Startup Valuation Estimator

Valuation is a conversation anchored to numbers rather than a number handed down. Two simple frames help you prepare for that conversation - a revenue multiple grounded in sector norms and a light discounted cash flow that asks what a stream of profits could be worth today. If you fill a few inputs with your best current data, you can build a fair range and a list of guardrails that keep the discussion calm.

Quick start - set ARR and growth first

Monthly recurring revenue multiplied by twelve gives you ARR, the base for most early stage multiples. Add year over year growth and gross margin because they explain why your multiple should be higher or lower than a broad sector median. Enter churn, CAC, and LTV to populate guardrails investors use as quick health checks. Choose a sector multiple that matches how you sell and to whom - SMB lines behave differently than enterprise lines.

Multiples - reading ranges with a level head

Multiples compress many assumptions into one digit. A 4x on ARR says the buyer expects your growth and margins to justify that price compared to alternatives. Using a range - say 0.7x to 1.3x around your base multiple - acknowledges noise in timing and pipeline. If your growth is accelerating and margins are strong, argue closer to the high end. If churn is elevated or sales cycles are lengthening, pick the middle and plan to earn the higher number in the next quarter.

DCF - a simple lens on cash generation

A simplified DCF projects revenue forward with your stated growth, applies a margin to approximate operating profit, and discounts those future cash flows back to today at a rate that reflects risk. It adds a terminal value that says - if the business keeps running past the forecast window with modest growth, what is that stream worth now. The exact margin assumption is a lever - this tool uses a light 15 percent of revenue after gross margin as a rough proxy for operating cash, which you can adjust for your model offline.

Guardrails - ratios that tell a quick story

Gross margin, monthly churn, and LTV to CAC compress operating reality into three lines. A strong margin means your growth can compound without burning per unit. Low churn means you do not have to sprint just to stay even. A healthy LTV to CAC above three suggests a repeatable motion. These are not deal breakers by themselves, but they explain why your multiple sits where it does and what would move it next quarter.

Comparison - multiple only vs multiple plus DCF

Bullet notes - prepare for the meeting

• Bring a one page showing ARR, growth, gross margin, churn, CAC, and LTV.
• Show a twelve month chart of MRR to display slope and stability.
• Explain a single change that would lift your margin or cut churn next quarter.
• Know your sales cycle length and win rate so pipeline math is credible.

References and sanity checks

If you want to read deeper, Professor Aswath Damodaran publishes sector multiples and valuation notes that are clear and widely cited NYU - Damodaran. For company building context, Y Combinator''s library hosts frank essays from founders and investors on the metrics that actually moved rounds in different markets YC Library. Ground your pitch in your real unit economics and you will navigate valuation discussions with fewer surprises.

Two questions to refine your range

• If growth slows by a third for two quarters, does your margin plan keep the DCF estimate within the same ballpark?
• Which single metric - churn, CAC, or margin - would most convincingly move your multiple up in the next 90 days?

Numbers do not remove uncertainty, but they make your judgment consistent. A range built from your ARR and a transparent model shows respect for both your team and your counterparty. It also highlights the one or two levers that deserve most of your attention before the next conversation.