How much is your business really worth, and how do you get a good offer without cutting your own throat. A recent blog post on The Next Web, written by managing partner George Deeb of Chicago-based Red Rocket Ventures (a startup consulting and financial advisory firm) sheds some light on these questions.
While the entire post is worth sinking your teeth into if you’re seeking funding, we want to focus on the stages of valuation that Deeb sets forth. This is a terrific guide for anyone unsure of how to value their business. Without further ado, the four stages:
“Freshman,” writes Deeb, “are a piece of paper to beta site (bootstrap financed).” Per the definition, Deeb estimates you could raise anywhere from $50,000 to $500,000 at this stage of the game.
One stage higher than freshman is that of the sophomore startup, which will be capable of raising anywhere from $500,000 to $1 million. These sites, Deeb states, are “beta site to full production site with initial users.”
“Juniors have achieved a full proof of concept around their business, with rapid user or revenue growth,” notes Deeb, adding that these startups are generally approaching “up to $1MM in revenues,” and that as a “Series A venture capital,” they could expect to raise anywhere from $1 million to $5 million.
Last But Not Least, The Seniors
Deeb refers to seniors as the startups that “have grown to multi-millions of revenues and are ready to materially scale their businesses with a significant capital raise.” He adds that these are “Series B venture capital” and as a general rule can raise anywhere from $5 million to $50 million or more.
“Which each stage of your growth, your valuation is moving up along the way,” Deeb said.
Here’s the full look at the various stages as well as different valuation techniques. Well worth your time to read the entire post.
Where is your business in the four stages of valuation (or have you even enrolled in school yet)? Deeb’s post is an invaluable commodity if you’re an entrepreneur who feels like your startup idea is flying too much by the seat of its pants. Use these classifications to take control, set goals, and get to where you want to be as a business owner.[Image via AlleyWatch.com]