How do you value a high-tech start-up? There are many ways, but very few, if any, result in a value with which both the founders and the potential investors are comfortable. I've seen methods like discounted cash-flow and net-present value, which isn't very accurate for a start-up with no revenue yet. I've seen outlandish methods like "$1 million per patent" or "$1 million per employee" but these can be highly inaccurate as well. Some kind of relationship between level of product development and potential revenue in the next one or two or five years is much more accurate, but still a guessing game.
If you're going for friends and family money, or even an angel round south of, say, $1M, the best general advice I can give is to avoid pricing the deal. In other words, attempt to do a CPN (convertible promissory note). This allows you to offer a discount to investors, and not having to commit to a valuation.
If, however, your investors are requiring preferred stock, and therefore most likely an equity round, then you will have to price the stock. What should your valuation be? Whether you try to use and justify any other methods, the bottom-line answer is "what the market will bear." In other words, you and your investors should try to find "comps"...similar deals that have recently closed, then use that valuation, possibly adjusting for any differences between your company and theirs.
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