If your start-up has limited (or no) revenue, valuation can feel like trying to price a house that hasn’t been built yet. You’ll hear strong opinions, see wildly different numbers, and wonder if you’re missing a secret formula.
There isn’t one. Business Valuation at seed stage is a negotiation backed by evidence. The goal isn’t a “perfect” number, it’s a number you can defend under pressure, with clear assumptions and proof points.
A sensible valuation also has to match the round you’re raising. It should fund specific milestones, over a realistic runway, with dilution you can live with.
What investors are really pricing at seed stage (it’s not last year’s sales)
When revenue is thin, investors price risk and momentum. They’re asking: “How likely is this team to build something people buy, before cash runs out?” Your valuation rises when key risks look controlled, and falls when they look vague.
Most seed investors anchor on a handful of drivers:
- The team’s ability to execute (relevant experience, speed, decision-making).
- The problem size (pain level, frequency, budget, and urgency).
- Proof the product works (not just a build, but clear user value).
- Speed of learning (tight feedback loops, measurable iteration).
- Early traction signals (usage, pilots, LOIs, pipeline with named stages).
- Direction of unit economics (even if early, the shape should make sense).
- Clear risks and a plan to reduce them (technical, regulatory, sales cycle, churn).
A strong valuation discussion is calm and specific. Bring a short checklist of proof points you can show, not just claim:
- Customer evidence: interview notes, themes, quotes, buying triggers.
- Product proof: demo, time to onboard, time to value, key workflows.
- Traction metrics: definitions, trends, cohorts, and retention.
- Commercial signals: pilots, LOIs, pricing tests, pipeline stages.
- Execution plan: 18 to 24 months of milestones and burn assumptions.
Traction you can use without revenue: the signals that still count
No revenue doesn’t mean no traction. It means your traction needs to be measured in behaviour and commitment, not invoices.
Useful signals include: active users (with a strict definition), retention by cohort, repeat usage per week, waitlist quality (who they are and why they joined), conversion rates across onboarding steps, paid pilots (even small), signed LOIs with clear scope, partnership terms (not just a logo), and a pipeline broken into named stages with counts and values.
Also bring the “messy” traction investors respect: churn risks you found and fixed, onboarding blockers removed, or sales objections that changed your product roadmap.
The key is consistency. Decide what counts as an active user (for example, “completed X action in the last 7 days”), then stick to it across your deck, data room, and meetings. Investors won’t mind early numbers. They will mind numbers that shift depending on the question.
A simple way to link valuation to the round: dilution, runway, and milestones
A practical sanity check is to work backwards from the raise. Founders need enough cash to reach the next value step, investors need enough ownership for the risk to make sense.
In the UK and Europe, recent market data into early 2026 shows median pre-seed or seed pre-money valuations around €4.7m to €5.0m, with typical dilution often landing in the 15% to 25% range, and many teams planning 18 to 24 months of runway. These are medians, not targets, but they help you spot numbers that don’t fit the market.
A quick check looks like this:
| Item | A sensible way to frame it |
|---|---|
| Runway | 18 to 24 months, based on hiring reality and sales cycles |
| Milestones | Product release, first paying customers, repeatable sales motion |
| Dilution | Often 15% to 25%, depending on round size and valuation |
If your valuation implies 5% dilution for a risky pre-revenue business, expect pushback. If it implies 40% dilution, you may struggle to motivate the team and hire well.
Practical valuation methods that hold up in investor conversations (use two or three, not one)
Photo by RDNE Stock project
Good seed-stage Business Valuation isn’t about picking your favourite method. It’s about triangulation. Build a range using two to three methods, then explain why your number sits where it does.
Keep it simple enough to show on one page. Investors don’t need a spreadsheet masterpiece in the first meeting. They need logic they can repeat to their partners.
Also, method fit matters. A deep tech start-up with long R&D cycles won’t read like a B2B SaaS company. A marketplace with liquidity risk won’t be valued like a single-product app.
Berkus and Scorecard methods: quick, founder-friendly, and easy to defend if you bring evidence
The Berkus method is useful when revenue doesn’t exist yet. It values progress across key risk areas, often with a cap, such as team quality, market potential, product readiness, traction, and strategic relationships. The power of Berkus is that it forces you to show what risk has been removed, and what hasn’t.
The Scorecard method starts from a typical local seed valuation, then adjusts up or down using weighted factors. In practice, you’re saying: “Compared to similar seed deals, we’re stronger here, weaker there, so the valuation moves accordingly.”
Make these credible by doing three things: use recent comparable seed deals in your region and sector, write down every assumption (no hidden magic), and score consistently. If you give yourself top marks for “team” and “traction”, be ready to show evidence that an investor would agree with.
VC Method and comparables: speak the language of exits and market pricing
The VC method works backwards from an exit. In plain steps: estimate a plausible exit value, apply a target investor return, discount for risk over time, then work out what that implies for today’s pre-money after the investment amount and ownership needs.
This method can feel harsh on pre-revenue start-ups, because it bakes in uncertainty. That’s why it’s useful in investor talks. It shows you understand how venture funds think, even if you don’t accept every assumption.
Comparables for funding rounds are often the fastest way to ground the conversation. Use recent raises by companies that are genuinely similar: stage, sector, geography, and traction type. Then adjust for differences that matter, like retention, sales cycle length, regulatory risk, or founder track record. Avoid cherry-picking one outlier deal. If you can’t explain why you’re comparable in the ways that count, the reference will backfire.
Cost-to-duplicate and milestone-based ranges: useful as a floor, not the whole story
Cost-to-duplicate asks: what would it cost to rebuild your product, data, and IP today, with a capable team? It can set a floor, and it can be helpful when an investor claims your business is “just an idea”.
It rarely sets the final number for venture-backed firms because it ignores upside. Investors pay for future cashflows, not past invoices.
A better companion is a milestone-based range. Present valuation bands tied to what will be true after the round. For example: “If we hit 10 paying customers with X retention, we’re in this range; if we also prove a repeatable sales motion, we move up.” It shows a path, not a demand.
What to avoid if you want your valuation to survive due diligence
If you want a valuation to hold, protect credibility. A high headline number with weak logic often triggers tougher terms, more control, or a slower process.
When you get pushback, don’t argue the number first. Ask which assumption they don’t buy, then fix the assumption or show the evidence. Investors back founders who stay rational under pressure.
The most common valuation mistakes founders make (and how to fix them fast)
| Mistake | Fast fix that builds trust |
|---|---|
| Using only one method | Show a range from 2 to 3 methods, explain the midpoint |
| Outdated or irrelevant comparables | Use recent, local, same-stage deals, adjust openly |
| Mixing up pre-money and post-money | Write the cap table effect on one slide, no ambiguity |
| Ignoring option pools | Model the option pool properly, show the impact on dilution |
| Quoting a number with no assumptions | List 5 to 8 assumptions, keep them consistent everywhere |
| Inflating TAM with no go-to-market | Tie market size to reachable segments and a sales plan |
| Pretending risk doesn’t exist | Name the top risks and how the round reduces them |
| Treating pipeline like revenue | Separate “interest” from “committed”, show stages clearly |
| Relying on vanity metrics | Prioritise retention, activation, repeat usage, and conversion |
These fixes don’t just raise your valuation. They make the round easier to close.
Red flags in your model and deck that trigger tougher investor terms
Investors tighten terms when numbers look untethered from reality. The common triggers are steep growth curves without a clear driver, retention that’s assumed rather than measured, no credible customer acquisition costs, margins that don’t match your sector, and headcount plans that ignore hiring time.
Hidden dilution is another one. If the cap table doesn’t reflect the option pool, convertibles, or future top-ups, expect hard questions. Keep the narrative and model aligned. If your deck says “enterprise” but your model assumes self-serve conversion rates, the valuation story collapses fast.
Conclusion
Valuing a start-up with limited revenue is hard, but it’s not guesswork. Pick two to three methods, build a sensible range, document assumptions, and tie the raise to milestones that change the risk profile.
When you can explain trade-offs clearly, your Business Valuation becomes a tool for closing, not a point of friction. Consult EFC can help you build an investor-ready valuation view, align your model and deck, and walk into funding talks with numbers that stand up to scrutiny.
Contact us today for a FREE consultation about your valuation.
