Berkus Method
Comparable Multiples
Discounted Cash Flow (DCF)
Net Assets
How it works and how to read it

The method: values pre-revenue startups by assigning a dollar value to five qualitative factors — the idea, the prototype, the team, strategic relationships, and early traction. It doesn’t use cash flows because, at this stage, there mostly aren’t any.

The inputs: each field is your estimate of how much value that factor adds, usually between $0 and a ceiling set by investors in your market.

The result: the Cost of Capital below is a reference figure — the return an angel investor would typically require at this stage. It doesn’t feed into the valuation; it’s context for negotiating terms.

To estimate the reference Cost of Capital
E.g. 10-year Treasury yield.
Extra return an angel investor requires for startup risk.
How it works and how to read it

The method: takes a financial metric from your business (EBITDA, revenue, active users) and multiplies it by a multiple observed in comparable transactions in your industry.

The inputs: the metric should be a representative average (not one exceptional month), and the multiple should come from real transactions of similarly sized companies in a similar geography — not from the US stock market.

The result: the “Implied Yield” is 1 ÷ multiple — the share of your investment you’d recover in a year if the business held steady. If that yield is below your estimated Cost of Capital, the multiple applied is demanding (expensive); if it’s above, it looks conservative (cheap).

To estimate the Cost of Capital (CAPM)
How it works and how to read it

The method: projects your business’s free cash flow forward and brings it to present value using a discount rate (WACC), adding a “terminal value” that represents everything the business generates after the explicit projection period.

The inputs: WACC is your discount rate (higher perceived risk, higher WACC). Terminal growth should be conservative — few businesses outgrow the broader economy forever, which is why we compare it against expected inflation.

The result: the Cost of Capital (CAPM) is an independent reference to check whether your WACC is reasonable. The IRR is only informative if you enter an entry price different from the calculated value — if left blank, the IRR will always exactly match your WACC (it’s mathematically the same figure, not new information).

To estimate the Cost of Capital (CAPM) and the IRR
How it works and how to read it

The method: subtracts current liabilities from the market value of total assets, with an optional adjustment for intangibles not reflected on the books (brand, IP, customer base).

The result: it’s a floor value — what would be left if the company liquidated everything today. It doesn’t reflect future earning power, which is why ratios like IRR or Cost of Capital don’t apply here: there’s no projected cash flow stream to discount.

Valuation Scenarios

Pessimistic
$0
Base
$0
Optimistic
$0
Applied methodology based on valuation principles by P. Fernández (IESE) and A. Damodaran (NYU) for real-world decisions. This calculation is an estimate — it does not constitute a financial audit.
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