What is a Startup Valuation? The Complete Guide to Valuing Your Company in 2025
A startup valuation typically uses five methods: Berkus Method for pre-revenue companies up to $2.5M, Scorecard Method comparing to similar funded startups, VC Method working backward from exit, Cost-to-Duplicate, and Discounted Cash Flow. Pre-revenue startups average $1-6M valuations, seed stage companies $10-15M, and Series A startups $20-40M.
The Valuation Reality Check
Your startup isn't worth what you think—it's worth what someone will pay. Understanding valuation methods helps you negotiate from knowledge, not hope.
Valuation determines how much equity you give up, employee option pricing, future funding capacity, exit expectations, and tax implications. Get it wrong, and you're either giving away your company or pricing yourself out of funding.
Pre-Revenue Valuation Methods
The Berkus Method
This method assigns maximum $2.5M valuation across 5 factors. Sound Idea gets $0-500K for TAM over $1B with clear problem. Prototype gets $0-500K for working MVP with user testing. Quality Management earns $0-500K for previous exits and domain expertise. Strategic Relationships add $0-500K for key partnerships and advisors. Product Rollout brings $0-500K for early traction and LOIs. Most pre-revenue startups realistically score $1-1.5M total.
Scorecard Valuation Method
Start by finding average pre-money valuation in your region. US averages $6.8M in 2025, San Francisco Bay Area $9.2M, Austin $5.8M, and NYC $7.1M. Then score yourself against the average across weighted factors: Team 30%, Market Size 25%, Product 15%, Competition 10%, Marketing and Sales 10%, Need for More Capital 5%, Other 5%. Multiply regional average by your weighted score for final valuation.
Revenue-Stage Valuation Methods
Revenue Multiple Method
Industry-specific multiples for 2025: SaaS companies get 5-15x ARR, E-commerce 1-3x revenue, Marketplace 2-5x GMV, Hardware 1-2x revenue, Services 0.5-2x revenue. Adjust upward 20-50% for growth rates over 100% yearly, add 30% for gross margins over 70%, and add 20% for CAC payback under 12 months.
VC Method
Work backward from exit value. Estimate exit value using industry comparables times expected revenue at exit. Apply target ROI since VCs want 10-30x return. Calculate post-money valuation as exit value divided by target return. Subtract investment amount to get pre-money valuation. For example, if expecting $100M exit in 5 years and VC wants 20x return, post-money needs to be $5M. If raising $1M, pre-money equals $4M.
Discounted Cash Flow
For predictable revenue startups, calculate present value of future cash flows plus terminal value. Use 5-7 year projections with 35-75% discount rate for startup risk level. Most investors ignore DCF for early-stage due to uncertainty.
Market-Based Valuation Benchmarks 2025
Pre-Seed with no revenue gets $1-3M, some traction $3-6M, strong team or idea $5-10M. Seed stage with $0-500K ARR values at $5-10M, $500K-1M ARR at $10-15M, over $1M ARR at $15-25M. Series A with $1-2M ARR commands $20-30M, $2-5M ARR gets $30-50M, over $5M ARR exceeds $50M.
Geographic adjustments use Silicon Valley as 1.0x baseline. NYC trades at 0.85x, Austin 0.75x, Seattle 0.80x, Miami 0.65x, International 0.40-0.70x.
What Actually Determines Your Valuation
Supply and demand drives everything. Multiple term sheets mean higher valuation. No competition means take what you get. Team pedigree adds 30-50% for ex-FAANG founders while first-timers face 20-30% discount. Growing 20% monthly commands premium while flat growth kills valuation. Hot sectors get 2-3x premium while out-of-favor sectors face 50% discount.
The StartupStage Alternative
Build value, not valuation. Focus on revenue growth that justifies higher valuations, metrics improvement that attracts investors, and strategic positioning for maximum exit value—all without equity dilution. Join hundreds of founders building valuable companies on their terms.