No Revenue, No Problem: How to Value Your Pre-Revenue Startup or Project

So, you’ve got a software project but no revenue yet. Congrats, you’re in good company.

The tricky part? Figuring out what it's worth. Pre-revenue valuations are a mix of educated guessing, negotiation, and investor psychology. You’ve got some tools, but no one really knows the future.

That said, if you’re serious about selling or raising funds for your early-stage project, you need to play the game. The methods below are the most commonly used – but not all are equal. Some are overhyped, others are founder favorites.

Let’s break it down.

The Top Pre-Revenue Valuation Methods (And When They Actually Work)

🔹 The Berkus Method

If you like simplicity, this one’s for you. Developed by angel investor Dave Berkus, it assigns dollar amounts (up to $500,000) to five key areas that can lead to startup success:

• Strong Idea – Having a good concept? That’s worth something.
• Working Prototype (MVP) – If it exists, bump up your value.
• Quality Management Team – Investors love a strong team.
• Strategic Relationships – Partners and early traction add value.
• Sales/Execution Plan – A roadmap to revenue earns another boost.

Why It’s Flawed:

• It caps pre-revenue valuations at $2M, which is low in today’s market.
• It assumes you’ll hit $20M in revenue within five years – most startups don’t.
• Investors rarely use this seriously – more of a napkin math exercise.

👉 Best for: Early-stage founders who need a quick sanity check, but not serious deal-making.

🔹 Scorecard Valuation Method: The Investor's Favourite

Think of this one as the comparison method. Your startup is scored in key areas and compared to others in your industry that have already raised money.

How It Works:

• Market Opportunity (25%) – Is there real demand?
• Team Quality (30%) – Can you actually execute?
• Product Strength (15%) – How good is your solution?
• Competitive Environment (10%) – How crowded is the space?
• Marketing/Sales Plan (10%) – Can you get users?
• Capital Needs (5%) – Will you need more funding soon?
• Other Factors (5%) – Anything unique?

Each category is weighted and benchmarked against peers. If similar startups raised at $1M and you score 120%, your valuation might be $1.2M.

👉 Best for: Startups in hot industries with accessible comp data.

🔹 Cost-to-Duplicate Method: A Lowballer's Favourite

This method asks: What would it cost to build this from scratch?

You tally the fair market value of assets like:

• R&D costs
• Prototypes
• IP and tech
• Developer salaries

Why It’s Flawed:

• Ignores future potential
• Great for acquisitions, terrible for raising funds
• Often used by buyers to lowball founders

👉 Best for: Tech-heavy projects (AI, deep tech) with high development cost.

🔹 Risk Factor Summation Method: The Investor Reality Check

This method flips the lens – it looks at risk, not just assets.

Risk Categories (12 factors):

• Team Risk
• Market Risk
• Competition Risk
• Technology Risk
• Funding Risk
• Manufacturing Risk
• Sales & Marketing Risk
• Legislation Risk
• International Risk
• Reputation Risk
• Exit Risk
• Other Risks

Each is scored from -2 to +2, with each point adding/subtracting $250K from your valuation.

👉 Best for: Startups with some traction and real risk exposure.

🔹 Comparable Transactions Method: The Market Speaks

Startups – like houses – can be priced based on what similar ones have sold for.

How It Works:

• Find recent acquisitions of similar startups
• Identify a valuation multiple (e.g., price/user, ARR multiple)
• Apply that multiple to your metrics

Example:
A SaaS company sold for 10× ARR. If you’re forecasting $100K ARR, that could imply a $1M valuation.

The Catch:

• Past deals may not reflect current markets
• Some sales are inflated acqui-hires or founder-friendly fire sales

👉 Best for: Startups in active M&A sectors with clean comp data.

Which Method Should You Use?

💡 Remember: Valuation ≠ Worth. It’s a negotiation signal, not gospel.

Common Founder Mistakes in Valuation

🚫 Overvaluing Traction

10,000 free signups ≠ product-market fit.

🚫 Ignoring Risks

Investors are trained to sniff out flaws. Acknowledge yours.

🚫 Not Knowing Multiples

Know the average exit/revenue multiples in your space.

🚫 Wrong Method for the Audience

Acquirers think differently than VCs. Choose wisely.

Final Thoughts: The Art of the Deal

Valuing a pre-revenue startup is more art than science. The smartest founders:

• Know multiple valuation methods
• Use different methods for different situations
• Focus on storytelling and numbers
• Back up their asks with comps, data, and clarity

Want Help With Early-Stage Valuation?

At Indiemaker, we’ve seen hundreds of early-stage deals close successfully – even without revenue. We help you position your project, price it fairly, and find aligned buyers. Whether you’re selling or raising, knowing your worth gives you the edge.

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Now go get that deal.