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Scorecard method

Description of the Scorecard method and use cases


The Scorecard Valuation, also known as the Bill Payne valuation method, is one of the most preferred methodologies used by business angels ("BA"). This method compares the startup (raising angel investment) to other funded startups modifying the average valuation based on factors such as region, market, and stage.

The first step is to determine the average pre-money valuation for comparable stage startups. BA tend to examine pre-money valuations across regions as a good baseline. The next step is to compare the startup to the perception of other startups within the same region using factors such as:

  • Strength of the Team (0-30%)
  • Opportunity size (0-25%)
  • Product/Technology (0-15%)
  • Competitive Environment (0-10%)
  • Marketing/Sales/Strategic partnerships (0-10%)
  • Need for Additional Investment (0-5%)
The ranking of these factores make the Scorecard Valuation Method certainly subjective, but given the risk undertaken by BA, this approach makes sense for investing in early-stage startups, because the main emphasis besides scalability is on the team.


Takeaway:
The Scorecard compares the startup (raising angel investment) to other funded startups modifying the average valuation based on factors such as region, market, and stage.