1. What is a Pre-Seed Valuation Calculator?

Definition: This calculator estimates the valuation of a pre-seed stage startup in Ontario using the Gordon Growth Model.

Purpose: It helps entrepreneurs and investors determine a reasonable valuation for early-stage companies based on projected revenues and growth.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( V \) — Valuation (CAD)
• \( R \) — Revenue (CAD)
• \( r \) — Discount rate (decimal)
• \( g \) — Growth rate (decimal)

Explanation: The valuation is calculated by dividing the revenue by the difference between the discount rate and growth rate. This represents the present value of all future cash flows.

3. Importance of Pre-Seed Valuation

Details: Proper valuation is crucial for fair equity distribution, attracting investors, and setting realistic growth expectations in Ontario's competitive startup ecosystem.

4. Using the Calculator

Tips: Enter the projected revenue in CAD, discount rate (default 0.12 or 12%), and growth rate (default 0.05 or 5%). The discount rate must be greater than the growth rate.

5. Frequently Asked Questions (FAQ)

Q1: What's a typical discount rate for pre-seed in Ontario?
A: 12-20% is common, reflecting the high risk of early-stage investments. The default is 12%.

Q2: What growth rate should I use?
A: For pre-seed, 5-10% is typical. The default is 5% (0.05).

Q3: Can I use this for later funding rounds?
A: This model works best for pre-seed. Later rounds may require more complex models accounting for multiple growth stages.

Q4: How do I estimate revenue for pre-revenue startups?
A: Use realistic projections based on market research and comparable companies in Ontario.

Q5: Does this include Ontario-specific factors?
A: The default rates reflect Ontario's startup ecosystem, but adjust based on your specific industry and location within the province.