Startup Valuation Help

Yelp 🐺 wolf
May 6 16 Comments

I have an offer from a startup. Their valuation is X billions. What information should I get to cross check if their valuation is justified?

If I base this on their revenue, what should the multiplier be?

First time evaluating a startup offer. any help/pointers are greatly appreciated!

Edit: the startup is in stealth and I’ve signed an NDA and hence unable to disclose much details. I am trying to understand what data points I should collect from the company so as to verify their valuation.

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TOP 16 Comments
  • Microsoft UMbR31
    Pitchbook
    May 6 1
    • Yelp 🐺 wolf
      OP
      This is the first thing I did a while ago! Unable to signup for pitch book. I sign up and they said they’ll get back. But no word after
      May 6
  • New / Mgmt
    Trisis

    New Mgmt

    PRE
    Palo Alto Networks, FireEye
    BIO
    Cybersecurity
    Trisismore
    Find out number of shares outstanding, strike price, vesting details, etc.

    But a stealth with a valuation of billions is living a pipe dream if they haven't sold anyone yet. The most accurate and helpful answer you will get to what any number of options are worth is.......What are your sales to date and how did you get them?

    I work directly with startups every day and have been for about 6 years now.
    May 6 1
    • Yelp 🐺 wolf
      OP
      Thank you for your thoughts. The recruiter said they can’t share any revenue, sales or growth numbers. The argument they gave me was “an external investor has invested money at this valuation, so that should mean something”. I really wanted to work with them and positively join. But at this point it’s all red flags
      May 6
  • Databricks / Data
    data4u

    Databricks Data

    PRE
    500 Startups
    data4umore
    Stealth startup worth billions?
    May 6 0
  • Uber
    sast

    Uber

    PRE
    Apple, Netflix, Microsoft
    sastmore
    I have joined two startups in my career. Hopefully during the interviews you got enough signal to make a decision. Check the linked in profiles of the people who interviewed you before even going to compensation part. For data points I always ask 409A valuation and have strict rule of never trusting any projections from recruiter.
    May 6 0
  • AIG / Product
    Raging

    AIG Product

    PRE
    Deloitte Digital
    BIO
    Counseling CxOs for AI-first strategy !
    Ragingmore
    409A valuation.

    Recruiters are not the best estimators of valuations.
    May 6 2
    • New / Mgmt
      Trisis

      New Mgmt

      PRE
      Palo Alto Networks, FireEye
      BIO
      Cybersecurity
      Trisismore
      409A is going to be very helpful, but again lots of other things to look at.

      And I agree most recruiters aren't going to be the best at valuations. But that is a pretty big generalization. The good ones who are in the startup space know the ins and outs of things like vesting schedules, single vs double triggers, etc better than most you'll talk to.
      May 6
    • Yelp 🐺 wolf
      OP
      They don’t have a 409A valuation per say. It’s more like a baseline price. They seem be an LLC
      May 6
  • Amgen Fin4eng
    You shouldn’t be worrying about the valuation of the company bu investors, that’s their expertise. You should focus on the % of company you would own, the exercise window for leaving the company, how many future rounds of dilution they foresee, and what their path forward is (exit, IPO, or just cruising along)
    May 6 1
    • Yelp 🐺 wolf
      OP
      Equity was like 0.02ish. I’d be something like <30th engineer
      May 6
  • Uber lock_up
    Without telling us anything about the company, it’s domain, number of employees, recent financing rounds, current valuation etc no one will be able to help you.
    May 6 1
  • Uber koloo
    Recruiters always pitch 10x valuation don't buy that shit use 409a and common sense
    May 6 0
  • Wells Fargo qUyB01
    Like lock_up said hard to tell whether valuation is justified without knowing revenue, growth etc.
    May 6 0
  • Yelp 🐺 wolf
    OP
    Update: thanks for all your comments and suggestions friends! I asked them their revenue and growth numbers. They refused to discuss them. They weren’t willing to discuss whose invested in it too. Kinda super confused. Brain sees a bunch of red flags. Heart wants to hustle it out. 😭
    May 6 0