Valuation: Risk Mitigation Valuation Method

In raising funding, valuation is a key number the CEO and investor must come to agree with. As a startup you must determine your target valuation. There are several methods.

One method is the Risk Mitigation Valuation Method. The Risk Mitigation method assigns dollar values to the startup’s accomplishments in each of four categories: Technology, Market, Execution, and Capital.

Technology Risk Mitigation -- 125
• Prototype developed: $75,000 
• 3rd party validation: $25,000 
• IP filed: $25,000 

Market Risk Mitigation -- 175
• Market research: $25,000 
• Early adopter program in place: $100,000
• Channel partners established: $50,000 

Execution Risk Mitigation -- 500
• Experienced founders: $200,000 
• Prior exit: $250,000 
• Detailed execution roadmap in place: $50,000 

Capital Risk Mitigation -- 150
• Early funding: $50,000 
• Only two angel rounds needed: $100,000

If you add up all the values you get a pre-money valuation, $950,000 in this example.

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