How do I set up my round valuation?

We launch new series of 1-minute videos — tips for startup founders from Alexander Konoplyasty, co-founder of Flashpoint VC.

❓“How do I set up my round valuation?”

👉The best strategy is to let the interested VCs formulate their offer. But sometimes when the round is not super competitive you might need to lead the pricing discussion.

Usual methods — ARR multiple of comparable companies, adjusted for your growth rates and difference in margins.

Another way to define valuation could be considering the amount of capital to be raised vs comfortable dilution. The amount of capital is usually a function of the length of your runway assuming customer/revenue additions and your CAC / R&D and G&A.

In the current market try assuming at least 24 months of runway, longer is less predictable. Asking for too much money when you don’t have a clear strategy on how to spend it would risk your round.

Dilution should also assume extra ESOP issuance for the team. Lastly, the previous round valuation could be a benchmark, adjusted for growth.

When thinking about the round valuation in a normalized situation you want to re-price the previous round comfortably but not spook the potential investors with out-of-market valuation levels, risking the round. Please contact us if your company is looking for capital. Submit your pitch today!