---
title: "Do You Know How to Value Your Startup?"
section: "Fundraising"
sectionId: "fundraising"
date: "2026-05"
---

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