Determining a valuation for a pre-revenue company is a difficult process. A Harvard VC formula does not make sense at this stage as available P/E ratios essentially compare apples to oranges, cash flow projections are too untrustworthy to use a DCF method, and there is no such thing as a true market comp. Investors must rely on qualitative factors in connection to valuation formulas to determine how much they think the thing is worth. Some qualitative factors include:
- Is the product proven in the market?
- How great can the product become based on market size and need?
- What is the competitive landscape and easy of entry into this market?
- How proven is the management team and what are their past successes in this market?
- What are the projected cash flows and expected return to investors?
- What is the company’s IP position?
To read the full, original article click on this link: Determining Your Pre-Revenue / Pre-Money Valuation - Business | Alerding Castor
Author:David Castor
