How are early-stage startups valued for angel investments?

This below is one of doitinvest.com answers to the linkedin questions there. It might be interesting for you, though.

I tend to agree with what has been written below. If you have a project, you should do first an evaluation of it by yourself, then build a solid business plan. The business plan will help you to drive the start-up through the early phases of the development, who are the most critical. It also helps you to clarify what the start-up should be doing and how. Then, and only then, you should present this plan to potential investors.

 

Every “angel” has his/her own metrics of measurement, but obviously two are always on their sight:

- the viability of the business plan, which can be measured as the risk involved with the investment;

- the potential returns on the start-up or eventually (but harder to find) the afinity with the project itself.

 

If I would be in your shoes, I would do my business plan asap and I would start to present it to potential investors.

 

I hope this helps, please let me know if you need more details.

“Here’s an answer I got from a SCORE counselor when I recently asked this question:

Valuation is pretty hard to do for a startup, but typically for a seed round the company is given a $1.5M valuation pre-money. That means that if you raise $500k then the investors get 25% of the preferred shares.

This number is used for just about any business and though it seems arbitrary what it does is balance the needs of both investors and founders. Investors dont want to own too much because then founders are not as motivated, but first investors are taking the biggest risk and should end up with a reasonable piece. You can use a higher number if you want or if there is a significant amount that youve invested. The $1.5M number is the “sweat equity” and most angel rounds use this number or something similar to it.

Subsequent rounds will dilute the first investors and again the new investors will not want your share to drop below 50%. That only happens when a later remedial round is required.”

 

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