High Tech Startup Valuation Estimator


Wondering what your Pre-Money Value 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. The model below is intended more for educational purposes than for performing serious valuations. Please read this Important Disclaimer. If you need help valuing your company, we offer valuation consulting services.

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. The first choice produces the lowest values; the fourth choice produces the highest value.

  1. My product or service is: [why it matters]
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
  1. My industry is: [why it matters]
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.)
  1. My product or service will: [why it matters]
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
  1. Global annual revenues in the sub-sector of the market I am competing in is: [why it matters]
Under $500 million
$500 million to $1 billion
$1-5 billion
Over $5 billion
  1. My market is: [why it matters]
Flat or shrinking
Growing by under 10% per year
Growing by 10-30% per year
Growing by more than 30% per year
  1. My primary competitors (others who are competing for the same consumer dollar by satisfying the same consumer need) are: [why it matters]
Nonexistent, since customers 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 customers have other ways to satisfy these needs)
  1. My customers (or potential customers) have: [why it matters]
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
  1. My sales and marketing plan is: [why it matters]
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
  1. My revenues over the past 12 months were: [why it matters]
$0-$999,999
$1,000,000 - $4,999,999
$5,000,000 or more
$10,000,000 or more
  1. My revenues over the next 12 months are expected to be: [why it matters]
$0-$999,999
$1,000,000 - $4,999,999
$5,000,000 - $9,999,999
$10,000,000 or more
  1. My revenues 5 years from now are expected to be: [why it matters]
Under $9,999,999
$10,000,000 to $29,999,999
$30,000,000 - $79,999,999
$80,000,000 or more
  1. My strategic partnerships consist of: [why it matters]
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
  1. My intellectual property includes: [why it matters]
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
  1. The highest level of entrepreneurial experience achieved by anybody on my team consists of: [why it matters]
Reading Inc. and Fast Company 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
  1. I developed my expertise in this market by excelling at senior positions in the industry for: [why it matters]
Never
Under 2 years
2-5 years
Over 5 years
  1. The number of Ph.D.s that have been working for me full time for at least three months is: [why it matters]
None
1-4
5-9
10 or more
  1. 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: [why it matters]
None
1-4
5-9
10 or more
  1. My business plan: [why it matters]
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
  1. I have invested ______ hours of my own time into this venture. [why it matters]
0 - 999
1,000 - 1,999
2,000 - 3,999
4,000 or more
  1. I have invested ______ of my own funds (from savings, credit cards, second mortgage, selling blood, etc.) into this venture. [why it matters]
$0 - $24,999
$25,000 - $99,999
$100,000 - $249,999
$250,000 or more
  1. My corporate attorney is: [why it matters]
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
  1. My intellectual property attorney is: [why it matters]
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
  1. If a Fortune 500 company decided to put their resources behind competing with my startup tomorrow, my startup would be: [why it matters]
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
  1. Once my product is on the market, my marginal gross margins - a new dollar of revenue minus the cost of producing that revenue - will: [why it matters]
Huh?
Essentially be flat, like a service business
Increase gradually, like a hardware business
Increase rapidly, like a software business
  1. 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: [why it matters]
Under $1 million
$1-2 million
$2-5 million
Over $5 million

Valuation Results

Click the "Update Valuation" button to calculate

Need Valuation Assistance?

As noted above, this model is intended more for educational purposes than for performing serious valuations. If you need help valuing your company, we offer valuation consulting services.

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