How Much is Your Pre-Revenue Company Worth? (article)
The issue of valuing pre-revenue companies is often raised when entrepreneurs are looking for external investment. Unfortunately, it is more of an art than of a science. There are formulae that can be used to provide a company valuation, but these generally just provide a base number from which negotiation can start and most of these valuation techniques limit the potential upside of the venture. Ultimately, about 50% of the businesses that receive investment offers turn them down, as they cannot agree on company valuation.
This paper looks at alternate methods of calculating the value of a pre-revenue company and provides tips for entrepreneurs as they prepare to negotiate with potential investors.