1. What is a Pre-Seed Valuation Calculator?

Definition: This calculator estimates the valuation of a pre-seed startup using the revenue discount model.

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

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( V \) — Valuation (USD)
• \( R \) — Revenue (USD)
• \( r \) — 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, investor negotiations, and setting realistic company goals.

4. Using the Calculator

Tips: Enter the projected revenue, discount rate (default 12%), and growth rate (default 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 startups?
A: Most investors use 10-15% for early-stage startups, with higher rates for riskier ventures.

Q2: How should I estimate my growth rate?
A: Base it on market research, comparable companies, and realistic projections (typically 5-10% for early stage).

Q3: What if my growth rate exceeds my discount rate?
A: The formula breaks down when g ≥ r. This suggests unsustainable growth or too low discount rate.

Q4: Should I use current or projected revenue?
A: For pre-seed, use projected revenue in 3-5 years, discounted to present value.

Q5: How does this differ from later-stage valuations?
A: Later stages use more complex models (DCF, multiples) with actual financial data rather than projections.