When someone asks what your startup is worth, it is easy to give a number. The real test comes when they ask where it comes from: the answer usually reveals whether that number is actually grounded in evidence. Valuation is one of the most debated and least consistently grounded topics in the startup ecosystem. The methods exist and benchmarks are available, but they are often applied incorrectly. The issue is rarely a lack of information; it is applying the wrong method at the wrong time. This article sets out the most widely used methods, sector benchmarks and the criteria for managing rounds that do not unfold as planned.
At GCO Ventures, we view valuation as an alignment tool, not just as a negotiation figure. A sound valuation should reflect the risk already reduced, the milestones still to be proven and the team’s real ability to translate product, distribution and execution into sustainable growth.
Why the valuation method depends first on stage, and then on sector
In Pre-seed or Seed, valuation reflects a negotiated expectation between founder and investor about the company’s future value, not its current value. The discounted cash flow (DCF) method has very limited applicability in early-stage companies: it can be useful as a sensitivity exercise, but it should rarely be the central valuation method when there is still no recurring revenue, operating history or sufficient visibility on margins and retention. The most widely used early-stage methods are the Berkus Method and the Scorecard Method, each suited to a different level of maturity. The Berkus Method assesses five key factors (validated idea, functional prototype, management team, strategic relationships and initial traction), assigning, in its original formulation, up to USD 500,000 to each factor and then adapting that reference to market context and geography. Rather than setting a universal ceiling, it is usually used as a reference for pre-revenue valuations in the low single-digit millions. It is well calibrated for very early stages, where there are few objective metrics to analyse.
The Scorecard Method adjusts valuation by weighting factors such as the team, market opportunity, product or technology, commercial traction, competition and the capital required to reach the next milestone. Some guides suggest indicative weights, but what matters is that the result compares the company with similar startups in the same sector and geography to determine whether the valuation should move above or below the average for that stage. In healthtech, insurtech or solutions linked to regulated services, regulatory compliance and access to traditional distribution channels can carry additional weight. A project with applicable certifications, operational validation or a signed pilot agreement with an insurer can improve its negotiating position versus one that only has a product. The reason is that, in these sectors, regulatory, commercial and trust-related assets can reduce perceived risk in a way that standard multiples do not always capture. GCO Ventures takes these assets into account because, as both a corporate VC and a venture builder, it combines financial return with strategic positioning in regulated markets and with a practical view of what it takes to scale through complex channels.
From Series A onwards, the comparables method becomes more relevant: applying market multiples to key metrics such as ARR (annual recurring revenue). In SaaS, for example, it is common to analyse ARR or recurring-revenue multiples, but these vary significantly depending on growth, net revenue retention, gross margin, churn, sales efficiency, market depth and revenue quality. In healthtech, proptech, insurtech or models linked to regulated services, comparables should be read with particular caution: valuation may incorporate revenue, but also licences, proprietary data, distribution agreements, clinical or operational evidence and barriers to entry. Differences between European and US multiples also tend to reflect liquidity, capital market depth and investor appetite. Rather than applying a sector multiple mechanically, it is better to build a reasoned range and test it against current benchmarks from sources such as Dealroom, PitchBook or Carta, among other references. No method replaces the specific financial, legal and tax review required for each transaction.
Down rounds and flat rounds: valuation is a consequence, not an objective
A down round reduces the valuation versus the previous round, while a flat round keeps it unchanged. Neither is, by definition, a failure: both are signals of an adjustment between previous expectations and the current reality of the business. In Europe, down rounds were more common between 2022 and 2024 than press releases publicly reflected. The relevant question is not whether the valuation has fallen, but whether the new terms allow the company to keep executing with strategic coherence. Valuation is a consequence of metrics, not the other way round: without metrics to support it, a high headline figure can become a problem in the next round.
From GCO Ventures’ perspective, a lower valuation accompanied by clear terms, sufficient capital and a realistic roadmap can be preferable to an artificially high valuation that leaves the company without enough room to execute properly. The key question is not only what the startup is worth today, but which milestones will support a higher valuation in the next round.
Ultimately, valuing a startup is not about maximising a number. It is about building a financial narrative that can be sustained by milestones, metrics, reduced risk and genuine execution capability. That is the kind of valuation that stands up best in due diligence and allows the company to keep building after the round.
Each month, the GCO Ventures blog publishes new resources for founders on fundraising, metrics and strategy. Come back next month for more practical insight to support better decision-making.
