How to raise with a solid valuation?

With Berthold Baurek-Karlic, a president of the European Super Angels Club,
founder & CEO of Venionaire Capital and CEO of DealMatrix

If I’ve learned one thing in entrepreneurship, it’s to accept and appreciate any feedback you get. Obviously, you’re not always going to hear what you want to hear, but there’s plenty to learn from any feedback.

– Berthold Baurek-Karlic, a president of the European Super Angels Club, founder & CEO of Venionaire Capital and CEO of DealMatrix 

It’s entirely possible that running the DealMatrix valuation engine and generating a valuation report for your startup might return a bad result, after the first run. Numbers don’t lie: Dealmatrix will return the spread of valuations professional investors will have in mind when they look at your numbers.

Do not be disappointed, there’s a lot you can learn from that self-assessment. Most startups tune their business plan and financials in 5 to 10 iterations. Here are a few immediate steps you can take.

  • Step 1: Check your input variables

You might want to check if you used the right input variables. ‘Multiples on Sales’ range from 3 to 30, depending on the sector in which the startup is working. Discount rates tend to be very high (>60%) as the risk of the underlying assets is also very high.

  • Step 2: Rethink your assumptions

Your business (financial) plan might be too conservative. VCs can’t see any hockey-stick financials anymore. Solid and well-documented assumptions are more important than ever, but be as aggressive as possible. High risk must mean a high-return opportunity.

  • Step 3: Ask your peers

Ask your peers (not your family — they will always tell you how great you are!) about their feeling for your team, product, competition, and so on (see ‘Scoring Criteria’ in the DealMatrix Valuation Engine). Make it clear that you’re looking for honest feedback. If you talk to 25 people your statistics will be valid – and you may see a trend that points to soft facts you need to improve. One example could be a need for stronger names in your team or board of directors.

Feedback is a great thing – don’t give up!

To most entrepreneurs, negative feedback is simply fuel for change, growth, or smart adaptions. Come back and recalculate your valuation, but make sure you’re not lying to yourself either. DealMatrix doesn’t mind if you recalculate 5 or 10 times, but you only have one shot to pitch to your investors. Also keep in mind that if investors compete over you, this can drive up your valuation.

Pro Tip

Get a subscription license and re-calculate your valuation using alternative parameters. Visit our learning centre for private coaching and online training on valuation.