I recently saw a pitch deck from a seed-stage startup which had a small amount of revenue. The deck claimed a valuation of $50M because a similar company exited at that valuation.
I asked his valuation and he claimed $50M because “that’s what my company will be worth.”
I reminded him that the example company exited with a $50M valuation had $15M in revenue at the time.
He said, “I’ll have that too.”
I often see entrepreneurs calculating valuations for today’s’ fundraise using tomorrow’s revenue.
Today’s revenue determines today’s valuation. Your business tomorrow determines your valuation tomorrow.
Some entrepreneurs have a strong mental block around this. They think their company will one day be worth more, so they should have that valuation today. Investors match investments with the current state of the business. As you increase sales, team, product, and IP, your valuation goes up.
The takeaway here- only raise as much as you need to get to the next level. Otherwise, you’ll be raising more funding on a lower valuation which means you’re giving up more equity than necessary.

Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies