If you are like me, you have put up a LaunchRock page and updated your LinkedIn profile to reflect your new status as CEO. You have a team of crack developers that you recruited away from the Geek Squad at Best Buy. You copied a business model off of DocStoc and put your name on it. It’s time to raise money, but how much is your company worth?
It has been said that investors invest in the team, not the idea. This is total bullshit. Investors like people that are young and stupid, which explains why they love college dropouts. How much money did Facebook raise anyways? Like a trillion dollars.
Add $100k if you are 27 to 29
Add $200k if you are 22 to 26
Add $400k if you are 19 to 21
Add $100k if you dropped out of college
Your founding team needs to be big so you can prove that you can recruit. The internet is filled with VC’s telling you to always be recruiting, and if you have 4 or 5 cofounders, then everyone knows you can close, and that is worth lots of money.
Subtract $500k if you are a solo founder
Add $50k if you have 2 cofounders with you
Add $100k if you have 3 cofounders with you
Add $500k if you have 4 or more cofounders with you
This is the worst thing for your business. Customers always feel like you owe them something, mostly because they gave you money, and then they try to tell you what to do. Worst yet, once someone pays you, then you have to tell investors how little the customer gave you. If nobody has given you any money yet, then you are ahead of the game.
Subtract $1k for every paying customer
Everyone working at a startup has to be good at something. And what is the best way to tell if someone has skills? Where they worked before.
Add $50k for each ex-Google employee
Add $100k for each ex-Apple employee
Add $500k for each Facebook employee
You are probably wondering why Facebook employees are worth so much to the value of your company. Investors only hate one thing worse than losing money, and that is looking stupid. The more Facebook employees you have, the more likely you are to get some newly minted millionaire idiot to invest in your company when it implodes.
There is plenty of other stuff that can impact your valuation.
Add $100k if your developers use Apple products
Subtract $100k if you know what Windows Azure is
Add $1m for: The Instagram of X
Add $100k for every five thousand Twitter followers you have
At the end of the day, just remember that entrepreneurship is not about creating value, it’s about raising money and buying a yacht. Follow my guide to valuing your company and you will be on the ocean in no time.