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Series A valuation for pre revenue company

Series "A" ValuationI wanted to gather some market intelligence on pre money valuations for very early stage companies that are pre revenue. Can anyone provide any anecdotal evidence or point me to any articles which discusses the range of valuations in the market. I know that these valuations are situation specific but I wanted to see if there was any data to look at.

Answers

Jake Kaldenbaugh
Title: Corporate Development
Company: CA Technologies, Inc.
(Corporate Development, CA Technologies, Inc.) |

In Silicon Valley they're around $3-5MM, depending upon how much of the asset has been developed, background of founders and other markers of quality. Here is a link showing valuations from various Angel groups (which tend to be lower than institutional money -- savvier?):
http://gust.com/angel-investing/startup-blogs/2011/10/12/2011-valuation-survey-of-north-american-angel-groups/

Plus, Quora tends to have the best qualitative discussions about startup valuations:
http://www.quora.com/Startup-Private-Valuations?q=startup+valuation

Topic Expert
Peter Freeman
Title: Chairperson - Clean Tech Committee
Company: Keiretsu Forum - Angel Investors
(Chairperson - Clean Tech Committee, Keiretsu Forum - Angel Investors) |

Another good resource is the MoneyTree report issued by the National Venture Capital Association, www.nvca.org/. It includes series A, and later stages as well.

Topic Expert
Joan Varrone
Title: CFO
Company: Cloud Cruiser
LinkedIn Profile
(CFO, Cloud Cruiser) |

Thank you both. I did ask a question in Quora and got similar info as Jack provided so that is a good validation point.

Best

Joan

Nick White
Title: CFO
Company: Consulting for a number of VC backed com..
(CFO, Consulting for a number of VC backed companies) |

Such broad valuations as $3-$5M is not very useful in my view.

Yes I have seen Series A funded at those prices but I've also seen it funded at a multiple of those prices - a pretty good multiple I might add.

It all depends on the management teams, experience, the space, and the VC's. The VC's are going to analyze what they think outcomes can be and will most likely be and then look at what returns they expect.

That's why Series A for one company may be a higher valuation that Series C for another.

There is not cookie cutter.

Topic Expert
Randy Lewis
Title: Managing Partner
Company: LP Valuation, LLC
(Managing Partner, LP Valuation, LLC) |

I have to agree with Nick. As a valuation pro, it's inconceivable to me to throw every company into some range like $3-5MM. While you could say that those are the deals being funded on average, it is short-sighted to just assume a certain company - with all the individual characteristics that Nick mentioned - will fall into that. While there are general theories as how to value pre-rev firms, the specific parameters will always be different.

Bryan Frey
Title: VP Finance/Corp Controller
Company:
(VP Finance/Corp Controller, ) |

I know that Joan said "Series A", but pre-revenue can run anything from seed (first investment) through series C for Bio/Med startups. And that brings me to agreement with Nick and Randy. It's really hard to peg a notional value on such an early stage company w/o knowing more. Is there IP? Are there rockstar team members (https://www.proformative.com/blogs/john-kogan/2011/07/10/five-flavors-venture-capital-funded-companies)? Is there a new molecule that has promise? Is it two guys and a dog in the garage?

One of my favorite sayings (not mine originally, of course) is that there are lies, there are damn lies, and there are statistics. This is one of those areas where an "average" on its own tells you next to nothing.

If you can provide more insight into the company (w/o giving anything away), that might help.

Topic Expert
Joan Varrone
Title: CFO
Company: Cloud Cruiser
LinkedIn Profile
(CFO, Cloud Cruiser) |

Yes it is VERY difficult to peg a value without details and yes there can be a wide range. This is pre revenue with a Beta completed and in the e commerce space notionally; one of the founders is a serial entrepreneur. There is small adoption so far as it is coming out of Beta. So this is better than seed but not quite a Series A in my opinion. I appreciate all of the discussion here.

Jake Kaldenbaugh
Title: Corporate Development
Company: CA Technologies, Inc.
(Corporate Development, CA Technologies, Inc.) |

Looks like Cooley has aggregated data from their deals and average in Q311 rose to $10MM, so significantly higher than my initial range.

http://www.cooley.com/files/85971_VF2011Q3.pdf

My original response was more oriented at the Seed stage than Series A specifically. And yes there can be a wide discrepancy, Quora raised their Series A at a $100MM valuation, but the founders were top 10 founding members at Facebook. So that's probably an outlier.

Topic Expert
Simon Westbrook
Title: CFO
Company: Aargo Inc.
( CFO, Aargo Inc.) |

I saw www.Gust.com mentioned a couple of times in searching through the Proformative Website, but has anybody actually had a successful fund raising from using it. It appears to provide a minimally controlled amount of information to a huge potential database that ranges from unknown angels to Kleiner Perkins. Can it really assure that someone at KP reads every email that is channelled in that direction without any pre filtering? The concept sounds like a good idea: creating a world wide forum for entrepreneurs and investors to see what is out there.

Topic Expert
Edward Abbati
Title: Vice President of Finance
Company: Location Labs
LinkedIn Profile
(Vice President of Finance, Location Labs) |

I am currently working on a Series A for a PaaS company that I advise and we got $5M valuation. The product is done so the focus is G2M.

Topic Expert
Edward Abbati
Title: Vice President of Finance
Company: Location Labs
LinkedIn Profile
(Vice President of Finance, Location Labs) |

Here is a link to the MoneyTree https://www.pwcmoneytree.com/MTPublic/ns/index.jsp

I just completed a Series A round: pre-valuation $11M ; post-valuation $14M
It was for an enterprise software cloud service.

Lawrence Bergenfield
Title: founder
Company: Magnetify Corporation
(founder, Magnetify Corporation) |

http://blog.pitchbook.com/4q-2013-venture-capital-valuations-trends-report-sneak-peek/

$8.9mm is average pre-money according to this survey of the marketplace. My company has raised 1.625mm as of today on 10mm pre.

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