Valuing early stage / pre revenue B2B e-commerce startups
How would you value it at pre-revenue or as early stage for B2B ecommerce? End goal is to raise 200K USD at minimum.
1. Is DCF even the right direction, if not, what is the best way? Projecting revenue seems to be difficult given how early stage this is.
2. What are core components in a strong pitch or story? I have some experience in making investment pitches but startups appear to be grasping for straws.
Item 1: You do need a forecast (maybe 2 or 3 scenarios from base to optimistic) to show that you can be cash generating at some point. Personnaly I would include a DCF to substantiate the dream value (but do use a high discount rate as you will be equity financed for the foreseable future and this is just a super high risk company (>20% sounds about right to me). Thinking of it, the DCF can actually be very simple: explain the steady state situation in 10y from now: (x million of sales, EBITDA margin of x, capex of z, etc.) on which you apply a perpetuity (with a more reasonable WACC by then). Question then is: how long will it take you to get there (discount the terminal value by those years at high WACC) and how much cash will you burn in the meantime (discount by high WACC and subtract).
Item 2: Explain size of the market you are targetting (current expenditure on competitor's software or why this is a new pocket of software revenue), box economics (how expensive is it to acquire 1 new client (sales reps, start up costs, training, etc), churn (no data on that it seems) and especially focus on why would people take the effort to switch? Especially the reasons to switch are super important as switching software providers is such a pain in the neck (training of your employees, switching costs, etc etc).
Have a lookt at this: https://piktochart.com/blog/startup-pitch-decks-what-you-can-learn/
Use creative metrics for valuing these investments eg. EV/user count ?
People actually use that for e-commerce? Sounds wild
Have seen that used in companies making money off apps.
Google "SAFE contract"
Yea the reality is you wouldn't actually do a DCF because there's just no way of knowing, at a raise this small you'd use a SAFE (simple agreement future equity) and punt valuation.
Various scenarios can really help you with this question. B2B is a huge area, so you can replay several development options by referring to the structure that will be more effective for your field of activity.
At preseed/seed it's largely driven by TAM and the founding team's background. Lol don't make a DCF for a pre-revenue company. DCF is fucking stupid for something with $20M in rev let alone $0. Like the other poster said, you'd probably skip valuation entirely and use a SAFE.
Read Brad Feld's "Venture Deals" book before you raise any money at all.
While Discounted Cash Flow (DCF) analysis is a common valuation method, it might not be the most suitable for pre-revenue or early-stage B2B e-commerce ventures due to the lack of historical financial data. Instead, you could consider methods like the Comparable Transactions or Market Approach, where you assess the value based on similar transactions or the market landscape. Given the difficulty in projecting revenue at this stage, focusing on the potential market size, competitive advantages, and the scalability of your business model could provide more insights for valuation. In crafting a compelling pitch for your B2B e-commerce venture, emphasizing the value proposition is key. Highlight how your solution addresses pain points in the market, particularly in terms of data enrichment which can enhance decision-making and efficiency for businesses. Clearly articulate your unique selling points, such as proprietary technology, strategic partnerships, or early customer traction. Additionally, demonstrate a solid understanding of your target market and showcase a clear path to revenue generation and scalability. Investors are often drawn to a founder's vision and passion, so weave a narrative that not only showcases the potential of your venture but also your ability to execute and adapt in a dynamic market landscape.
Eum nam sint natus quo. Omnis voluptatem error et praesentium modi fuga. Beatae eos non voluptatem quo mollitia.
Voluptas dolores vero non. Officiis autem officia placeat sint expedita. Aut in optio voluptatem voluptatem soluta. Eius voluptas maxime voluptates ea molestias iste neque.
Est laudantium rerum reiciendis. Et sunt velit ad sit. Ut amet velit doloribus consequatur. Nesciunt magnam perferendis et dolorem odit sed nemo.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...