How to value a tech startup? (From a two time exited CFO)



Startup Valuation

One of the key reasons investors get a bad first impression is when the founders over value or in a lot of cases under value their startup. There aren't clear guidelines, if there are, great CFOs keep it hidden from everyone, unless you hire them.


I want to tell anyone who is reading my five-step formula on valuation.


Important pre-work

You need an integrated financial model, which means a balance sheet. This is how you find out the actual health of the business in 3 years' time, assets over liabilities and cash positioning. These are crucial to convince investors. Get in touch with me, I literally join your company and work for you to create a tailored human-made financial and business model. Book a meeting now.


The five-step framework

Once your financial model is ready, you can have a view of your revenue, cash balance and health in the future. Along with that follow the below steps, and add to your model:


1. Ideation stage, you have an idea and a visible market fit: ADD £200,000


2. Prototype, simple MVP that barely works: ADD £400,000


3. Launch: You have launched a product to market: ADD £1,000,000


4. Traction: Any signed contracts from potential clients? ADD £500,000 -2,000,000 (based on deal size and duration of the contract)


5. Founder skills, if the founders have domain expertise: ADD £250,000 - 2,000,000 (depends on relevancy)


Conclusion

A financial valuation + add the five steps above will significantly improve your valuation and give you real life, factual basis for a higher valuation.



You can speak directly with Hayat Amin for free

Hayat Amin takes 5 clients at a time for advisory, this way he provides full impact and focuses and also saves you 70% of the costs of hiring a full-time CFO. Book a meeting now.




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