5X Your Raise Method of Valuation

5X Your Raise Method of Valuation

March 1, 2021 by investor

In raising funding, you’ll need to propose a value for the equity in your startup called valuation. One way to set a valuation is to use the 5X your raise method.

Here’s how it works.

Most investors want to see the valuation for their money coming in at 20%-25% of the post-money valuation.

This gives a 4X-5X valuation based on the investment.

For example, using 4X raising $500K, a $500K investment plus $1.5M pre-money, yields a $2M post-money valuation.

In another example using 5X raising $500K, a $500K investment plus $2M pre-money, yields a $2.5M post-money valuation.

Using this method, your pre-money ranges from $1.5M-$2M.

This gives you a ballpark estimate for setting the valuation of your raise.

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