Get profitable then you wont need vc?

Openvc.app ?

Usually, there are two factors to figure out valuation.

Firstly, you look at comparable startups at similar stage raising a similar round. That will give you a sense of where the market is.

Second is demand. Usually investors have a minimum %age they are looking for in the company to make it worth their while. At your stage for a raise of 1.5M I would guess 8-15%. If you have multiple offers you can either negotiate the %age down or negotiate the mount raised up and keep the %age the same.

Also I would not worry about valuation so much. Figure how much you need to get to the next stage with some margin for risk - some extra as you might need to raise again 6-9 months before running out of cash.

Then let the investors make an offer they have a sense for the market - get multiple interested parties then have an honest discussion and negotiation on what works. If you only get one investor, they have the leverage. If you have multiple you can quickly get a sense of where the market is.

Good luck!

Before asking for valuation, do you know if your business qualifies for venture capital ? Most businesses don’t. Check if you qualify and also understand that the VC industry is in winter mode since last year and works on trends too. 2023 is generative data science labelled AI, like 2022 was web3 etc…

Y Combinator has some excelllent free vids on valuation.

I like the podcast The Pitch. Then you see CEOs pitching their business and investors asking on valuation, revenue, traction, churn and giving some feedback.

https://open.spotify.com/episode/6H062bQQeVAQ9Z87GG3MuR?si=BHjrHT_CT9mRMVJF4g_LuQ

It’s really hard without knowing more details about your business because different industries are going to have different multiples.

I’d suggest looking at some of the links others have posted here to help craft your story and pitch deck. Also a typical lead seed investor will want 10-20% of your company, so if you need $1.5M and they write $1M you can usually work backwards to your valuation too.

You’ll also want to ensure, if you’re raising from VCs that the business has potential to scale to the size a VC needs it to scale to (typically $1bn+). You should also be aware that you’re signing up for a 5-7 year journey minimum when taking venture capital.

I’ve raised venture capital for my company and we did it all pre-revenue. Happy to answer any additional questions

I wrote my story about raising funding for my startup and the top fundraising mistakes that I have seen from founders.

In short, if you quadruple revenue every two months, you should start to be cash flow positive. In this case, you are default alive, and you may go without raising any money because you will avoid any dilution.

If you are growing revenue but are still not profitable, you can either (1) raise money or (2) change your unit economic and come back to the situation one paragraph above.

The point is: I would really avoid raising money unless you really need to. Raising a round is not easy, it takes time and it’s painful. Not only, it will distract you from operating your company (and serving your customers) but you will eventually give away a lot of equity and maybe give up control of your company moving forward.

While we think raising funding is the traditional way, there are many other ways to start a company. Some major public tech companies were bootstraped for a long time, and it worked out very well for them.

Just go get revenue based loan. Some connect directly to your sales channel and automatically give you a maximum line of credit.