Valuation is the estimated worth of your company, typically determined during fundraising. Pre-money valuation (before investment) + investment amount = post-money valuation (company value after funding).
Valuation determines how much equity you give investors. Two types: (1) Pre-money valuation—company worth before investment. (2) Post-money valuation—company worth after investment. Example: Pre-money ₹10 crore, investor puts ₹2 crore → post-money ₹12 crore, investor owns 16.67% (₹2 crore ÷ ₹12 crore). Valuation methods: Early-stage (no revenue): Comparables (similar startups' valuations), scorecard method (rate team, market, product). Growth-stage: Revenue multiples (SaaS = 10-20x ARR), DCF (discounted cash flow). Example: Company with ₹1 crore ARR, 10x multiple → ₹10 crore valuation. Factors affecting valuation: Traction (revenue, users), growth rate (10% vs 100% MoM), market size (₹1,000 crore vs ₹1 lakh crore), team (repeat founders = higher), competition (hot space = higher). Valuations fluctuate: 2021 had inflated valuations (₹10 crore ARR companies raising at ₹1,000 crore), 2023-2024 correction (same companies now ₹200 crore). Focus on fair valuation you can grow into, not maximum valuation (leads to down rounds, team morale issues).
Post-Money Valuation = Pre-Money Valuation + Investment Amount | Investor Ownership % = Investment ÷ Post-Money Valuation₹5 crore ARR SaaS, growing 200% YoY. Valued at ₹100 crore (20x ARR multiple). Raising ₹20 crore → post-money ₹120 crore, investor gets 16.67%.
Raised Series B at ₹500 crore valuation. Missed targets, next round at ₹300 crore (down round). Hurts morale, dilutes early investors, signals problems.
Edtech reached $22B valuation in 2021 based on GMV. 2024 revaluation at $3B. Overhyped valuations crash when metrics don't support them.
Higher valuation = less dilution (keep more equity). But too high = pressure to meet unrealistic growth targets, risk of down round. Founders optimizing for max valuation often regret it—better to take fair valuation from helpful investor.
Seed (pre-revenue): ₹10-50 crore. Seed (early revenue): ₹30-100 crore. Series A: ₹100-500 crore (typically 10-20x ARR for SaaS). Varies by market, team, traction.
Get multiple term sheets (competition drives up price). Show traction growth. Benchmark against comparable companies. But don't optimize for max valuation—optimize for best investor+fair terms.
Yes, called "down round." Happens when company misses targets or market corrects. Example: Raised ₹500 crore, next round ₹300 crore. Hurts morale, dilutes early investors more.
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