When it comes to early-stage startups, there’s often no long history of financials. That’s where the Comparative (or Market Multiple) Method comes in — a simple way to anchor valuation by looking at what’s happening around you.

Here’s how it works

1. Find Comparable Companies
Identify startups in the same industry, stage, and geography. These are your benchmarks.

2. Look at Their Valuation Metrics
Most common multiples used are:

Revenue Multiple (e.g., 5x annual revenue)

User/Subscriber Multiple (e.g., $100 per active user)

GMV Multiple (for marketplace startups)

3. Apply Multiples to Your Startup
Example: If a comparable startup with $200K in revenue is valued at $1M (5x revenue), and your startup has $100K in revenue, a similar valuation would be ~$500K.

4. Adjust for Key Differences
Valuation isn’t copy-paste. If your team is stronger, your market bigger, or your product more scalable, you may justify a premium. If risks are higher, expect a discount.

Final Thought:
The Comparative Method keeps things simple and credible. It’s not about perfection, but about giving both founders and investors a real-world reference point. At the end of the day, valuation is less about numbers and more about negotiation grounded in reality.