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

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.

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

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

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

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.


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

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?

“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

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

where to look for investors

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

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



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