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How do you value a company with no revenue in a new market?

At what valuation should you raise money?

Brian Costa was a Darden student in our incubator one summer. After he spent an hour explaining to me how great his company/product was, he wanted to know at what valuation to raise his first round of Seed money. I explained to him that, though he had well described the business he was going to launch, he had completely failed to tell me what all investors want to know...  "If I give you $100K now, how and when will you return to me ten times my investment (assuming that is the investors target return)? How much more money will you need after mine, how much "dilution" (drop in percentage ownership) will I experience, and how are you going to exit with a big return?"

Brian thought about it and said, "So! I need to not just tell you the "story of the business", I need to also tell you the "story of the money"". 


Below you will find an Excel sheet which lays out the valuation model.

NOTE: You need to edit the Workbook (upper right) and save it to see the underlying formulas.

Below is a video that walks you through the spreadsheet above. It is about 20 minutes long...

Below is a web site which allows you to look at the impact of dilution based on successive rounds of funding. It is an other way of looking at the same issue that students have found helpful.