See post “After 20 years, updating the Berkus Method” here: https://berkonomics.com/?p=2752
-Dave

The maximum should have been flexible by geography and discipline. See my subsequent update to the Method in 2016 by clicking here: https://berkonomics.com/?p=2752
Good luck!

Dave

I am from Bhutan and as one of the least developed country, the max valuation of $500K of each metrics is not applicable and too high for us. It would be grateful if you could explain how you came up with the max valuation of each metric so that it can be made relevant in our economy.

Thankyou.

The point here is since the major part of the investment will be used in acquiring content rather than just cash burning, how the pre-money valuation could be arrived assuming there is no major prior content bank. Further, the data of subscriber will add great value to the company. Pls advise.

Vishal,
You bring up one of the issues we should discuss. Let’s say that your startup already has $1MMM in the bank. Should you add $1MM to the valuation? Most all investors say “no” since it is assumed that the cash will be used in the business to grow it. Therefore a $2MM valuation with $1MM in cash would not yield a $3MM valuation. Yes, I know this seems counter-intuitive. It is the same for your content, which may create a barrier to entry and increase valuation that way, but not just by the value of the content. Entrepreneurs will always object; investors will most always ignore assets already in hand.
-Dave

We are starting a OTT platform which will have a large content bank. In this case how the pre-money valuation could be arrived given the fact that the content has its own value apart from the five factors that you have mentioned. The majority of the investment will go into acquiring the content.

Stephan,
Thanks for your comment. I do not make it a habit of providing valuations in this environment. But I do hope you’ll use the information I’ve provided to guide yourself. All the best,
Dave

Greetings from Switzerland.
I am looking at pre-earning start up active in the software vendor business for so-called “independent wealth managers” (roughly 2500 companies) in Switzerland. These guys will be heavily regulated soon (law into force in 2022) and need urgently a cost-efficient solution in compliance matters.
The company (4 Seniors, very professional guys in sales and IT, compliance) has almost finished its unique digital compliance toolbox (E(Margin)=30%) and also already has several early mover clients. 2 strategic partners representing around 1500 client accesses are close to be signed. Expected revenues in 3 yrs of $ 9 Mio with a growth rate of 20% p.a.
Any hint/idea what kind of pre-money valuation would make sense?

Tks Stefan

Syed,

The $20MM target assures the investor that there could be a large market and gives the company five years to “figure it out” and begin to penetrate. A lower number does reduce the valuation a bit but not in proportion. And there are industries such as pharma where those numbers make no sense in calculating valuation. And how about software with near 100% gross margins where a lesser number with low overhead flows toward the bottom line…

Dave