If your startup is actively seeking investment, determining the value of your operation is a critical step in the negotiation process. In addition to looking at market comparables and gathering data to back up your estimates, it’s just as important to assess whether a potential investor is right for your business and in alignment with your short- and long-term goals.
As experts, the members of Forbes Business Council have experience navigating valuation and forming relationships with potential investors. Below, 20 of them offer advice on how startup leaders approaching valuation can effectively negotiate with investors.
1. Identify What You Need
Be clear on what you need from an investor. When your business is still defining itself, bringing in an investor early on can create pressure that does more harm than good. Negotiate to the specific need because cash alone isn’t enough. Pressure from investors through heavy financing can be the downfall of a business, especially a young one. – Deisell Donahoe, DIOSS LLC
2. Do Your Due Diligence
Do your homework as a founder. This means understanding what recent Series A and B rounds for similar startups have been valued at, as well as understanding what metrics drove those underlying values, such as annual or monthly recurring revenue. From there, you can clearly communicate how you’re going to achieve target milestones on revenue and how that justifies a similar forward valuation for your company. – Jack Chang, DGP Capital LLC
3. Know The Market
Most investors are looking at a volume of deals. If you know what they’re seeing, you’ll know where you likely sit in the field of opportunities. Start from there and use your relative strengths to bargain up. Remember that the best deals come when you have two bona fide competing opportunities. – Arar Han, Sabot Family Companies
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4. Base Valuation Numbers On Facts
Valuations often tend to be based on emotions and egos. Try to keep your numbers based on facts that can be backed up and that also have the opportunity to grow as more capital is needed. Be on the lookout for investors with different end goals, as you want to have the money coming in to be on board with the plans you have in place. – Bryon Hough, Children’s Activity Management
5. Balance Ambition With Realism
Inflating numbers can scare away backers, while underselling stunts potential. Offer a picture reflecting both current traction and future potential. Over-promising breeds distrust, and lowballing harms growth. Support your figures with data-driven milestones and a credible growth path. A confident, grounded valuation builds trust and fosters a lasting partnership. – Mike Vietri, AmeriLife
6. Demonstrate Your Startup’s Worth
When negotiating valuation, don’t just throw out a number. Instead, demonstrate why your startup is worth it by showing traction, revenue growth, customer demand and scalability potential. Investors want a clear path to ROI, so be transparent, justify your valuation with strong data and highlight the long-term value your business brings to the market. – Roxana Diaconu, ROXANA AESTHETICS CLINIC
7. Tell A Compelling Growth Story
Focus on telling a compelling growth story backed by real traction like revenue, user growth or partnerships. Investors want to see potential, but they trust numbers. One key tip is to justify your valuation with clear milestones you’ve hit and realistic projections. This builds credibility and shows you’re grounded, not just optimistic. – Joel Li, EV.com
8. Prepare Market Comparables
Have your comps ready with points on why you are similar or unique, as the case may be. Despite what they teach in business school, valuations are heavily influenced by the market and gut checks, not discounted cash flow projections. For example, there are two other companies in our space that have coincidentally mirrored our historical valuations at near or over $1 million. – Scott Graybeal, Caelux®
9. Showcase The Story Behind The Numbers
Focus on the story behind your numbers. Investors don’t just buy into financial projections—they invest in the vision, market potential and execution capability. Instead of fixating on a high valuation, frame your ask around tangible traction like user growth, revenue milestones or a defensible market advantage. A well-supported, realistic valuation builds trust and long-term partnership potential. – Pranav Dalal, Office Beacon
10. Prioritize Strategic Alignment
One tip is to consider prioritizing strategic alignment over just the valuation figure. Look for investors who not only offer capital but also bring industry expertise, a robust network or mentorship that can help you scale. This added value can be more impactful in the long run than a slightly higher valuation that might lead to constraints or conflicts later on. – Cris Cawley, Game Changer Publishing
11. Examine Your Risk Position And Selling Capabilities
It’s more important to deliver a meaningful return for investors first before you start making money for yourself. Startup ventures need to assess their risk position and focus on selling their capabilities with confidence. By taking this approach, you assume more risk, but you also keep more of the upside of the venture after valuation. – Steve Swinney, Kodiak Building Partners
12. Leverage A Well-Researched Valuation Range
Anchor your negotiations with a well-researched valuation range. Come to the table with robust market data, comparable company metrics and precise growth projections. By establishing a credible, data-driven starting point, you justify your asking price and demonstrate to investors that your valuation isn’t arbitrary; it’s grounded in realistic benchmarks and future potential. – Beth Worthy, GMR Transcription Services, Inc.
13. Be Honest In Your Valuation
My top tip is to be honest in your valuation estimate. Don’t inflate your valuation; instead, be reasonable and try to secure as much equity in your startup as possible. If you truly believe in its potential and want to be properly compensated for your role in its success, ensure a sufficient sliding scale of equity so that if you reach an established level of sales or growth, your equity also rises. – Dr. David Lenihan, Tiber Health
14. Structure Valuation Around Milestone-Based Growth
A valuable approach is to structure valuation around milestone-based growth. Instead of concentrating on a single number, link it to specific revenue, traction or expansion milestones. This strategy not only aligns your interests with those of investors but also reinforces your position by showcasing your confidence in execution and scalability. – Arunabh Dastidar, Leni
15. Prioritize Long-Term Investor Potential
Focus on long-term potential, not just current revenue. Highlight growth metrics, market opportunity and your competitive advantage to justify valuation. Be flexible—investors value realistic founders who balance ambition with fair terms. Negotiating a fair valuation builds trust and sets the stage for future funding. – Ken Thomas, BOND
16. Establish A Realistic Growth Pattern Backed By Data
When market trends change quickly, it’s advisable to establish a realistic growth pattern and back it up with convincing drivers for future growth. Center your valuation around go-to-market strategy, customer acquisition, revenue retention and growth, and industry benchmarks to support your ask. Finally, negotiate based on future potential by demonstrating a path to profitability and scalability. – Einat Steklov, Kashable
17. Remain Flexible During Negotiations
One essential tip for startups is to remain flexible during negotiations. Understand that valuation is usually a point of discussion. Being open to feedback and willing to adjust expectations can lead to more favorable terms and foster a positive relationship. Focus on being flexible during negotiations, as valuation is often a discussion point rather than a fixed number. – Veena Jetti, Vive Funds
18. Under-Promise And Over-Deliver
Set a valuation based on where you are now, not just where you hope to be. Investors respect startups that show steady, realistic growth over inflated projections. Keep expectations grounded, prove your value through execution and exceed targets. This builds trust, strengthens negotiations and sets you up for long-term success rather than short-term hype. – Andrew Lopez, 1000 Media
19. Know Your Worth Beyond The Numbers
Investors look at revenue, but they also value market potential, team strength and scalability. Don’t just take the highest offer—align with investors who bring strategic value. One key tip is to justify your valuation with solid data and a compelling growth story. Confidence and clarity in your numbers will strengthen your position. – David Price, The Price Group
20. Sell Momentum
Don’t just sell numbers—sell momentum. Investors bet on traction, not just projections. Show proof of demand, customer growth or a killer product-market fit. A high valuation isn’t just about revenue; it’s about convincing investors that getting in now is their smartest move. Make them fear missing out. – Dr. Christina Carter, Her Practice®
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