Pre-revenue Startup Valuation Calculator for Startups.
Our Free Startup Valuation Calculator will help you calculate the valuation of your pre-money startup in 2 minutes.
The tool has been developed in consultation with Venture Capitalists and Angel investors and uses industry standards
to calculate the Valuation.
Our Free Startup Valuation Calculator will help youcalculate the valuation of your pre-money startup in 2 minutes. The tool has beendeveloped in consultation with Venture Capitalists and Angel investors and uses industry standards to calculate the Valuation.
Pre-revenue startup valuation – Scorecard method
To solve the problem many larger Angel investors have developed sophisticated algorithms to come up with a realistic valuation. But what if you don’t have access to such a tool? Well, a number of third-party valuation methods have been devised with the Scorecard method being one of the most popular.
What is the Scorecard Startup Valuation method?
The Scorecard method uses a combination of industry data and weighted percentages based on detailed quantitative analysis to come up with a realistic valuation. The method is split into four steps which we’ll look at individually.
Step 1: Determine the average industry pre-money valuation
Competition for investors and the limited number of good ideas available can inflate the value of startups in some regions. So thorough research needs to be carried out into both the industry and the location of the business to ensure you get a realistic valuation.
AngleList and CrunchBase are good places to get accurate startup valuation data. Search each site for the top 10 startup companies in your industry and filter the data by location. Simply add up the pre-money valuation of each and divide by 10. For this example, let’s say the industry average pre-money valuation is $1.5 million.
Step 2: Determine the individual weighted averages
Strength of the Management Team (0-30%)
Size of the Opportunity (0-25%)
The size of the market should be assessed and realistic market share targets should be set. If the size of the market is too low, it would have a negative impact on your startup valuation.
Competitive Environment (0-10%)
Marketing/Sales Channels/Partnerships (0-10%)
Need for Additional Investment (0-5%)
Step 3: Calculate percentage weights
Now we need to bring everything together and calculate the percentage weights for our business and compare them with a percentage for a business in the same sector and preferably location. Payne devised the following table which we have filled in with speculative data to show how this is done.
Factor = (WxC)
Strength of team
Size of opportunity
Need for additional investment
Step 4: Multiply the sum of the factors
While the Scorecard method still requires a degree of subjectivity on behalf of the investor it does provide a solid foundation for the valuation of pre-money startups. The method also ensures founders carry out good industry research and commit to an honest and introspective understanding of their own abilities before seeking capital.
If you are an early stage startup and would like an idea of how much your business could be worth. Use our Free startup valuation calculator. Alternatively, if you would like more information about how we can transform your innovative app idea into a successful mobile application. Contact our development team here .