Pre-revenue startup valuation: methods and real numbers

Imagine two founders in the same city with the same idea and no revenue. One leaves a pre-seed meeting with a €6 million valuation, the other with €3 million. Nobody lied. So where does the number come from?

Mostly from negotiation, a little arithmetic, and a formula or two brought in afterwards to justify the result. In about ten minutes you’ll see how pre-revenue startup valuation really works, five methods people quote with a worked example for each, why a discounted cash flow model is weak at this stage, and what the latest medians say. If the vocabulary is new, start from our beginner’s map from zero to a first round.

How is a pre-revenue startup valued in practice?

Backwards. Founders and investors start from the money, not from the product. You decide how much you need to reach the next milestone, say a working product and the first paying customers. Then you decide what share of the company you’re willing to sell, which is your dilution. Divide the first number by the second and you have the post-money valuation, the value of the company once the new money is in. Subtract the cheque and you have the pre-money.

Share sold	Post-money	Pre-money
15%	€3.33 million	€2.83 million
20%	€2.5 million	€2.0 million
25%	€2.0 million	€1.5 million

Nobody valued the product there. The cheque and the slice did the work. That’s also why valuations move with the market: in March 2026 Carta put rising seed valuations down to bigger rounds combined with steady dilution. How big a slice is normal? Carta counted a median 19.5% across 5,118 US priced seed rounds in 2025, and fewer than 10% of software seed rounds sold 30% or more. Our guide to how much equity to give away at pre-seed and seed goes deeper, and the one on pre-money vs post-money valuation shows the maths in both directions.

The five methods people cite

None of them was built to give the right answer. They give an investor and a founder a tidy way to argue. In an Angel Capital Education Foundation text, Bill Payne, whose Scorecard method is on the list, calls his worksheet “only a guide” and valuing pre-revenue startups “an art”.

Method	How it works	When it’s useful
Berkus	Up to $500,000 for each of five factors: sound idea, prototype, management team, strategic relationships, product rollout or sales	Very early, with a prototype at most, as a quick check
Scorecard	Start from the median pre-money of similar pre-revenue startups in your region and sector, then scale it with weighted factors: team 30%, opportunity 25%, product 15%, competition 10%, marketing and partnerships 10%, need for more money 5%, other 5%	When you have a believable local median, as angel groups do
Risk factor summation	Rate twelve risks from -2 to +2; each point adds or subtracts $250,000 from a regional average	To discuss the weak spots one by one
VC method	Estimate the exit value, divide by the return the investor wants, adjust for future dilution	When an investor must justify the cheque against an exit
Comparables	Look at what similar startups raised recently: same stage, region and sector	Always, as the reality check on the other four
Discounted cash flow	Forecast cash flows and discount them to today	Rarely before revenue: use it once you have data

Berkus. Dave Berkus gives up to $500,000 for each of five things: a sound idea, a prototype, a good management team, strategic relationships, and product rollout or first sales. The ceiling is $2.5 million after rollout and $2 million before revenue. It was designed for startups with the potential to pass $20 million in revenue within five years, and it stops applying once real revenue appears. It’s quick and a little crude, and Berkus is candid about it: in a reply to a reader he calls the $500,000 per factor arbitrary, and he says you can raise the maximums to reflect geography.

Scorecard. Payne starts from the median pre-money valuation of similar pre-revenue companies and scales it by how you compare on the weighted factors in the table. Invented example: the local median is €2 million. Your team is stronger than most, so call it 120% of the norm. The market looks bigger than usual, 110%. Competition is crowded, so 80%. You score the other four factors at a plain 100%. Let’s run the numbers. Your team scores 120% on a factor worth 30% of the total, so it adds 0.36. The market scores 110% on a 25% factor and adds 0.275. Competition is a 10% factor, and at 80% it brings only 0.08. Product keeps its 0.15, and the last three factors share 0.20 between them. It all adds up to 1.065. Multiply the median by that and €2 million becomes €2.13 million.

Risk factor summation. Same starting point, a regional average. Twelve risks get a rating between -2 and +2, from management and technology to litigation and reputation. In the original method each point moves the value by $250,000. For an invented example I’ll convert the step to €250,000 and suppose your ratings add up to +3. Three points at €250,000 each is €750,000 on top of a €2 million baseline, which lands you at €2.75 million. Rho’s guide flags the weakness. The ratings are subjective.

The VC method starts at the exit and walks back. First the investor guesses a selling price for the company. Then comes the return the cheque must earn. Divide one by the other and you have the post-money: exit value ÷ target return. An Angel Capital Education Foundation text uses 30x for a seed-stage example.

Try it with invented numbers. A fund is ready to put in €1 million. It believes the company could one day sell for €80 million, and it wants ten times its money back, so €10 million. That’s 12.5% of €80 million, the stake it must hold at the exit (1,000,000 × 10 ÷ 80,000,000). Later rounds will shave that stake by 40%, so it has to own 20.8% today. Work backwards from there: a €1 million cheque buying 20.8% means a post-money of €4.8 million and a pre-money of €3.8 million.

Leave out the dilution step and the same inputs give €8 million post-money. The exit guess and the dilution guess matter far more than the formula does.

Comparables. Look at what similar startups raised. Same stage, same region, same sector, roughly the same period: that’s the whole method. Payne’s Scorecard is comparables with a score sheet attached. Reports from Carta and PitchBook give you the medians, and Growth Capital with Italian Tech Alliance counts the Italian rounds. Treat them as a reality check on the other methods, not as the answer. Every deal is different.

Why a DCF doesn’t work before revenue

Picture a spreadsheet that predicts a company’s cash for the next ten years and then shrinks every future euro back to what it’s worth today. That’s a discounted cash flow model, and it’s the right tool for a business with a history. A pre-revenue startup has none. You’d be guessing the first sale, the growth rate, the margin and the discount rate, and nudging any one of them swings the answer wildly. Berkus doesn’t soften it: fewer than one startup in a thousand meets or beats its projected revenues in the periods planned. On screen the spreadsheet looks precise. In practice it tells you very little.

What do real valuations look like in 2026?

Start in Italy. In the first half of 2026 pre-seed and seed together made up 59% of the 145 venture rounds counted by Growth Capital and Italian Tech Alliance, with €37 million at pre-seed and €135 million at seed. That’s the size of the local pool. For price tags you need wider data.

Europe: PitchBook’s Q1 2026 analysis, reported in May, shows the median pre-seed and seed deal at €2.0 million and the median pre-money valuation at €6.0 million. Our own rough sum, since medians don’t combine exactly: the investor buys about a quarter of the company, €2.0 million of an €8.0 million post-money.

The US figure comes from Carta: a median seed valuation of $24 million post-money in Q4 2025, up from $18 million a year earlier. Set it beside the European one and American startups look much pricier, yet the two don’t line up. Carta quotes dollars and post-money. PitchBook quotes euros and pre-money, from its own sample of deals. A gap this wide still matters. Know it’s there before a number from a podcast becomes your anchor. At the earliest stage the valuation often hides in a SAFE’s cap, which our guide to SAFE vs convertible note explains.

Checklist: how to set your own number in six steps

1. What must the money achieve: a working product, the first paying customers? Write it down, with the months of runway it takes.
2. Turn it into a raise: monthly spending × months, plus a buffer. Our guide to how much money you need to start a startup helps with a first estimate.
3. Choose the slice you’d sell. Carta’s median is 19.5%, and 30% or more is rare for software seed rounds.
4. Divide the raise by the slice to get the post-money. Subtract the raise to get the pre-money.
5. Run two methods as a check, for example Scorecard with a believable local median, and the VC method with an exit an investor would believe.
6. Compare the result with recent rounds of similar startups, then expect to negotiate. See what your cap table will look like afterwards.

Valuation is half of the paper you’ll be offered. The other half is the clauses: our term sheet explained guide walks through them. For the bigger picture, our guide to raising capital for a startup in Italy is the hub.