What’s My Company Worth?
We have rounded up insights on valuation calculation, the state of Seed, and the digital health investment landscape.
Greetings! This week we bring you a podcast, a report, and an article to help unpack the state of Seed.
🤔 What's happening at the Seed stage?
In this Venture Unlocked podcast episode, host Samir Kaji, brings together three Pre-seed and Seed investors to discuss the current state of Seed-stage investing, the arduous path to hitting Series A milestones, and the difficulty emerging managers are facing in raising new funds.
Notable highlight: “...one of the things that we're trying to coach founders [on] is the reality we're seeing is sometimes [companies raise] up to five rounds before the Series A.”
— Jenny Fielding, Co-founder & Managing Partner, Everywhere (The Fund)
STV Take: The bar for raising money has risen across all stages, including Seed. It’s not enough to show progress on the product. Investors are expecting to see companies making headway on quality commercial traction.
As we have discussed, this has been felt the most at Series A. As the revenue threshold for raising Series A has increased, companies are spending more time in the Seed phase (h/t Rich Maloy), and as a result, are raising more rounds of capital before being able to successfully secure a Series A. We’ve been beating the drum about this for two years (May `22 report, October `22 report), but stay tuned for a follow-up report from SpringTime about the current state of Seed.
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STV Take: Outsourcing your finance function is a no-brainer for startups. We’ve known AVL Growth Partners for over a decade and they have a stellar reputation.
🤑 What’s my company worth?
SaaS Capital released a valuation framework for startups. While there is no formula for calculating a valuation at Pre-Seed & Seed, the folks at SaaS Capital have done a great job adding some science to the art. Basing valuation on public market comparables is a good starting point, even if not strictly relevant to Seed.
Notable highlight: You can go straight to the spreadsheet here, though the article is worth reading.
STV Take: Combining revenue, revenue growth, and net revenue retention into a matrix is the best formula we’ve seen. At the early stages you can use this to work backwards from a potential Series A.
🩺 Q1 2024 digital health funding: Great (reset) expectations
Rock Health’s latest report shows that funding in digital health experienced higher deal volume but smaller check sizes in Q1, while investors are beginning to place an emphasis on understanding the efficacy of the solution earlier in the startup’s journey.
Notable highlight:
STV Take: With so many startups vying for customer’s attention, the best way to stand out is to show that the solution can do what it is purported to do. Investors are starting to focus on outcomes, not just the number of customers a company has, because they know that future customer acquisition is dependent on this. I’d take this one step further and add that what a lot of potential digital health customers are looking for is how the clinical outcomes translate to cost savings. Founders should be able to articulate how the improvement in clinical outcomes drives the financial ROI.
👋 Until next week!