Startup Funding Espresso -- The Soft Side of Valuations

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

In setting the valuation for a startup, there are financial calculations, and then there are non-financial factors.

I call the non-financial factors the “soft side of valuations”.

These include the following:

Current market conditions -- as the market heats, up certain sectors turn ‘hot’ and therefore command a higher valuation than the numbers indicate.

Predictability - companies with recurring revenue streams and long-term contracts command a higher valuation because their revenue is much more predictable.

Customer concentration -- startups with a broader list of customers will survive longer. If a customer accounts for over half of the business, then this should be reflected in the valuation.

Pre-profitability -- for early-stage companies, those with profitability should command a higher valuation.

Pre-revenue -- for even earlier-stage businesses without revenue, intellectual property and customer forecasts come into play. 

Start with the financial calculation and then refine the valuation from there based on these issues.


Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.
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