How To Value Your Startup Using Comparables

I'm embarrassed to admit that lately, I've been watching a lot of HGTV. Whenever I have programming to do that is easy but time consuming, I watch House Hunters or Designed to Sell in the background. On both shows, buyers and sellers use comparable houses to help them put a value on a house. Similarly, investors value companies based largely on how the company compares to other companies they've seen before. Wouldn't it be nice if there was some way for founders to see the valuations of other startups too?

Finding and Valuing Startup Comparables

You can start valuing your company more like an investor by seeking out comparable startups and working backward from the funding they've raised.

  1. Go to the funding section of CrunchBase and look for companies who have received funding recently that are similar to you: similar stage (angel, seed, series X), similar progress (demo, launch, 10k users, paying customers), similar team size/composition.
  2. Take the funding amount, divide it by 0.2 and 0.3 to get a range for the post-money valuation. 0.2 and 0.3 correspond to how much dilution you expect from the funding. Example: GroupMe raised $850k. The post-money (high end of the range) is $850k / 0.2 = $4.25m.
  3. Subtract the funding amount from each side of the range to get the pre-money valuation. Example: GroupMe's pre-money (high end of the range) is $4.25m - $850k = $3.4m.

Here are a few example pre-money valuations of companies on CrunchBase who have received seed or angel funding within a month. Ideally, you'd look closer at the composition of the team and the progress of company; however, I've only included the team size and how long the company has been operating here.

10 responses
Hi Nathan, this is a fascinating post, and a great place to start. I think rate of growth remains a key determinant of valuation multiple.
thank you
I need to understand why you divide the amount to be raised with 0.2 or 0.3, how you calculated that number . Is this something to do with dilution. can you share more detailed doc pls
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