Benchmarking your startup's valuation

Yesterday the founder of a startup client and I had a phone conversation about valuing his company for purposes of a first round of outside investment.

I found myself flipping back, mentally, to the charts in the recent Wilson Sonsini 2012 private company valuation report (which I blogged about here; the full report is here).

Particularly at seed and Series A rounds, valuations trend up and down, not just arbitrarily but sometimes with pronounced swings. How early state venture financings happen to be trending is not something a given entrepreneur is going to be able to control.

But you need to know how the market is trending, of course.

What I liked most about the recent Wilson report was a new presentation of the firm's financing trend data, a chart expressed in terms of the impact of the first round of financing on founder equity, relative to outside investor equity.

There are other open resources on the web.

This morning I noticed that the Wall Street Journal's "The Accelerators" blog is running a series on setting valuations. I distill two essential points from the posts I see up there so far: (a) bootstrap if and as far as you can (see Joanne Wilson's post); and (b) if you have to take outside money, don't overprice yourself out of getting that money (see Naval Ravikant's post).

Another new open resource, and a good one: the valuation browser at AngelList. Looking at that data suggests that valuations have, overall, held fairly constant over the last year and a half. Though what's especially cool about the AngelList presentation is that you can filter the data lots of ways and watch the numbers adjust; for example, you can compare valuations for companies associated with Y-Combinator against valuations for those funded by the Alliance of Angels.

Here's a list of the sources mentioned above, with one or two others thrown in for good measure (pun intended):

• WSG&R 2012 private financing report
• AngelList valuations browser
• The Halo Report - Q3 2012 angel group update
• WSJ "The Accelerators" series on setting valuations
• Cooley 2012 venture financing report
• Fenwick 2011 seed financing survey (due for an update, presumably)

Photo: Burns Library, Boston College / Flickr.