India is home to one of the biggest startup ecosystems in the world, with more than 1.5 lakh startups recognised by DPIIT. As these startups are bursting with potential, the most common question asked during a consultation is – How to get my startup valuation right? It is much easier for later-stage startups, thanks to historical company performance data. However, for younger companies, startup valuation methods are a little different.
How do you Calculate a Company Valuation?
A company’s valuation is its fair market value or intrinsic value. This means the value of a startup can be assessed based on market factors or the actual value of its assets. In either case, valuations depend on certain dynamic factors such as:
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- Time: The value of your business can change daily depending on working capital, cash flows and earnings. These factors are always in a state of flux, and hence, so is the valuation of a startup.
- Market forces: General politico-economic conditions influence the rate of return for your business, making the valuation subjective.
- Liquidity: Increased liquidity in the company increases its value. This is because the stockholders use liquid assets as security in case of bankruptcy.
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In addition to these main factors, future cash flows and underlying assets also influence the valuation process.
7 Startup Valuation Methods Every Indian Founder Should Know
Whether you’re bootstrapping in Bengaluru or raising your first round in Hyderabad, how company valuation is calculated is one of the most important things to get right before fundraising. Choosing the right valuation method depends on where you are in your startup journey: pre-revenue, early traction, or scaling with cash flows. Here are seven valuation techniques to help you determine your startup’s worth and walk into investor meetings prepared:
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Berkus Method
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Ideal for: Pre-revenue startups
This is one of the most straightforward startup valuation methods if your startup is still at the idea or MVP stage with no revenue. The Berkus Method assigns rupee values to five key success factors: sound idea, prototype, quality team, strategic relationships, and product rollout or sales.
For example, if each factor is assigned ₹50 lakhs, your startup may be valued at ₹2.5 crores even before revenue. It’s based on the assumption that your startup can hit ₹160 crore (around $20M) in revenue in 5 years.
Use this method if you’re seeking an angel investment with a vision-heavy pitch.
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Risk Factor Summation Method
Ideal for: Founders with an idea and a solid plan
This method starts with a base valuation and adjusts it up or down based on 12 risk categories like management, legislation, technology, competition, etc.
Each risk is rated as +2 (very low risk), 0 (average), or -2 (very high risk). The overall score tweaks the base value to reflect your startup’s circumstances. It’s a slightly more detailed method than Berkus and works well for early-stage Indian startups building in regulated or high-risk sectors like fintech, agritech, or healthtech.
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Scorecard Valuation Method
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Ideal for: Comparing yourself to other Indian startups
Think of this method as a startup valuation calculator that benchmarks you against similar startups in the Indian ecosystem. It takes a known average pre-money valuation and adjusts it based on market size, team, traction, product, and more factors.
For instance, if similar startups in your sector are valued at ₹6 crore, but you have a stronger team and early user traction, the method adjusts your valuation upward accordingly. Angel investors commonly use this method, especially when there’s enough market precedent.
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Comparable Transaction Method
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Ideal for: Startups with some progress to show
How do you calculate a company valuation when there’s already some buzz in your industry? This method compares your startup with companies that recently acquired or raised funding in the same sector.
Let’s say a B2B SaaS startup offering similar features was acquired at 10X revenue, and you’re projecting ₹2 crore in ARR, your valuation of startup companies could land near ₹20 crore. This method relies on access to market data. Use it if your segment has seen exits or recent raises.
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First Chicago Method
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Ideal for: Post-revenue startups in India’s growth markets
This technique combines three potential outcomes: best-case, base-case, and worst-case scenarios. Each outcome is assigned a probability and valuation, and the weighted average gives a balanced view of your startup’s worth.
This valuation method works well for scaling startups with unpredictable revenue patterns like D2C brands or mobility startups. It brings realism into the valuation process, which investors in India’s competitive capital landscape often appreciate.
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Discounted Cash Flow (DCF) Method
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Ideal for: Revenue-generating startups with long-term visibility
The DCF method estimates your company’s value on the basis of projected cash flows, discounted to present value using a risk-adjusted rate. While not always ideal for high-growth tech startups due to cash burn and reinvestment, it’s valuable for SaaS or B2B startups with predictable income.
This method is data-heavy and best used when you have financial projections for 5+ years and a clear path to profitability.
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Venture Capital Method
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Ideal for: Startups preparing for institutional rounds
The Venture Capital method starts with the investor’s desired exit value and return multiple and works backwards to calculate today’s valuation. For example, if an investor wants to exit at ₹100 crore in 5 years with a 10x return, your startup’s pre-money valuation would be pegged at ₹10 crore.
It’s practical, quick, and often used by Indian VCs looking at growth potential rather than current earnings.
Calculate Smarter: Opt for a Consultation
When you’re an early-stage startup founder, valuation methods can feel overwhelming and often confusing. To get a fair idea, you can opt for a consultation for choosing the right valuation method and understanding the rationale behind pitching it. A prefunding consultancy can guide you through this process, offering market insights, hands-on expertise and near-accurate calculations.
Valuation is not Guesswork. It is a Strategy.
The Indian startup ecosystem is booming, but so is investor scrutiny. Whether you’re chasing seed capital or a Series A round, understanding these startup valuation methods can help you stay realistic, confident, and better prepared at the negotiation table.
Remember: Investors don’t just invest in ideas; they invest in confidence backed by logic. And nothing says “I know my business” like choosing the proper valuation techniques. At Stack’D, we help you select the best startup valuation methods, backed by experience and expertise, for the best results.
