It’s believing the number means something.
I’ve valued 100+ early-stage companies. Created a framework (the “Berkus Method”) that’s used globally. Here’s what five decades taught me about startup valuation:
Your pre-revenue valuation isn’t a prediction. It’s a negotiation.
VCs know this. Founders often don’t. They walk into a room believing there’s some objective truth to their company’s worth. There isn’t. The number is whatever you can convince someone to pay, balanced against how much you’re willing to give up.
But here’s what matters more: the number you raise at matters less than the dilution you take.
[Email readers, continue here…] Raising at $20M and giving up 40% is worse than raising at $10M and giving up 20%. Same capital. Different outcomes. One leaves you in control. The other leaves you working for your cap table.
Valuation is a snapshot. Equity is forever.
I’ve watched founders celebrate a “hot” round, then realize they sold too much too early. By Series B, they’re working for their investors. The excitement of a high valuation fades fast when you’re negotiating your own job security.
So how do you actually value an early-stage company? Here’s the framework: value the risk reduction, not the idea.
• Sound idea? Add value.
• Prototype working? Add value.
• Quality team? Add value.
• Strategic relationships? Add value.
• Product traction? Add value.
Each milestone reduces risk. Each reduction earns valuation. It’s not about the vision in your pitch deck. It’s about the proof that you can execute.
The best entrepreneurs I’ve backed didn’t optimize for the highest valuation.
They optimized for the right partner at a fair price. They understood that integrity compounds faster than a hot round. They knew that who you raise from matters more than what you raise at.
If you’re fundraising right now, ask yourself: Am I chasing a number or building a company?
Because only one of those creates lasting value.
