This week we\u2019re doing something a little different, as I was in Malta for the SiGMA gambling conference, I asked a good friend and all-around sharp businessman to pinch-hit for me. John Goldberg is both a successful investor and entrepreneur, having invested in and started several businesses\u2014most recently\u00a0Pixel, which is an on-chain identity service built on the Bitcoin SV blockchain.\u00a0 The question I posed to John was one that most first-time entrepreneurs have is, \u201cHow do I value my company?\u201d\u00a0 In our Ayre Ventures pitches, I\u2019ve seen valuations that were so far out of line that it causes some trepidation when considering the initial proposal. The startup had valued their work and their company, I should say, they valued their idea in the millions, but it hadn\u2019t progressed beyond that back of the napkin stage we\u2019ve talked about in past articles. Also, I\u2019ve seen startups ask for a number so low that it wouldn\u2019t cover the costs of a good lawyer, it was like they were afraid or felt guilty asking for investments. John Goldberg was kind enough to share with me his method for placing a valuation on his new startups, and we believe you will find this useful.\u00a0\u00a0 How to properly value your startup When valuing your startup, you need a few key things: capital requirements, target network, target market, projected volume, and projected revenue chart (1-3 years with different scenarios). Capital requirements You need to get past the initial investment and funds you\u2019re raising and look at the long-term picture for your company. Most Venture Capital (VC) firms are looking for a return in 3-5 years or sooner, and they expect a sizeable return. Just like credit, VC bridges the gap for you to fund the project and grow your business, making it profitable. 10% 25000 20% 50000 30% 75000 40% 100000 50% 125000 60% 150000 70% 175000 80% 200000 90% 225000 100% 250000 Value 250,000 If you want to raise US$100,000 for 40% of your company, that would mean you are valuing your company at US$250,000 currently. Make sure to always factor in these costs \tOffice \tElectric \tWater \tInternet \tSalary - Keep your personal salary small. At Pixel Wallet, we pay ourselves $1.00 a year. We choose to invest the rest of the money into the company as we can live on personal savings and other investments \tHardware Target network Write a small paragraph on what you see your product doing better and more effectively than others. If you are a wallet, for example, explain why your wallet is better than the many other wallets in the marketplace, demonstrate what features it offers that make it unique and desirable.\u00a0 Also, if you are a wallet, show how it makes money, this is critical for a VC to invest in your company.\u00a0 Will you be charging a fee or cutting a deal with miners to get a rebate back to you for hosting? These are all things you need to factor in to value your company positively. Target market Spend time analyzing the Target Network; this is critical for your business evaluation. Look at how your product will fit into the world like a jigsaw piece in the global structure.\u00a0 If there is a product similar to yours, study it and build a strategy on how you will outperform them.\u00a0 Do a cost analysis of where your product dominates and is more profitable than them.\u00a0 Do a simple one- to two-year graph in Excel, study the cost they use, then do a layout of your product to fine-tune your product to make it more streamlined.\u00a0 Consider GDP, mobile phone dominance, unbanked, internet access and environmental impact. Projected volume How many users do you see using your new product?\u00a0 Do a simple flow chart and break that down over three years to show the long-term expectations. Any successful startup needs to think of the future. Your VC will look at where you will be in 3-5 years, or even later.\u00a0 For this chart, even if you think your numbers will be more significant, have a level head and keep the projections lower. It is better to use smaller amounts and grow larger than not be able to meet expectations.\u00a0 \u00a0 1 Year 2 Year 3 Year Scenario A 5,000 users 10,000 users 20,000 users Scenario B 25,000 users 50,000 users 100,000 users Scenario C 125,000 users 250,000 users 500,000 users You should project out and look to double your numbers yearly, if possible. With a startup, these are only projections so keep yourself grounded, don\u2019t try to grow from 1,000 users to 500 million users in six months. If your projections are so unrealistic most VC will pass on your project as you\u2019ve shown them that you have no logical way to run a business. Remember it\u2019s important to keep it simple and effective. Projected revenue\u00a0 From your projected volumes, show how much each user will generate. For example, if each user is on average 50 cents a month, $1 a month and so on, this will help you with laying out the cost of running your day to day operations and see the lowest possible average. (Do not cost basis on highest cost) Do a cost break down on the lowest reasonable average so that way you stay realistic and can also see how much your company will be bringing in to show if it will be profitable in the worst-case scenario.\u00a0 It is advisable to do the same with an A, B, C scenario of revenue. Don\u2019t worry if the numbers are low in the worst case as you need to be realistic with your valuation. Show a VC what you have laid out\u2014that way they can see the numbers as it will help gauge if they want to invest in yourself and your product. Lastly, speak the VC language You may be excellent at coding, but when you\u2019re talking with a VC, they are excellent at numbers, so you need to speak their language. So take your time just like you built your project and review your numbers and ask people you trust to review them as well. Using these steps will help you value your company and show what it\u2019s worth. Interested in making your pitch? Learn from the people, like Ivy Dang of CityonChain, who pitched their projects to a panel of investors in Seoul for the first ever Bitcoin Association Pitch Day. Watch all Pitch Day videos on\u00a0The BSV Pitch YouTube playlist. https:\/\/www.youtube.com\/watch?vi5NjSWx_ZN8 Watch this space for more information concerning the next Pitch Day as part of CoinGeek Conference London this February or if you feel your business is ready for investment, feel free to send your business plan and pitch deck to\u00a0Ventures@AyreMedia.com.