As a startup, you must determine your target valuation. Several methods can be used to accomplish this.
One method of determining target valuation is Market Comps or Comparables. In this method, you look at similar companies to yours that have recently raised funding to guide your valuation selection.
Here are the steps:
Start with Crunchbase. Look up companies in your industry and sector to find out their fundraiser.
Take the funding amount and divide by 0.2 or 0.3 to get the post-money valuation. Using 0.2 yields the high end of the range, while 0.3 yields the low end of the spectrum. A company that raised $1M divided by 0.2 yields a post-money valuation of $5M. Using 0.3, we find $1M divided by 0.3 yields $3.3M.
Subtract the funding amount from the post-money to get the pre-money valuation. In this case, $5M minus $1M yields a $4M pre-money valuation. Subtract $1M from $3.3M pays a pre-money of $2.3M.