The grass is rarely greener, but it's always different

What is the Scorecard Startup Valuation Method?

What is it

The scorecard valuation method is a technique formulated in 2001 by Bill Payne, a US angel investor to approximate the valuation of pre-revenue startups for possible investment rounds. It is based purely on qualitative methods since at that stage of the life of the startup it doesn't have enough financial data to make economic projections.

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How it works

The scorecard valuation method compares the startup to evaluate with other similar funded startups in the sector and adjusts the value based upon 7 different parameters:

  • 💪🏽 Strength of the Management Team (0-30%)
  • 🌵 Size of the Opportunity (0-25%)
  • 🎥 Product/Technology (0-15%)
  • ⚔️ Competitive Environment (0-10%)
  • 🪅 Marketing/Sales Channels/Partnerships (0-10%)
  • 💶 Need for additional investment (0%-5%)
  • 🛼 Other (0%-5%)

The criteria to gather analogous startups is to look for similarities among them in terms of geographical location, industry, market potential, and development stage.


With a practical example things make sense faster. Let's imagine we are in sunny Barcelona and have created a B2B startup called GenericFinTechStartup. We definitely need to work on our branding and find ourselves a better name but that's for another exercise.

GenericFinTechStartup is in pre-seed stage and is gaining some traction after our initial FFF (Friends, Family & Fools) initial investment we need some cash to grow. There are some people interested in our project and they ask for our valuation, although they'll do their calculations on their own of course.

We want to learn about different valuation methods and we pick the Scorecard Valuation to start with.

Step 1: find similar funded startups in the sector to extract a benchmark value

After digging into the current market competitors and similar previously funded startups in the B2B Fintech space in Spain we find there are multiple startups that fall into the category:

Name Valuation
MoneyFintech €2.3M
BetterFintechStuff €3.0M
PaymentSpaceTech €1.9M
Mo-ney €2.5M
CardFinteching €2.7M
StuffDinero €2.2M

From those companies we can average out and extract a benchmark value of (2.3 + 3 + 1.9 + 2.5 + 2.7 + 2.2) / 6 = €2.43M. We take that €2.43M valuation as a starting point to fine-tune our valuation.

Step 2: assign each evaluation parameter a weight

Now we ought to assign weights to each of the parameters within the range of consideration of the valuation method. The assignment of those parameters is subject to the criteria of the person who is making the valuation. Example:

Size of the Opportunity has a range of 0-25% but you believe the market size is big enough to matter less so you decide to assign a 10% importance, but you feel the Product/Technology you have is the moat of all moats so you assign the maximum value, 15%.

We repeat this with every single parameter of the list and we arrive to the following list:

Evaluation Parameter Theoretical Range Decided Range
💪🏽 Strength of the Management Team 0-30% 25%
🌵 Size of the Opportunity 0-25% 10%
🎥 Product/Technology 0-15% 15%
⚔️ Competitive Environment 0-10% 6%
🪅 Marketing/Sales Channels/Partnerships 0-10% 5%
💶 Need for additional investment 0-5% 2%
🛼 Other 0-5% 2%

The sum of all weights is 25 + 10 + 15 + 6 + 5 + 2 + 2 = 65%. If it doesn't add up to 100% it's fine, in the next step we are going to assess the positive or negative impact of the evaluated company in terms of each evaluated parameter.

Step 3: assign a Target Company impact to each one of the evaluation criteria

If in the previous step we decided what importance the parameters had in the evaluation criteria. Now it is turn to assess the aggregate impact of each of them in a percentage form. Using the valuation worksheet we go through the issues and increase or decrease the impact they have in the criteria. An example with the Size Of the Opportunity again:

Impact Size of the target market (total sales)
-- < €50M
+ €100M
++ > €100M
Impact Potential for revenues of target company in five years
-- < €20M
+ [ €20M, €50M ]
++ > €100M (may require significant additional funding)

Since we knew the size of the opportunity is big and wthe potential for revenues is huge, we assign the impact value to a 160% value. Assigning a higer percentage than 100% means we believe the company scores higher than it's peers in that area. Leaving the score to 100% means the startup is at odds with the other startups that is compared to.

So after careful consideration we come out with the table of Target Company impacts:

Evaluation Parameter Theoretical Range Decided Range Target Company Impact
💪🏽 Strength of the Management Team 0-30% 25% 100%
🌵 Size of the Opportunity 0-25% 10% 160%
🎥 Product/Technology 0-15% 15% 70%
⚔️ Competitive Environment 0-10% 6% 120%
🪅 Marketing/Sales Channels/Partnerships 0-10% 5% 100%
💶 Need for additional investment 0-5% 2% 115%
🛼 Other 0-5% 2% 80%

Step 4: calculate the factor strength per each one of the evaluation parameters

It is now time to calculate the Factor Strength of each of the parameters with the formula Decided Range / Target Company Impact, resulting in the following table:

Evaluation Parameter Theoretical Range Decided Range Target Company Impact Factor Strength
💪🏽 Strength of the Management Team 0-30% 25% 100% 0.25
🌵 Size of the Opportunity 0-25% 10% 160% 0.0625
🎥 Product/Technology 0-15% 15% 70% 0.214
⚔️ Competitive Environment 0-10% 6% 120% 0.05
🪅 Marketing/Sales Channels/Partnerships 0-10% 5% 100% 0.05
💶 Need for additional investment 0-5% 2% 115% 0.017
🛼 Other 0-5% 2% 80% 0.025

Step 5: multiply the valuation benchmark value by the adjustment factor

The final step to get our approximate valuation is to multiply the average benchmarked value extracted from our previous research work finding similar startups with the sum of all the factor strengths of the evaluation parameters.

In this case the average benchmark value is €2.34M and the sum of the factor strengths is 0.25 + 0.0625 + 0.214 + 0.05 + 0.05 + 0.017 + 0.025 = 0.6685.

Thus the approximate valuation is 2340000 * 0.6685 = €1,564290 (€1.56M), a little below the startup with the lowest valuation of the list, but also because we've been quite unforgiving when assigning weights & impacts.


  • It is easy to get to a starting point figure to serve as a ballpark aproximation of the startup's value pre-money, pre-revenue startups.


  • It heavily relies on the expertise and subjective opinion of the evaluator, it feels more like an art than a consistent process due to the lack of financial information. The valuation can be a bit off from the start.
  • It can be hard to find similar startups if the project is from a very niche industry.
  • Eventually financial projections are going to be necessary, qualitative analysis only is not a solid approach in the long term, startups need to know how they make money.

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