How to Price Your Startup’s First Funding Round

How to Price Your Startup’s First Funding Round

Pricing your startup’s first round is one of the most misunderstood — and emotionally charged — decisions a founder makes.

Go too high, and you scare away savvy investors.
Go too low, and you give away too much ownership too early.

Here’s how to value your startup at the pre-seed or seed stage, even before you have major revenue or traction.

---

1. Understand That Valuation Is Negotiation

At early stages, valuation isn’t just a math equation — it’s a mix of:

• Market comparables

• Investor sentiment

• Team strength

• Vision and narrative

• Fundraising supply/demand

VCs and angels aren’t pricing your company — they’re pricing risk.

---

2. Common Valuation Ranges (2025)

• Idea stage: $1.5M – $3M pre-money

• MVP with beta users: $3M – $5M

• Revenue-generating: $5M – $10M

• Growing traction: $10M – $15M+

These are ballparks. Industry, geography, and team all shift the numbers.

YC’s standard SAFE in 2024 was $3M–$5M cap at pre-seed.

---

3. Choose a Structure: SAFE, Note, or Priced Round

Your fundraising instrument affects how “price” is perceived.

• SAFE/Note: You negotiate a valuation cap, not a direct price

• Equity round: You set a share price based on valuation

💡 If unsure, use a SAFE with a cap + discount (e.g., $5M cap, 20% discount)

---

4. Anchor on Your Metrics (Even If They’re Early)

Even pre-revenue, you can justify value using:

• Waitlist signups

• LOIs or pilot commitments

• User engagement data

• Unit economics modeling

• Team expertise (ex-FAANG, second-time founders)

✅ Example:
“We’ve signed 8 LOIs with enterprise customers averaging $12K ACV. That’s $96K in pre-launch demand.”

---

5. Use Comparable Startups to Benchmark

Look up funding rounds on:

• Crunchbase

• AngelList

• [PitchBook] (if you have access)

Find:

• Similar stage

• Same vertical

• Recent raise (last 12–18 months)

Create a mini comp set to guide your expectations.

---

6. Balance Ownership and Fundraising Goals

Your valuation should leave room for:

• Investor incentive (~20–25% ownership)

• Future rounds (avoid too much dilution)

• Team options (~10–15% pool)

🔢 Example Math:

• Raising $500K at $5M post = 10% dilution

• Raising $2M at $8M post = 25% dilution

Don’t just raise the most you can — raise what you can deploy efficiently over 12–18 months.

---

7. Expect Pushback (and Be Flexible)

It’s normal for investors to challenge your price.
Come prepared with:

• Why your team de-risks execution

• Why the market size justifies a big swing

• How you’re capital-efficient

Be ready to adjust — especially if you’re a first-time founder or lack traction.

---

8. Don’t Anchor Too Low Either

Going too low may:

• Signal desperation or inexperience

• Leave you over-diluted at Series A

• Attract the wrong type of investors

A fair deal respects both sides of the table.