How to value a startup: methods for early-stage companies

Valuing an early-stage startup is very different from valuing a mature company. There is no steady cash flow, so the number depends largely on the team, the market and future potential. This guide summarises the methods investors use most often and what to watch for in negotiations.

Pre-money and post-money valuation

Pre-money valuation is the value of the company before the new investment. Post-money valuation is the pre-money value plus the amount invested.

• With a pre-money value of 8 million and an investment of 2 million, the post-money value is 10 million.
• The investor's stake is the investment divided by the post-money value: 2 / 10 = 20 percent.

Always clarify which figure is being discussed. Whether "a 10 million valuation" is pre-money or post-money directly changes the founders' stake. For all the terms, see our startup investment glossary.

Methods used at the early stage

Comparables

Investors look at recent rounds of startups in a similar sector, stage and geography. Public data is limited in Türkiye, so investors rely on their own portfolios and ecosystem announcements.

The Berkus method

A simple method designed for pre-revenue startups. Value is built up by scoring five elements: the idea, the prototype or product, the quality of the team, strategic relationships and first sales. Each element has a cap, which keeps estimates from becoming too optimistic.

The scorecard method

The average pre-money valuation of similar startups in the region is the starting point. It is then adjusted up or down by weighting criteria such as the team, market size, product, competition, sales channels and the need for additional funding.

The venture capital method

The investor estimates the likely exit value a few years from now and divides it by the target return multiple to reach today's post-money value. With an expected exit of 200 million and a 20x target, today's post-money value is 10 million. This also explains why funds look for very high growth potential; see our guide on how venture capital funds work.

Revenue multiples

For startups with recurring revenue, especially SaaS, a multiple of annual recurring revenue (ARR) is used. The multiple depends on growth, churn and gross margin. Our guide to the metrics investors look at explains how to measure them.

What raises a valuation?

• A founding team with complementary skills that has worked together before
• Paying customers and steady month-on-month growth
• A large, growing market with international potential
• Defensible technology, data or network effects
• Interest from more than one investor (a competitive round)

What to watch in negotiations

1. The highest valuation is not always the best. A very high price raises the risk of a down round if you cannot beat it next time.
2. Model dilution over several rounds. Giving 15–25 percent in a seed round is common; build a cap table in which founders keep control after later rounds.
3. Remember the option pool (ESOP). Whether the pool is included in the pre-money or post-money value changes the founders' stake.
4. Read the terms, not just the price. Liquidation preference, veto rights and anti-dilution clauses matter as much as the headline number. Our term sheet guide covers them one by one.

Conclusion

At the early stage, valuation is more negotiation than science. Use several methods to set a reasonable range, back your story with metrics and talk to more than one investor. Publishing your profile on Türkiye Startups helps investors find you.