Valuation is an important part that a founder or an executor always has in his mind. Valuation matters to investors as they are getting the company share in lieu of the money they are going to spent.

Determine the value of the company at the seed/early stage is commonly described as the art of describing the growth rather than a science.

Let us see what factors does influence the decision of the Investors:

Hotness of the Industry:

Investors travel in packets just like they are going behind with others who already take leads in the market. If something is hot and others are already investing in the industry, they may pay a premium so as to stand in that particular industry.

Pre-Valuation Revenues:

Revenues are more important for the startups. Revenues make the company easier to value. In the initial stage if you have a functioning product and up to the most the product is yielding the revenue from the market, then this could be the most effective point that will affect the investor decision.

Reputation of the Team:

Before going to take a round for investment one must build his/her authority or the image in the market. The most important thing what a VC looks is the founder capability and his image in the industry or belongs to the particular industry.

Traction:

Traction is a sign that your company is taking off. Traction is basically quantitative evidence of customer demand. You can always get more traction.

In other words, traction is growth. The pursuit of traction is what defines a startup.

Out of all things that you could possibly show an investor, traction is the number one thing that will convince them. The point of a company’s existence is to get users, and if the investor sees users – the proof is in the pudding.

[original:yourstory]