What Should your First Valuation be?

What should your first valuation be?

Some examples:
1st time founder raising from F&F, Angels: $1M cap
Serial entrepreneur w/ exit raising from big VC: $20M cap
Accelerator programs: $2–5M cap
Strong team, good idea, early traction: $4–8M cap
Bootstrapped to $150k ARR: $6M-15M priced

Transcription

Hello Everyone. Today, we’re talking about your first valuation. It’s a question I get a lot and unfortunately there is no right answer. However, I can give you some examples based on the companies I see each year.

At the lower end of the scale, if you are a first-time founder with just an idea, perhaps you’re raising from friends and family Angel Investors, former employers. Then you might have to accept a $1M cap on your safe or convertible notes or you might have an uncapped SAFE with a high discount of 50% or more.

At the other end of the scale if you’re a serial entrepreneur with a previous exit and you’re raising from a large VC. Then you might expect to raise $3–5M at a $15–20M cap.

If you’re raising your first money from an Accelerator program, you might expect $2–5M cap. But here you need to be careful of how much access they have to future rounds and any other terms that come with the deal.

Now, if you’re a strong team that went to a good school, you have domain expertise, perhaps the early signs of traction and you’re working in a big market. Then you might have a $4–8M cap as your first valuation.

Lastly, if you’re a bootstrapped team you’ve managed to get to $150K ARR and you’re just raising money now to scale. Then you might expect, if you’re in a big market, a $6–15M dollar pre-money valuation on a priced round and that might be $1.5–3M.

Pre-seed Investor. Email: ash@sterlingroad.com. B2B, US only. I work with founders for 3 months before investing. More info: http://SterlingRoad.com/process

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