Everybody is talking about the Internet of Things phenomenon, where “interconnected embedded computing devices” are literally flooding the market and the Internet. Certainly, the IoT industry will be one of the key contributors to the uprising economy and will eventually account for $1.7 trillion globally in 2019, according to data by BI Intelligence Estimates. In addition to these impressive figures, it is forecasted that device shipments will reach 6.7 billion in 2019, which represents a CAGR of 61% for the next 5 years.
Early-stage startup valuation is an important topic for both founders and venture capitalists. On one side entrepreneurs want to receive recognition for their achievements so far, while on the other investors require comprehensive and adequate pricing methodology for pursuing an investment in a particular startup. However, because of the nature of the startup business and the development stage it is at, most founders seeking seed funding from angel investors, venture capitalists, or corporate accelerators struggle determining the right value of their technology venture. In most cases attracting seed funding means that a startup has negative cash flows, does not have revenues (not to mention profits), maybe but rarely possesses intangible assets in the form of an established brand or a patent deterring competition from entering their niche. Thus, using traditional valuation methods (usually in the case of public companies with millions worth of revenues) is especially arduous. As a result, you should use a set of methodologies that are typical for the specific purpose of valuing a deal at the seed stage.
Securing first investment for your startup is a long and hefty process that will inevitably involve taking a step or two in the wrong direction, but in order for a technology startup to succeed in attracting first round of VC funding, it definitely takes to make all the right moves. Here, I will attempt to exhaust all the right steps. Please, have in mind that this is not a post on how to make your pitch more appealing to investors. There are many worthy resources that provide detailed illustration on how to structure your slides. A valuable resource, and my personal one, is the self-acclaimed Pitch Doctor, Christoph Sollich, who is based in Berlin.