaller market share
	Able to stay a step ahead through innovation, agility, and speed
	Delighted to partner with them and license our proprietary technology to them, since there's no way they can get in this market without infringing on our rock-solid patents

Once my product is on the market, my marginal gross margins - a new dollar of revenue minus the cost of producing that revenue - will:

	Huh?
	Essentially be flat, like a service business
	Increase gradually, like a hardware business
	Increase rapidly, like a software business

Other startups in my industry raising venture capital at a similar stage of development (product, management team, revenues, partnerships, prior funding, etc.) are getting pre-money valuations of:

	Under $1 million
	$1-2 million
	$2-5 million
	Over $5 million

Estimated Pre-Money Value: (click the "Update" button to calculate)

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