Question 1

What is the Berkus Method?

Accepted Answer

The Berkus Method values pre-revenue startups by assigning up to $500K for each of five risk factors: sound idea, prototype, quality team, strategic relationships, and product rollout/sales. Maximum pre-money valuation is $2.5M.

Question 2

What revenue multiple should I use?

Accepted Answer

Revenue multiples vary by industry: SaaS companies typically trade at 5-15x annual revenue, e-commerce at 1-3x, marketplaces at 3-8x, and fintech at 5-12x. High-growth startups can command higher multiples.

Question 3

What is pre-money vs post-money valuation?

Accepted Answer

Pre-money valuation is your company's value before receiving investment. Post-money valuation equals pre-money plus the investment amount. For example, a $2M pre-money with $500K investment gives $2.5M post-money.

Question 4

How do investors actually value startups?

Accepted Answer

Investors use multiple methods: comparable companies, revenue multiples, DCF (discounted cash flow), and the Berkus method for pre-revenue startups. The final valuation is often a negotiation based on market conditions, traction, and team quality.