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Valuation for early stage companies is a complicated process, which is why we focus our energy on helping founders and investors close deals at fair terms — without wasting too much time. Here are a few key points you should consider to ensure your valuation is a good reflection of your startup and the potential it offers to investors: 📈 Understand Financial Projections • Craft a Narrative: Financial projections should tell a compelling story about your company's future. They should outline assumptions regarding customer acquisition, pricing, and growth strategies. • Revenue and Cost Assumptions: Clearly define your revenue streams and estimate customer acquisition costs. For instance, if you have multiple service tiers, project the number of customers and average revenue per user (ARPU). • Growth Trajectory: Establish an ambitious but realistic growth plan. For example, if you're targeting market leadership, factor in the necessary investments in marketing and product development. 💸 Manage Costs Wisely • Budget for Growth: Anticipate future expenses, including salaries, marketing, technology, and overheads. Keeping costs in check is crucial to avoid cash burn. • Quality of Revenue: Investors are interested in the sustainability of your revenue. Ensure your customer acquisition costs are manageable compared to the revenue generated. 📊 Refine Your Valuation • Iterate Based on Feedback: Valuation is not a one-time process. Use platforms like Equidam to adjust your assumptions based on investor feedback and market conditions. • Benchmarking: Compare your startup against similar companies in your industry to set realistic expectations for your valuation. Analyze recent funding rounds to understand market trends. • Use of Multiples: Understand that multiples based on current revenue or EBITDA are outcomes of the valuation process, and not an input, for early stage companies. They are a tool for comparison, not pricing. 💎 Final Thoughts Balancing ambition with realism is essential in startup valuation. Engage in ongoing discussions with investors and be prepared to iterate your valuation based on their input. Typically, the conversation is trading specific company insights (from the founder) with a deeper fundraising market perspective (from the investor) in order to align both sides. #Startups #Valuation #Fundraising

📩 Advice on building startups from SVB, Finro Financial Consulting and Equidam The Equidam Monthly is a curated collection of articles from the best in the industry delivered on (or near!) the last Friday of the month. • 📢 Trends in the world of venture capital • 🚶 Advice from founders, investors and experts • 🏃 Early stage fundraising news Read the full newsletter here: ➡️ https://lnkd.in/eNHResa7 Here's a quick preview of this month's stories: Ready ... 📢 • Ingrid Lunden of TechCrunch reports on the surge in AI investments, which grew 62% to $110 billion in 2024, in "AI investments surged 62% to $110B in 2024 while startup funding overall declined 12%" • Navina Rajan, Charlie Farber and Oscar Allaway of PitchBook examine the rebound in European VC valuations in 2024, in "European VC Valuations Report" • Marc Cadieux, Mark Gallagher, Eli Oftedal, Josh Pherigo, Andrew Pardo, CFA, and Jake Ledbetter, CFA of Silicon Valley Bank analyze the state of the innovation economy in 2025, in "State of the Markets H1 2025" Set ... 🚶 • Daniel Faloppa of Equidam explores how high startup valuations can leave founders and employees with nothing despite billion-dollar exits, in "How to Exit for $1B and Walk Away With Nothing" • Lior Ronen of Finro Financial Consulting looks at the risks of overvaluation in startup fundraising, in "The High Cost of Overvaluation: How Startup Valuation Impacts Fundraising Effort" • Dan G. Gray of Equidam explains why founders should prioritize negotiating value over price when raising venture capital, in "Why Negotiating Price With Investors is a Trap" Go!!! 🏃 • Nurçin Metingil of ArcticStartup reports on Copenhagen-based biotech startup Fuse Vectors, developing a novel cell-free viral vector technology, in "Danish startup secures $5.2M in pre-seed funding to streamline gene therapy production" • Lucy Adams of Tech.eu writes about Munich-based AI governance startup trail, helping companies automate compliance workflows, in "Trail secures €1.45M Pre-Seed funding to enable trustworthy AI systems" • Saskia Koopman of City AM reports on UK healthtech startup Level Zero Health, developing the world’s first remote and continuous hormone monitoring device, in "UK healthtech bags Europe’s largest pre-seed funding round for female founders" cc Ula Rustamova Irene Jia Benjamin Blaha Jordan Turnbull Anna Spitznagel Nikolaus Pinger Sven Hölzel

Gaming is a $200B+ industry, yet VC funding for gaming startups fell 12% in 2024, continuing a multi-year decline. • Investor focus has shifted to AI and enterprise software, leaving consumer-facing sectors struggling. • Layoffs and project cancellations at major studios signal caution across the industry. • Despite market challenges, standout startups like Build A Rocket Boy ($110M) and Second Dinner Studios ($100M) still attracted funding. This trend isn't unique to gaming—e-commerce and consumer electronics are seeing similar declines.

Fundraising isn’t about winning the highest price—it’s about structuring the right deal. Many founders see valuation as a benchmark for success. But pushing for a high number without understanding value creation can lead to misalignment, aggressive investor terms, or future downrounds. The best fundraising negotiations focus on: ✅ Growth Potential – Do you and your investors agree on realistic revenue targets? ✅ Risk Mitigation – Are you aligned on challenges and how to navigate them? ✅ Competitive Advantage – Can you sustain an edge in your market? When investors believe in the value of your company, they’ll align on valuation. Get this right, and you’ll raise on fair terms—without the traps of price fixation.

Overvaluation isn’t just a founder problem—it’s an ecosystem problem. VCs chase high-growth bets, founders set sky-high valuations, and when growth doesn’t materialize, investors pull back, leaving startups stranded. We’ve seen this cycle before. The solution? - Founders: Push for fair, sustainable valuations, not just the highest number possible. - Investors: Assess valuations as an output, not an input—multiples should reflect reality, not set it. Graphic from Finro Financial Consulting, link below.

Despite a slower year for dealmaking, 2024 saw record-high valuations for European startups, particularly at pre-seed. According to PitchBook: •  Pre-seed valuations rose 42% YoY to €3.7M •  Late-stage funding rounds take longer to close, but strong startups still attract capital •  Down rounds declined, signaling improving investor confidence For founders, this means: •  Higher valuations—but only for those with strong fundamentals •  Longer fundraising timelines—plan ahead •  Investor quality over quantity—smart capital matters more than ever Analysis by: •  Navina Rajan - Senior Analyst, EMEA Private Capital •  Charlie Farber - Manager of Data Analysis •  Oscar Allaway - Data Analyst 📄 Full report linked below.

Many founders approach fundraising negotiations like a battle over price. But chasing the highest possible valuation can backfire—leading to aggressive investor terms, misaligned expectations, and downround risks. Instead, founders should negotiate value: • What drives growth? • How do we de-risk execution? • What competitive advantages justify this valuation? The best investors focus on these fundamentals—not just what the market dictates. That’s how you build long-term alignment and a funding round that actually supports your company’s success. Drop the “pricing game” mindset.

Too many founders focus on negotiating price instead of value when fundraising. Valuation isn’t about finding the highest bidder—it’s about aligning on growth, risk, and defensibility. If both sides of a transaction can agree on a similar outlook, then valuation is downstream of that consensus. On the other hand, price is shaped by a number of factors: - Market conditions (including sector hype) - Deal terms - Valuation - Portfolio synergies Only two of these are within the influence of a founder (valuation and terms), although the last few years has demonstrated the extreme downside of leaning too heavily on deal terms to influence price. In reality, the best place to focus negotiations is on valuation. It's the input that matters the most, and it's the one where the founder has the most leverage. The best deals aren’t won through negotiation tactics but through shared conviction in the company’s potential.

Employee Stock Ownership Plans (ESOPs) are a crucial piece in the puzzle for European competitiveness in global technology. Traditionally trailing the USA on this topic, European nations have begun implementing reforms that make employee stock compensation more practical and tax friendly. Why is this important? Stock compensation allows cash strapped startups to attract talent by offering potential employees a share in the future value of the company that they will help create. It's a powerful way to align interests and reward hard work. Thanks to Špela Prijon and Tamas Varkonyi of EquityPeople for sharing their ESOP wisdom with us:

How should founders prepare for fundraising? What does a 'venture backable' company look like? Dan G. runs through a number of important questions to ask ahead of speaking to investors on this episode of TheOnePoint podcast by Rohit Yadav, CAIA. Full episode ("Decoding Startup Valuations") linked below.