Startup Funding Espresso -- 5X Rule of Post-Money Valuation
5X Rule of Post Money-Valuation Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing. As an investor reviewing deals, you\u2019ll hear a wide range of startups with various fundraises and pre-money valuations.\xa0\xa0 So, how can you screen the deals to find those who have \u2018reasonable\u2019 valuations? Try the 5X rule. The 5X rule says to take the post-money valuation and multiply times 5. If the company sells for that price, then the investors will do well.\xa0\xa0 If you don\u2019t think the company will be able to sell for that price, then the company is overvalued and will most likely not provide a return to the investor. Entrepreneurs usually quote their fundraise target and their pre-money valuation.\xa0 To find the post-money valuation, add the fundraise amount to the pre-money valuation. Here\u2019s a recent example. The company is raising $2M on a pre-money valuation of $10M yielding a $12M post-money.\xa0\xa0 By multiplying 5*12, we see a target exit value of $60M. Most companies in the space were exiting at $25M to $30M, so this one was overvalued. Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.Let\u2019s go startup something today. ___________________________________ For more episodes from Investor Connect, please visit the site at: \xa0 Check out our other podcasts here: \xa0 For Investors check out: \xa0 For Startups check out: \xa0 For eGuides check out: \xa0 For upcoming Events, check out \xa0\xa0 For Feedback please contact info@tencapital.group\xa0\xa0\xa0 Please , share, and leave a review. Music courtesy of .