Fund Economics

Forecasting exit value of startup?

Asked by:
Community Member
Jul 24, 2023
Forecasting is obviously inaccurate, but how would you model a portfolio with "realistic" exit valuations

Could startup's current deck provide any usable inputs for such model? E.g. market size, market CAGR, team experience etc?
Obviously when founders say their ambition is just 100-500M$ exit, that tells something. But what else and how to factor in the assumptions?
1 answer
Accepted Answer
Jul 27, 2023
Start with fund models from Foresight https://foresight.is/venture-fund-model-annual/
Exit potential from pre-seed and seed is more art than science. You're looking for team and product potential to scale dramatically to dominate (or create and dominate) a large market segment, with all the steps along the way including likely raising substantial additional capital. CrunchBase, PitchBook and CBInsights can provide data on successful exits, though M&A data can be sparse.
Can you discern potential from a deck - maybe, though most likely not. 75-90% of seed startups fail. As a VC, your job is to spot and nurture the true potential of companies, sometimes the deck sucks and you need to look deeper. Emerging managers outperform as they can look deeper and apply domain expertise to find the rockstars, rather than delegating filtering to associates.

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