Company Valuation: Breaking Down the Numbers

What you are actually negotiating

• Pre-money valuation: what the company is worth before new money hits the bank.
• Investment amount: cash injected in this round.
• Post-money valuation: pre-money + investment (same round, same terms—watch for ESOP pools or converts that move effective dilution).

The two formulas every founder should memorize

Post-money = pre-money + new investment. Example: ₱40M pre-money + ₱10M raise ⇒ ₱50M post-money.

Investor ownership (before ESOP expansion) ≈ investment ÷ post-money. Same example: ₱10M ÷ ₱50M ≈ 20% of the company for this round’s investors unless options or SAFE conversions change the share count.

Run this math before you emotionally anchor to a headline valuation—ownership and runway matter more than bragging rights.

How buyers actually estimate startup value

• Comparable transactions (comps): revenue or EBITDA multiples from similar stage, sector, and geography—often expressed as a range because deals are noisy.
• Venture capital method (high level): forecast exit value in a credible scenario, apply a discount rate or target multiple for time/risk, then back-solve to today’s implied post-money—useful as a sanity check, not scripture.
• Discounted cash flow (DCF): fits mature businesses with predictable cash flows; early-stage startups rarely have stable enough inputs—if someone shows you a precise DCF pre-revenue, ask what assumptions moved the needle.

A practical “calculation stack” for seed–Series A teams

• Anchor on observable traction: ARR or MRR, growth rate, gross margin direction, concentration risk—not vanity users.
• Pick a defensible revenue band (last twelve months or annualized run-rate) and compare to public guidance or investor chatter for your sector—then apply a multiple range you can cite (for example 3×–8× ARR is illustrative only; hardware, regulated, or marketplace models diverge widely).
• Cross-check with milestone pricing: what round sizes and dilution bands do comparable PH or SEA deals publish—even loosely?
• Triangulate to a range (say ₱30M–₱45M post) rather than a fake exact figure; update when cohort retention or enterprise pipeline moves materially.

Discounts and adjustments founders overlook

• Illiquidity and buyer scarcity in smaller markets can justify lower multiples than US headline deals.
• Customer concentration, regulatory exposure, or single-channel GTM adds risk—often reflected in discount rates or smaller raise sizes, not just storytelling.
• Convertible notes and SAFEs postpone priced-round negotiation—track cap and discount so you model dilution before you close.

When to get professional help

Use spreadsheet ranges for internal planning and investor dialogue; hire an independent valuation specialist or advisor when ESOP accounting, secondary sales, or dispute contexts require defensible documentation.