How is a Startup's valuation determined?
It is often difficult to determine the value of a Startup, especially if pre-revenue, or if sales are just beginning to ramp up with early or pilot customers. One way valuation may be calculated considers the projected future profits, and then discounts that amount to account for the risk early stage Investors are taking. In the absence of established sales, Investors often consider other factors such as the team, market opportunity, competition, market readiness and previous funding rounds. See the 5 T’s for more about evaluating a Startup.
The Startups listed on Fundify determine their own valuation, usually in consultation with their financial advisors. In our review process, we consider if there’s a reasonable basis for this valuation; however, Fundify makes no guarantee as to any valuation’s accuracy or validity.
You may also hear about “pre-money” and “post-money” valuations. The difference is simple. The pre-money value of a Startup is its worth before a funding round. The post-money value is its worth after the funding is committed, when the additional capital has been received and added to the pre-money amount.
As an example:
Pre-money -- Startup A proposes to be worth $500,000
Startup A conducts an equity crowdfunding campaign and raises $300,000
Post-money -- Startup A is now valued at $800,000
