Judge the value of your company

After founding and forming my startup, I left my company. As the company found Product-Market-Fit, it operates well without my day-to-day monitoring. Setting up all techincal operations in the automated-manner pays off finally.

As my share becomes passive, which means common stock and not bound to the active founder, it becomes appealing for investors. One reason is to buy out when it is relative inexpensive. Another reason is to remove the potential red-flag when it comes to the next financial round. For some investors, big part of company share held left founder couldn’t be seen as ideal case.

Then, what decides the value of the stock in the private market, more exclusively in early stage startup. In traditional evaluation strategy, some factor * anual revenue or some factor * anual profit is applied. Howeer, anual profit is mostly negative for startups (especially, VC-backed startup; otherwise there’s no strong need of raising capital.) So, it’s often used for the mature business&industry.

See the Appendix below for the some factor

I have experienced multiple negotiation with investors, and yet it’s quite hard to find the common ground. It’s very natural to end up asking high for seller-side, and low for buyer-side. The value is up in the air, so nobody can objectively tell who is asking from the out of reasonalble range.

One strategy is to anchor the share price from the last round. Of course, there are factors to consider in this case.

1. The money is not invested into company which will have the potential to increase the inovation within the company.
2. If the share status is different (common vs preferred), its value differ.
3. The last round may have happened months or even years ago.
   The business could have evolved—or deteriorated—over time, making that old valuation less reliable.

When expectations diverge, arguing over a single number rarely helps. What works better is structuring the deal so it moves with reality. Sometimes the price isn’t fixed at signing but adjusts later—say, when the next funding round sets a fresh valuation. Sometimes the sale happens in stages: a portion now, the rest when milestones are met. A neutral valuation can also help anchor both sides, and non-cash elements—faster liquidity, a role, introductions—can close the gap without simply raising the cash number. In the end, early-stage secondary sales are less about formulas and more about aligning incentives and trust. Clarity on risk, share rights, and the company’s trajectory does more to seal a deal than any spreadsheet multiple.

---

Appendix: Typical Valuation Multiples by Industry & Stage

Industry / Business Model	Company Stage / ARR / Size	Typical Revenue Multiple (EV/Revenue or ARR)	Notes & Considerations
SaaS / Subscription Software	Early‐stage, ARR < ≈ US$1-2M	~ 1× to 3×	If growth is modest, high churn, unproven retention. (Class VI Partners)
	Growth stage, ARR between US$1-10M	~ 2× to 6× (sometimes more, up to ~8× for strong metrics)	Higher growth, better metrics (low churn, good gross margins, recurring revenue) push toward upper end. (Aventis Advisors)
	Mature SaaS, ARR > US$10M & good retention/profitability	~ 5× to 10×+	More stable, less risk → higher multiple. But investors expect returns and some path to profitability. (Acquire.com Blog)
Tech / B2B (non-SaaS)	Smaller revenue ($1-5M range)	~ 2× to 3×	Includes hardware, non-recurring sales, services. Less recurring revenue → lower multiple. (First Page Sage)
	Medium size ($5-10-$75M)	~ 2.5× to 4×	Growth, scale, repeat business help. (First Page Sage)
Fintech	Private, high-growth fintechs	~ 3× to 5× revenue in many cases	If growth is very strong and risk tolerable, can go higher. Higher regulatory risk tends to suppress multiple somewhat. (First Page Sage)
Private SaaS / Bootstrapped	Smaller, bootstrapped SaaS firms	~ 4.5×-6×	Data from SaaS Capital: bootstrapped firms tend to get lower multiples than equity-backed, but still meaningful. (SaaS Capital)
Public SaaS / Big-cap	Larger, public SaaS companies	~ 5× to 15×+	When metrics (growth, margins, retention) are excellent, multiples at high end; otherwise lower. (Acquire.com Blog)

---