Video by sammrchant

What valuation should you give a pre-revenue startup? This is actually a really tricky topic and is often something that most founders get wrong. Two ways that you should think about this as a founder. Number one is dilution and I don't mean the valuation you raise at, I mean the total amount of dilution as a percentage of the shareholding and cap table of your business.

You see, you want to be maintaining as much control as you possibly can but at the same time you need to be understanding an investor coming in and the risk that they're taking given the business is so early stage. And the second thing you need to consider is actually just how much capital are you raising? You see, I meet founders who are trying to raise big seed rounds. I'm

talking five, 10, even up to $20 million. And they don't realize that the valuation that they're raising at, they then need to grow into that valuation over the next 18, 24, however long the runway is going to last them. The reason that that's an issue is because if you don't grow into that valuation you don't hit the metrics required to raise at that level very quickly you end up

doing a down round and that's where everyone starts to lose out especially you as a founder so when it comes to valuations think about the perfect balance between dilution so that you maintain as much control as you possibly can but then also the valuation that you are then going to grow into