The various ways to value your early-stage startup

When you're just starting out, putting a number on your startup can feel... well, kinda awkward. You might be at a stage with no revenues, no product, and perhaps, no active users - just an idea, a pitch deck, and a stubborn intuition that you're onto something.

Still, potential investors will ask. Founders will wonder. Accelerators will demand. So, it’s worth wrapping your head around how startup valuations work - especially in the early stages when storytelling reigns supreme.

Let’s break down some of the main ways founders value their startups in the early stages - what each method implies, and how you can use them to approach your next investor call with confidence.

This list highlights a mix of quantitative methods and more intuitive approaches - both commonly accepted and applied during the early stages

The Scorecard Method

This method uses a points-based system. You start with an average pre-money valuation for startups in your region and stage (say, 3M€), and adjust up or down based on factors like:

• Strength of the team

• Size of the market

• Product/tech advantage

• Competitive landscape

• Marketing/sales channels

  
  

Each factor gets a weighted score and nudges the valuation accordingly. (For example, strength of the team is 30%)

Best for:

• Founders pitching to structured angel networks

• Investors who prefer a framework over gut feeling

  
  

Things to consider:

• It’s helpful as a reference point but doesn’t always capture unique upside, especially if you’re in an uncharted / new market.

Example – Scorecard Allocation

Factor	Weight (%)
Team	30%
Market Size	25%
Product/Tech Advantage	20%
Competitive Environment	15%
Marketing/Sales Channels	10%
Total	100%

Each factor's score (e.g., Team = 8/10) multiplies by its weight to adjust the base valuation accordingly.

The Berkus Method

Similar to above, this is a simplified approach used mostly for idea-stage companies with little or no traction. It assigns dollar values (typically $0–$500K each) to five key elements:

• Sound idea

• Prototype

• Quality management team

• Strategic relationships

• Product rollout or sales
  

The final valuation is the sum of all these categories.

Best for:

• Pre-revenue startups

• Concept-stage founders looking for fairness and structure
  

Things to consider:

• Keeps expectations grounded early on

• Can feel limiting if your company is already outperforming in one category (e.g. traction but no prototype)

Discounted Cash Flow (DCF) Method

This method is common in later stages, DCF tries to model the future cash flow of your business and then discount it back to present value, factoring in risk.

For most early-stage startups? This is usually… not relevant, as forecasting revenue 5 years out for a product you haven’t launched is basically science fiction.

Best for:

• Revenue-generating startups (Series A+)

• Founders in industries with stable, predictable revenue models

  
  

Things to consider:

• Good for internal planning

• Not typically used by VCs or early-stage investors - it is too speculative. But can help guide.

Venture Capital Method

A useful option for estimating a pre-revenue valuation. It reflects the investor mindset of aiming to exit the business within a few years.

There are two key formulas you’ll use to calculate your valuation:

• Anticipated Return on Investment (ROI) = Terminal Value ÷ Post-Money Valuation

• Post-Money Valuation = Terminal Value ÷ Anticipated ROI

  
  

First, calculate your startup’s terminal value - the expected selling price after the VC investment. You can estimate this using industry revenue multiples or the price-to-earnings ratio.

Next, determine the anticipated ROI, such as 10x, and use it to find your post-money valuation.

Finally, subtract the investment amount you’re seeking to arrive at your pre-money valuation.

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Now, more artistic (but used) ways:

The “What Did They Get?” Method

One of the most common - and - least scientific methods is just looking at what other startups like yours are being valued at.

You could research five similar companies (same sector, stage, geography) and look at what valuation they raised at. Then you make a case for why your startup deserves something similar.

Best for:

• Sectors with clear benchmarks (like SaaS, fintech, DTC)

• Founders who can frame a compelling case using precedent

  
  

Things to consider:

• If your valuation is too aggressive, future investors may push back

• If it’s too low, you could unnecessarily dilute equity in early rounds

  
  

You could use platforms like Crunchbase or PitchBook to find accurate data.

Also, don’t just compare the valuation - look at traction, team, and timing too in your benchmarks.

The how much do you need method?

Let’s be real: sometimes your valuation is just reverse-engineered based on how much capital you need and how much equity you’re willing to give up.

Example:

You need $500K, and you’re okay giving away 10%. That implies a $5M post-money valuation ($4.5M pre).

It’s not glamorous, but it’s often the reality.

Best for:

• Pre-seed or seed-stage rounds with limited market data

• Founders bootstrapping or raising from angels

  
  

Things to consider:

• Can work if you have track record, a solid pitch and investor belief

• If you anchor too high without the traction to back it up, it can hurt future rounds

The no valuation method

When you truly can’t - or don’t want to - agree on a valuation yet, these instruments can help.

• SAFE (Simple Agreement for Future Equity) is an agreement where investors give you money now in exchange for future equity when you raise a priced round.

• Convertible Notes are similar but include interest and maturity terms.
  

These typically include:

• A valuation cap (maximum price the investor will convert at)

• A discount (e.g. 20% cheaper than future investors pay)
  

Best for:

• Early-stage startups that want to delay setting a valuation

• Founders who plan to raise a priced round later
  

Things to consider:

• Keeps the cap table clean for now

• But caps act as a “shadow valuation” and still influence investor expectations

And then.... there's the gut feel method

We’d be lying if we said early-stage valuations are always rational.

Sometimes, a founder’s vision, team, story, and charisma carry enough weight that investors are willing to bet big, even with limited data.

If you’re pitching a huge opportunity, solving a timely problem, or bringing a world-class team to the table, that alone can drive valuation up.

Best for:

• Visionary founders

• “Hot” sectors (AI, climate tech, Web3, etc.)

  
  

Things to consider:

• Story-driven valuations can raise eyebrows later if traction doesn’t catch up

• But if you deliver? That early optimism pays off

Final Thoughts

Valuing an early-stage startup can both be an art and science - and even sometimes, it can be just vibes.

The truth is, there’s no single “right” way to do it. Each method has its place.

Often, founders will mix two or three of the above approaches to arrive at a number that’s defensible, fair, and still leaves room to grow.

Bonus points: a few things to avoid:

• Setting your valuation too high too early (it can box you in later)

• Underestimating dilution - equity is your most expensive currency

• Forgetting to account for investor expectations that come with certain valuations

  
  

I hope this article was helpful! Happy fundraising!