Start-Up Valuation(s)

There is the development stage valuation approach, often used by angel investors and venture capital firms to quickly come up with a rough-and-ready range of company value. Such “rule of thumb” values are typically set by the investors, depending on the venture’s stage of commercial development. The further the company has progressed along the development pathway, the lower the company’s risk and the higher its value. A valuation-by-stage model might look something like this:

Estimated Company ValueStage of Development
$250,000 – $500,000Has an exciting business idea or business plan
$500,000 – $1 millionHas a strong management team in place to execute on the plan
$1 million – $2 millionHas a final product or technology prototype
$2 million – $5 millionHas strategic alliances or partners, or signs of a customer base
$5 million and upHas clear signs of revenue growth and obvious pathway to profitability

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