Valuing your business: a guide for early-stage founders

Discover the average valuations at each stage of your journey

Author

Steven Williams
March 01, 2023

Hi, this is Steven from Drop. If you’d like to see if we can help you grow your business get in touch today.

In today’s email:

  • Valuing your business: a guide for early-stage founders

    • Idea

    • Product

    • Launched

    • Traction

    • Revenue

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Valuing your business: a guide for early-stage founders

It's an exciting time to be a founder. With so many opportunities and resources available, it's never been easier to turn your idea into a reality. However, one of the biggest challenges you will face is determining the value of your business. This week, we'll be sharing some insights and tips on how to estimate your business’ worth.

We've mapped out the average valuations we see according to the stage of business to help you figure out if you're in the "right" ballpark.

But before we dive into the juicy bits, let's talk about something important. Yes, we're talking about Silicon Valley. We know it's tempting to look at those sky-high valuations and dream of becoming a unicorn. But hold your horses! These numbers are often inflated, and they might not be applicable to other regions.

Now that we've got that out of the way, let's talk about valuations in the UK.

Idea

You're at the beginning of your journey. You've got an idea that you believe can change the world. The problem is, you need to get it off the ground, and that means raising £50K to £100K. At this stage, your investors are likely to be your friends and family. The average valuation we see at this stage is £1M.

Product

You've spent months refining your idea, doing user testing, and building a working prototype. You're either about to launch or have just launched but haven't got significant traction yet. You're looking to raise somewhere between £100K and £250K, most likely from angel investors. The average valuation we see at this stage is between £1.3M - £1.5M.

Launched

You've just launched your minimum viable product, and things are going well. You're seeing some promising signs, and you're ready to take things to the next level. You want to raise money for improving and marketing your product to grow your user base. The average valuation we see at this stage is £1.5M.

Traction

You're seeing good signs of early traction, enough to get angel investors and early-stage funds interested. You have revenue plans, but nothing to show yet. The average valuation we see at this stage is between £2M - £3M.

Revenue

Things are looking good! You're pulling in recurring revenue between £20,000 and £50,000 a month, and your user base is steadily growing. You're looking for investment to develop your product further and step up your marketing efforts. The average valuation we see at this stage is between £3.5M - £6M.

So, there you have it! These figures are just a guide, and your company valuation is whatever you and your investors agree it to be. But knowing where you stand in terms of valuations for your stage of development can help you negotiate better investment terms with potential investors.

If you’d like to see if we can help you raise investment for your business get in touch today.

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