How to Value Your Company When There’s No Value

Let’s start with the most common rookie mistake: an entrepreneur walks into the room with a hockey-stick forecast—usually based on the assumption they’ve already raised the money—and shows a five-year projection that ends with, “…and that’s why we’ll be worth $200 million.”

You might as well stop right there.

One of two things will happen:

Silence, followed by a polite “thanks for your time.”

Feedback—which won’t be pleasant (Hint: it may involve sex and travel - But hey, at least it’s feedback!)

If investors are tired of one thing more than anything else, is hearing how every company is going to become the $1 billion unicorn.

The reality is this: most early-stage valuations are speculative and negotiated. There’s no perfect formula. What the investor is really evaluating is this:

How much capital am I willing to risk, and what percentage of this company makes that risk worthwhile?

That’s it. It’s all about confidence of execution and downside protection. Your job is to give them enough reason to believe you’ll make that upside real—and that the downside won’t be catastrophic.

Here’s how you build a valuation story that actually works, even when there’s no cash flow.

Pillar One: Build a Rational Path to Value

1. Start with a Realistic Forecast

Don’t drag numbers across an Excel sheet with a +15% monthly growth assumption. That screams lazy. Build your revenue model from the ground up. Show your go-to-market strategy:

Who are you targeting?

How will you reach them?

What’s your sales cycle?

What’s your conversion rate?

If you’ve got a CRM with 500 qualified prospects, and a plan to onboard five customers a month, scaling to 10 with social proof—that’s a believable story.

2. Audit Every Line

 

Time and money are always underestimated. Assume double both.

Delays, churn, pivots, team issues—they happen.

Plan for them. Bake in margin for error.

Over-delivering on a conservative plan builds trust.

 

3. Define Future Valuation Post-Cash Flow

Once you’ve achieved sustained, predictable cash flow, that’s the point at which a more grounded valuation can be justified—based on revenue multiples or EBITDA.

That might be in year 2, 3, or 5—but that’s your long-term target valuation.

4. Reverse Engineer Investor Returns

Now that you know your future valuation, work backwards:

What does a 10x return on investment look like for your investor?

That’s the minimum bar for most early-stage investors.

Back-calculate what the strike price would need to be today to hit that, assuming your roadmap and execution hold.

But don’t inflate your numbers to justify a high valuation. Everything hinges on your assumptions—traction, funnel metrics, LOIs, pilots, pre-orders.

If you can’t back them up with real proof or logical rigor, it falls apart.

Pillar Two: Capital Efficiency and Clean Terms

Every dollar you raise should be stretched with maximum impact.

That means no bloated team, no fancy office, no $10,000 branding package. Be frugal. Be surgical. Show that you can build real value on a lean budget.

Most equity rounds land between 10% and 30% dilution.

Less than 10%? Likely not compelling for early investors.

More than 30%? They’ll want greater control and influence.

 

For example: If you’re raising $500K pre-seed, your valuation will likely fall between $1.6M and $5M. That’s the ballpark—don’t fight it without a very good reason.

Pillar Three: Avoid Valuation Altogether (Use a SAFE)

A lot of founders sidestep the valuation debate by using a SAFE (Simple Agreement for Future Equity).

It’s a convertible instrument where the investor gives you money now, and it converts to equity later—usually during your priced round—based on a valuation cap or discount.

Why do this?

Because it defers the valuation negotiation, reduces legal friction, and lets you raise faster—while still rewarding early believers with better terms later.

Final Thought: Be Clear, But Be Strategic

Whether you’re using a priced round or a SAFE, investors want clarity:

How much are you raising?

What’s the proposed valuation or cap?

What’s the use of funds?

What milestone will this money unlock?

Personally, I often avoid setting a strike price out of the gate. I’d rather outline what the investor is buying (MVP to revenue, product-market fit, a market entry), and let the market define value through term sheets. Why negotiate against yourself?

In Summary:

Valuing a company with no cash flow is tough—but not impossible.

Don’t sell a fantasy. Sell Execution.

Sell a thoughtful plan, supported by data, validated assumptions, and conservative spending.

Show how an investor could make a real return—and earn the right to tell your story.

 Thanks for reading - and do well.