Valuation: how to sustain the value of your startup throughout the investment journey

100 Open Startups
7 min readSep 19, 2022


Defining the aluation is a challenge that every entrepreneur faces when looking for investments. This definition should take into account the investment journey, not the snapshot.

Boosted by the years of the pandemic, the startup investment market went through a festive moment, promoted mainly by Venture Capital funds . During this period, investors gambled (and big), leading to an explosion in valuations . Although this appreciation scared many, the vast majority of investors accepted the risk and joined the party. However, this imbalance in the investment market generated a hangover, and we started the year 2022 with a wave of layoffs, precisely in the startups that raised the most funds.

At the moment, the investment market is undergoing a correction, and entrepreneurs themselves are getting back to their feet more on the ground. Startups are more cautious about their own valuation calculation analysis , remembering that, more than the photography of the moment, it is worth building a sustainable journey to value your company . After all, excessive valuation and funding can jeopardize its long-term development.

In this article, we separate the main tips for you, early-stage entrepreneur , who seeks to build a solid fundraising journey and how to more effectively negotiate your valuation . Check out:

what is valuation

Valuation represents the value of an enterprise and is considered as a necessary analysis of the business for the entrepreneur looking for investments. However, the definition of valuation is just one element of this journey . He, by himself, doesn’t mean much.

There are several classic methodologies for defining the valuation of companies, based on predominantly financial assumptions. However, many of these analyzes are not suitable for startups that plan to enter a high growth journey, as the staged-financing mechanism applied, specifically, by the category of Venture Capital investors assumes.

Startups that want to reach their growth potential quickly, but sustainably, must consider a journey that allows them not to be diluted ahead of time, but also must not be deceived by unsustainable valuations in the face of the uncertainties of their development process.

According to Gustavo Junqueira, Director of KPTL , a Venture Capital fund manager , valuation is one of the ingredients of a joint construction, in which the entrepreneur, during his journey, sees the need for support to get where he has the potential to get. “And investors come to accelerate, reduce risks and anticipate the future,” he says.

Value creation journey: the first step in negotiating your valuation at every step

When developing a business model, it is not enough for the entrepreneur to build his journey based only on the confidence he has in the potential value of his innovation. It is necessary to have a plan of which steps must be taken to achieve success. In other words, the value creation journey is the story of how the entrepreneur wants to realize his potential and how the investment rounds will support this growth expectation step by step.

Therefore, the objective is not to obtain the highest possible valuation for each investment round, but how the journey will be built together with investors to get further and faster.

“It’s a marathon, not a 100-meter dash. It is necessary to prepare to succeed in the war, and not worry about just one of the battles”, says Gustavo.

Valuation definition for early-stage startups

Ebitda multiples? Billing multiples? Discounted Cash Flow? Exact valuation formula for early-stage startups does not exist !

All these methods can help define a company valuation at more mature stages. However, the valuation of early-stage startups is considered an empirical and business calculation.


For early-stage startups , which have high potential, but low revenue levels, one of the methodologies used by investment funds is the scorecard .

This method takes into account less tangible aspects than purely financial indicators, such as:

Future growth potential : as well as the validation steps for realizing this potential;

Competition : the funds evaluate startups by segments of activity. For example, a startup in the Agritechs segment is compared to other startups in the same sector;

Intellectual property and information about innovation : investors also look at how the innovative solution stands out among the other startups in the portfolio;

Risk level : analysis of the solution’s risk points, as well as the startup’s operating processes;

Development stage : point that is a consequence of the previous items and still takes into account revenue structure (scalability); cost structure (economies of scale) and key growth indicators.

Transparency is the name of the game

Valuation of early-stage startups depends on an understanding of the potential of the business, its stage of maturity, the execution capacity of its teams and, finally, the need for resources (not only financial) to overcome each of the development stages. .

The concern of the proper calculation of the valuation must be of both, entrepreneur and investor. On the one hand, the valuation must not be so low as to dilute entrepreneurs to levels that could discourage them; on the other hand, they must not be so high as to be unsustainable to attract investors in the next round of funding.

Gustavo reinforces the importance of putting the cards on the table. Entrepreneurs must be transparent about their innovation and show where they want to go with each round.

“ Valuation is also an analysis of the operation, being a two-way street, where the investor contributes to growth, provides mentoring and helps startups to develop (not only providing financial resources)”, he adds.

Until when must founders guarantee more than 50% participation?

According to Orlando Cintra Founder & CEO of BR Angels , the rule that entrepreneurs must guarantee participation of more than 50% until the Series A round may or may not make sense . If the startup’s journey foresees going to Series F , joining the venture capital journey in its Series A with more than 50% is mandatory, but it may be that the startup has an exit plan focused on M&A or organic growth, for example, and don’t go past Series A .

“Many valuation definition indicators were built from the analysis of unicorn companies (and they are American indicators). And this is the danger, because the analysis is out of the curve, precisely because it takes into account a business of great magnitude”, says Orlando.

He also comments that the funds are not able to identify a unicorn at the beginning of the fundraising journeys. Therefore, for startups that are going through the first rounds, whether angel, seed, pre-seed or Series A investments , it is important to be cautious in the valuation analysis , so that they continue to “burst” ceilings as they advance in their journeys. of growth and innovating in the possibilities of monetization with the built assets.

Early-stage investors are long-term partners

The entry of investors in the initial stages of your startup means establishing relationships that typically range from 3 to 7 years, and can reach a decade.

Therefore, who these investors are, and how the entrepreneur relates to them, is critical. The exit horizon will only be defined after the establishment of a long journey or until there is a liquidity event.

Founders and Co-founders

Do your partners carry the business with you? This question may seem random, but investors are increasingly looking at the reality of startup governance. Having a team of hardworking partners, who jointly carry the weight of the company, is of paramount importance, including for defining the percentages of assets destined for them.

where to look for investors

Options abound! Startups have different ways to seek contributions. It can be via angel investor, Venture Capital (VC) funds, in addition to Corporate Venture Capital (CVC), Crowdfunding , among other means.

With so many options, it is best for the entrepreneur to seek more than one source, as this increases the chance of capturing, having a consistent business model. In addition, ecosystem management is also highly valued. Thus, the startup has the chance to talk to several players in the innovation ecosystem, who can help with complementary views.

Build your Justice League: bring investors who want to grow together with you!

Best practices to support your valuation

  • Build your investment rounds journey. It will be important to define how many rounds you will need to reach your goal.
  • Don’t overdo the valuation . If the valuation of the angel round is overstated, future rounds could suffer. As we said, the important thing is not to maximize the valuation of the round, but to make a consistent journey.
  • Form your Justice League. Coordinate with different players and form a versatile group of investors. It is important to seek investors who are aligned with the need for your journey.
  • Get good legal support. It is important to pay attention to the clauses and be in alignment with investors, so that, in the future, no party is harmed. Entrepreneur and investor need to talk and be transparent with each other.
  • Find your big difference. It is important that your innovation is not “more of the same”. Impressively showing how your business stands out in the market will have a positive impact on investor assessment.
  • Balance is needed. The entrepreneur needs to take into account the investor’s side as well, having a view of the profitability generated after the investment, since the multiplication of capital is still the main objective sought by investors.
  • Do not give up! If you got “no” from a fund, work on improvement points based on the feedback received. The “no” might just represent that you weren’t ready at that particular moment. Investors: the feedback culture is important for the evolution of entrepreneurs.
  • Know , above all, where you have the potential to go. Not every startup needs to reach a Series F round , for example. More money requires more robustness, more innovation and more performance.

TOP Open Startups Forum

The TOP Open Startups Forum aims to bring together the founders and founders of the startups awarded in the Ranking 100 Open Startups since its first edition, published in 2016. The objective is to generate a space for exchanges, learning and networking, bringing to the agenda topics of relevance to the day-to-day business, with a special focus on attracting investments. Forum activities are part of the exclusive benefits for startups awarded in the Ranking 100 Open Startups.

At the last meeting, we received Orlando Cintra, Founder & CEO of BR Angels, and Gustavo Junqueira, Director of KPTL.