There's no line of revenue to multiply, so investors and founders fall back on a handful of proven frameworks, Berkus, scorecard, VC method, and comparables, to put a number on a company that only exists as a pitch deck and a team.
Every founder raising a pre-seed round eventually hits the same wall. A buyer will pay a multiple of revenue or EBITDA for an established business. A pre-revenue startup has neither, so the usual math doesn't apply. Figuring out how to value a pre-revenue startup means accepting upfront that you're not calculating a number, you're negotiating one, and the frameworks below exist to make that negotiation less arbitrary.
None of these methods produce a precise valuation. They produce a defensible one. That distinction matters more than founders think, because the goal in a pre-seed round isn't accuracy, it's alignment between what a founder believes the company is worth and what an investor is willing to write a check against.
Public company valuation runs on cash flow. Price-to-earnings, EV/EBITDA, discounted cash flow, all of it assumes a stream of money to discount. A pre-revenue startup has a team, a product, maybe a handful of pilot customers, and a market it hasn't proven it can capture. You're not pricing performance. You're pricing the probability that performance eventually arrives, and that's a fundamentally different exercise.
This is why pre-seed valuation caps cluster around round ranges rather than company-specific math. According to Carta's State of Private Markets report, the median pre-seed valuation cap in the US sat around $10 million to $12 million through 2024, with plenty of variation by sector and location. Investors aren't running a discounted cash flow model to arrive at that number. They're pattern-matching against every other pre-seed deal they've seen that quarter.
The Berkus Method
Dave Berkus, an angel investor who has backed more than a dozen companies over a four-decade career, built this method specifically because he was tired of founders pitching him hockey-stick revenue projections five years out that meant nothing. His approach assigns a dollar value, up to roughly $500,000 each, to five qualitative factors: a sound idea, a working prototype, a quality management team, strategic relationships, and evidence of product rollout or early sales. Add them up and you get a valuation ceiling, typically capped around $2 million to $2.5 million pre-money.
The method is deliberately blunt. Berkus designed it for angel deals under $2 million, not venture rounds, and he's said as much in talks to angel groups. It won't work for a biotech startup burning capital on trials with no product yet, and it wasn't built to. But for a scrappy consumer app with a working beta and a founding team that's shipped before, it gives both sides a shared vocabulary instead of a guessing contest.
The scorecard method
Bill Payne, another veteran angel investor associated with the Kauffman Foundation's early-stage investing curriculum, developed the scorecard method to solve a different problem: how do you compare a startup to others in the same stage and geography when there's no financial data to lean on. You start with the average pre-money valuation of recently funded companies in the same region and sector, then adjust it up or down based on weighted factors, management team strength counts for up to 30%, market size for up to 25%, with smaller weights for competitive environment, marketing and sales channels, and the need for additional financing.
What makes this method useful in practice is that it forces investors to write down their assumptions instead of keeping them in their head. An investor who says a founding team is
Also read: How to Build a Personal Finance Dashboard With AI Before You Talk to a Wealth Advisor • How Much Runway Do You Need Before Raising, and How to Model It • How to Calculate Startup Runway Before Your Cash Runs Out
