Do You Know How to Value Your Startup?

Your valuation is mostly determined by the market — but understanding how it's set gives you a stronger position in any negotiation.

How valuation gets determined

If you land a lead investor, they will typically set the terms. The lead does the work of pricing the round, and other investors follow.

If you go the party round route — many small investors, no lead — you will need to set your own terms. This gives you more control but also more responsibility to price correctly.

Historical valuation benchmarks

The traditional rule of thumb was roughly 10x ARR = valuation. So a company generating $1M of annual recurring revenue is worth ~$10M.

Market conditions shift these multiples significantly. In late 2021, David Sacks observed that 100x ARR had become the standard for enterprise SaaS — meaning that same $1M revenue company could be valued at $100M. Those multiples have since compressed, so always calibrate against current market conditions rather than a fixed formula.

What pushes valuations higher

• Trendy or high-growth verticals
• Serial entrepreneurs with prior successful exits
• Strong traction metrics (growth rate, retention, NPS)
• Competitive term sheets — multiple investors creates leverage