The seed stage of venture capital valuation exactly how to decide

authorized in this article reprinted from WeChat 500Startups (ID:fivehundredstartups)

valuation of the early start-up companies tend to be very vague, I want to talk about the topic in detail, really.


in short, the valuation of seed stage companies tend to be relatively arbitrary, driven by supply and demand. Supply depends on the amount of this round of financing, the demand depends on investors.

The valuation of startups such as

is not based on their current earnings performance. Therefore, it is not very similar to the market value of listed companies. This is indeed a critical need to understand, because there are many founders wondered, "why income of 0 companies to finance the $10 million convertible bonds? And another company, can run in the $1 million cost, but most barely raise $6 million of convertible bonds


because the valuation is determined by supply and demand, the following is the leverage factor affecting your valuation:

1, market economy

2, geographical area

3, your vertical field of competition

4, your core strengths (revenue / team / growth / data performance..)

5, financing method

a. Market background

about this, unfortunately, the market situation is completely beyond your control. For example, 2008 – 2009 is the financing of winter, many VC investors just sit on the sidelines. When the market active investors significantly reduce, valuations remain low. I know an investor at this time to about $2 million into the early Instagram seed wheel, which is considered to be a high valuation of the period. By the year 2011 or so, not cap valuation becomes very common.

reality is that, compared to what you actually do business, external market conditions will affect your valuation. Because no one really knows how to value your business is reasonable, seed startups are usually valued at a similar amount, regardless of what the company actually does.

two. Geographical region

in addition, the location is also very important. Compared to many other places, Silicon Valley start-ups are often able to raise capital at higher valuations, after all, there are more investors. On the other hand, if you are in a place where there are only 5 seed investors, they can do almost everything they want. The situation has changed, as startups have started to move out of their cities to raise money, and at least for the past 2 years many places have seen more VC (New York is a good example).

and the needs of investors

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