The Comparable Transactions method, which will be referred to as “comps” throughout this article, is one of the simpler ways of finding the valuation of a company. Essentially, you find comparable companies and average their valuation at the same stage of your company. It’s important to note that aspects of this method can (and are) used in different methods to provide a benchmark. To find a comp as the method requires, you must look at a few important factors. They include…

The Cost-to-Duplicate method for startup valuation is one of the most common ways to find the valuation of a pre-revenue startup. As its name implies, the valuation is the cost of what it would take to duplicate the company. This method stands out because it has a simple approach. Other methods focus on the future and what the company may be worth later, but this method focuses on what you’ve already built. It asks the question: “how much would it cost to replicate this start

The Venture Capital Method for valuations of startups is one of the most widely used methods, especially for startups without revenue. It was developed by Bill Sahlman, a professor at Harvard Business School, in 1987. He created it as a way to help investors work backwards from a future outcome instead of guessing with numbers that don’t exist yet. Unlike some of the other methods that score on qualitative traits, this method is almost all quantitative which makes it appealin

The Risk Factor Summation method is a common method used to evaluate pre-money, pre-sales companies. It provides a different perspective of how a business will do by looking at risk mitigation instead of trying to assume how a business will do. The first step to this method is the same as the Scorecard method. You need to find a baseline valuation for your company. To do this, find other companies with similar industry sectors, geographic area, stage of development, and bus

The Berkus Method for valuation is one of the simpler ways of evaluating a startup. It was developed and popularized by Dave Berkus, a longtime angel investor and author. One of the more interesting parts of this method though, is that while keeping the same base idea it’s been developed and refined over time. To evaluate, you score your startup on 5 categories corresponding to a number value up to 500,000. You then add it up to achieve your final evaluation. The 5 categorie

This method was first conceived in 2001 by angel investor Bill Payne. While there were many other valuation techniques that were being used to evaluate businesses at the time, this method stood out as it was specifically aimed at startups and looked at many different metrics. Many other techniques used metrics (internal rate of return, multiple on invested capital, etc) that wouldn’t be applicable to startups in their seed stage. This method uses an analytical way (with quali