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Ask YC: What is an appropriate valuation for a startup that is brand new?

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Re: Ask YC: What is an appropriate valuation for a startup that is brand new?

#11

Post by tptacek »

webwright wrote: post #9

"Fair"? There's nothing fair about valuing a company at millions of dollars when it's just a few guys and an idea. It's about getting the right amount of investment while not selling too much of the company (but selling enough to make it with the investors time). Check: http://www.avc.com/a_vc/2010/10/employee-equity-dilution.htm... Because you've offered zero information to dial it in, $500k to $4m post-money as a w…

You're scaling this to typical SF angel investment sizes, right? I got the impression that this was, like, one guy.

Re: Ask YC: What is an appropriate valuation for a startup that is brand new?

#13

Post by staunch »

jerf wrote: post #8
staunch wrote: post #5

Others are saying you can't place a value. I don't buy that at all. People do it every day. The people that are truly capable of building a successful business are few and far between. An investor is lucky to find someone worth betting on. From your perspective taking investment is a serious commitment. You're promising to to spend the next N years dedicating yourself to making the company successful. That's worth qu…

"People" aren't saying you can't place a value on it. "People" are saying you can't place a value on it based on 121 characters of text, less than half of which even describes the startup in question. If you rephrase the question as "What is this thing in my hand worth?" you haven't changed all that much....

You can make some common assumptions:

1) There are (or will be) 2 founders that are prepared to dedicate years to the venture

2) They're able to convince an investor to put money in (otherwise valuation won't matter).

To me that's enough to justify the ballpark valuations I gave. You don't need to know their specific market, product, or anything else.

Re: Ask YC: What is an appropriate valuation for a startup that is brand new?

#14

Post by Yzupnick »

anigbrowl wrote: post #3

# of programmers * months to MVP * credibility * $10k. Even a mockup is better than nothing, but you'd do well to find your own tech partner.

So if it takes a large number of programmers a very long time to produce a product, the valuation is higher than a small amount of programmers creating a viable product quickly?

Re: Ask YC: What is an appropriate valuation for a startup that is brand new?

#15

Post by anigbrowl »

Yzupnick wrote: post #14
anigbrowl wrote: post #3

# of programmers * months to MVP * credibility * $10k. Even a mockup is better than nothing, but you'd do well to find your own tech partner.

So if it takes a large number of programmers a very long time to produce a product, the valuation is higher than a small amount of programmers creating a viable product quickly?

It would need to be :-)

What I'm driving at is that some ideas you can do a minimum viable product very quickly, other more ambitious ones might need months of work - I was trying to avoid making assumptions about what this unknown idea might be, and throw the focus on potential cost to launch. The question is so open-ended that it sounds like an interesting idea without any financials yet; so I'm trying to estimate the cost of satisfying my curiosity about whether or not a market exists for whatever-it-is.

A webapp that solves a particular problem by matching buyers and sellers might need only a week of work to begin being useful. But not all ideas are so straightforward - for all I know s/he might be imagining the next evolution of the spreadsheet.

Re: Ask YC: What is an appropriate valuation for a startup that is brand new?

#16

Post by DirtyAndy »

Question: Are you looking for an angel investor, or has one approached you?

If you are looking for one and have no contacts then I don't think there is really an answer to your question, but somewhere close to zero.

However if someone has approached you then that is a different question. I've talked about ideas in the past and had people ask me about investment. The way I value that is if I am going to work the next five years at startup levels of stress and hours I value my income at US$200,000 a year. So five years (commitment I would assess putting into it) x 200K is $1,000,000. Then it is up the investor as to what percentage they are after. So 10% means I would want them to invest around $100K.

That all needs to be balanced by your level of experience, financial expectations, how much you need the money - and how likely you perceive the potential to accept the concept.

Re: Ask YC: What is an appropriate valuation for a startup that is brand new?

#17

Post by pascalchristian »

anigbrowl wrote: post #3

# of programmers * months to MVP * credibility * $10k. Even a mockup is better than nothing, but you'd do well to find your own tech partner.

So if I hire stupid and lazy programmers my valuation will approach infinity?

Re: Ask YC: What is an appropriate valuation for a startup that is brand new?

#18

Post by jacquesm »

staunch wrote: post #13
jerf wrote: post #8

Earlier quoted context omitted.

"People" aren't saying you can't place a value on it. "People" are saying you can't place a value on it based on 121 characters of text, less than half of which even describes the startup in question. If you rephrase the question as "What is this thing in my hand worth?" you haven't changed all that much....

You can make some common assumptions: 1) There are (or will be) 2 founders that are prepared to dedicate years to the venture 2) They're able to convince an investor to put money in (otherwise valuation won't matter). To me that's enough to justify the ballpark valuations I gave. You don't need to know their specific market, product, or anything else.

You can't put a value on a company that is based on an unknown idea with research by an unknown individual with unknown skills.

Sorry but no. I don't care if the founders are prepared to dedicate the rest of their lives to it (assuming it is founders and not founder), after all you could dedicate your life to making a better mousetrap but for me that would be worth $0.

The guy is basically asking how much his time is worth without giving his qualifications for all you know he's flipping burgers at McD's.

My brother in law came up with an idea for a better garbage can, not immediately obvious and not in production anywhere, after some 'research'.

What is it worth?

For me it's worth $0. He has no background in manufacturing, sales, marketing or design, he does not have anybody that would dedicate his life to it, and he's not prepared to mortgage his house and let go of his day-job to pursue it. So it won't be going anywhere.

I don't see this guy making any statements about what he will bring to the table either other than the idea, not even implicit ones, no statements about commitment or anything.

So, more info is needed. Both about the idea and the OP (track record would help but likely none or he wouldn't be asking the question).

No realistic valuation ever rested on this little info.

Sure 'angel' investments fall in to a certain range, say 0 to 10% of the stock for 0 to $1M. But that's like saying the sun will be shining tomorrow, that's not an answer to the question.

Re: Ask YC: What is an appropriate valuation for a startup that is brand new?

#19

Post by anigbrowl »

pascalchristian wrote: post #17
anigbrowl wrote: post #3

# of programmers * months to MVP * credibility * $10k. Even a mockup is better than nothing, but you'd do well to find your own tech partner.

So if I hire stupid and lazy programmers my valuation will approach infinity?

Only if you have epic levels of credibility.

Re: Ask YC: What is an appropriate valuation for a startup that is brand new?

#20

Post by staunch »

jacquesm wrote: post #18
staunch wrote: post #13

Earlier quoted context omitted.

You can make some common assumptions: 1) There are (or will be) 2 founders that are prepared to dedicate years to the venture 2) They're able to convince an investor to put money in (otherwise valuation won't matter). To me that's enough to justify the ballpark valuations I gave. You don't need to know their specific market, product, or anything else.

You can't put a value on a company that is based on an unknown idea with research by an unknown individual with unknown skills. Sorry but no. I don't care if the founders are prepared to dedicate the rest of their lives to it (assuming it is founders and not founder), after all you could dedicate your life to making a better mousetrap but for me that would be worth $0. The guy is basically asking how much his time is…

It seems like you're being intentionally obtuse. He asked a general question about startup valuations. A general answer is perfectly possible. Whatever...
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