Oftentimes, I’m asked about the concept of pre-revenue valuation for a startup. Well, that’s a very difficult thing because you’ve got no revenue and certainly no profit.
How do you value this?
In my opinion, the first step in the valuation of a company is to ask these 18 questions. These 18 questions cover five areas. First is trust; second is the idea; third is execution; fourth is the exit; and the fifth is enthusiasm.
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Idea
Source: A. Stotz Investment Research
2. How amazing is the idea? How do
people respond to it?
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Product proof
Source: A. Stotz Investment Research
3. What level of proof is there that
the product actually works?
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Pain
Source: A. Stotz Investment Research
4. Does the product solve a real pain
point? Who REALLY needs this?
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Disrupter
Source: A. Stotz Investment Research
5. Is the product a disrupter?
(If yes, then market pain may not be
necessary)
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Industry
Source: A. Stotz Investment Research
6. What is the industry's size and
growth? Is the addressable market
massive?
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Revenue
Source: A. Stotz Investment Research
7. What is the revenue potential?
How complete and compelling are
the 5 year revenue forecasts?
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Intellectual property
Source: A. Stotz Investment Research
8. What is the intellectual property?
Is it protectable?
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Enthusiasm
Source: A. Stotz Investment Research
18. How many people have I told about this idea
since I learned of it?
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Every startup’s dream
Source: A. Stotz Investment Research
-5,000
0
5,000
10,000
15,000
20,000
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9
US$million
Profit Revenue
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