When it comes to evaluating a pre-revenue startup, it’s not an easy task and there are a handful of key components to the valuation process. Larry Scheinfeld lists 4 thoughts to consider when determining a prospective startup and their potential value.

1. 4 Metrics That Matter:
How to Recognize A
Startup Worth Investing In
Larry Scheinfeld

2. Determining a startup’s worth is more so an
educated guess.
Here are 4 thoughts to consider when determining a
prospective startup and their potential value…

3. #1: Founding Team

4. It’s not uncommon for an angel investor to believe in a
team more than the actual product, hence why it’s one of
the more important factors.
Just as much as the idea, you’re investing in the team
that plans to carry out the idea.

5. It’s also best to determine where the entrepreneurs true
passions are and what they can offer.
An already established team could decide many factors,
such as future hires, burn rate, or even how the seed
funding will be used.

6. Take into account the vision the founders have for their
entity and how detailed their plan of action is 3-5 years
down the road.
Their expectations for their company is usually a good
indicator of their expertise and ability to carry the idea
out.

7. #2: Traction and Expected
Near-Term Revenues

8. Traction! We hear it everyday when it comes to startups
because it’s so integral in the fundraising process,
especially in the seed round.
Traction is a startup’s claim to value and it’s usually the
measuring stick VCs use to evaluate a business’s
potential or already proven growth.

9. Traction varies depending on the business model and
the product/service, but nonetheless it shows that a
startup provides value and ideally – it’ll also show the
demand.

10. Read Full Story:
http://larryscheinfeldvc.com/
2016/01/12/metrics-that-matter-how-
to-recognize-a-startup-worth-
investing-in/